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Structure of health care industry : Demand and supplyBY: David Prakash Kumar | Category: Business and Finance | Post Date: 2009-06-24
Health care as an industry is developing with rapid strides. It is seen as a potential money spinner for businessmen. This has resulted in a number of corporate hospitals, catering to the needs of the wealthy, cropping up. The health care industry also has demand supply characteristics like any other industry.
In health care the market is much more than two way relationship between buyer & seller. There is multilateral transaction. More than one agency is involved in providing health care. Similarly, patient groups have different and highly specialized needs. These needs may be different in different communities and different countries.
Characteristics of health care services:
The health care industry possesses some unique characteristics that are different from other markets. There are
A. Demand characters:
1. It is irregular and unpredictable unlike other demands. The demand may increase or decrease.
2. Illness is costly in itself. The ill person cannot go for work and loses his salary, in addition to the
cost of treatment.
3. Government or some other organization offer treatment at minimal cost that is not available in
other markets. In some places increasingly insurance coverage helps take care of the health needs of people.
4. There is certain uncertainty in the outcome of health care services, as we cannot test and identify the
outcome of the treatment. The outcome is also unpredictable.
5. Health care services produces external benefits. Example:- when a child is given vaccination for
tuberculosis, not only the child, the others in the environment also get the benefit of not being
affected by tuberculosis.
B. Supply characteristics:
Restriction in the supply include
b. Limitations on admissions to medical / nursing or health related institutions
c. Lack of profit by medical care hospitals
1. The health care industry is governed by medical councils or other regulatory bodies. These bodies may be different in each country. Each has it's own set of rules and standards that has to be followed by professionals who are working under that regulatory authority. This will help in improving the standard of health care provided.
2. The medical / nursing education costs are subsidized by the government.
3. Advertising and competition in health care industry is unethical. Since it is unethical, most health providers only advertise their services and do not compete with each other in an unethical manner.
4. Hospital is the most focal point for health care and most government hospitals run as non- profit
organization in developing nations. In developed nations, they are either covered by social security or health insurance.
This is the demand supply structure around which the health care industry functions.
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