1. Hospitals HAS 4320

2. Revenue Philanthropy and grants Global budgets Charges Per diem

3. Revenue Cost reimbursement Per case Capitation Managed care

4. Funds Out Payroll Professional Fees Supplies and other Capital depreciation

5. Financial Management Cost shifting Cream skimming

6. Capital Financing Hill-Burton Act (1946) Borrowed funds Borrowing loses steam Hospital chains

7. Who gets the profits Hospitals are doctors workshops Hospitals are managed for the benefit of the managers

8. Competition among hospitals Consider the pros and cons of competition among hospitals… –Why is it good, why is it bad –Quality, cost, third-party payors –One hospital versus 10 hospitals –10 hospitals that agree on price –Competition 1975-1980 and competition today

9. Some findings… Stanford Business School...Kessler and McClellan Technology advantages Centers of Excellence

10. Hospital Prices and Cost Some hospitals cost more than others Short-run = fixed Long-run = variable

11. Figure 9.1

12. Figure 9.2

13. Budgeting Variation –Foreseeable –Unknown –Random

14. Other thoughts on cost Deviation from theory Economies of scale Diseconomies of scale

15. How managers deal with change

16. Some ideas Centers of Excellence or focused providers Contracting Out

17. Measuring Competition Survivor analysis Community provider Market share