Supply of Health Care
As a healthcare administrator and operations professional, you will need to be comfortable utilizing a number of well-established methodologies when it comes to generating forecasts. We routinely forecast sales, revenues, and expenses. It is important to keep in mind that forecasting isn’t a precise science, since it routinely involves the inclusion of history and judgment. As you know, historical performance isn’t always indicative of future performance. Judgments are assumptions grounded in one’s experience, so they aren’t always accurate. Changes in demand and policy can certainly have an impact for original forecasts and serve as a catalyst for reforecasting. You’ve probably noticed that several publicly traded companies are forced to adjust their earnings forecasts based on the trended performance in the company’s sales, revenues, and or expenses. Like many other industries, the healthcare industry is in a constant state of flux. We experience an all too familiar pattern of “peaks and valleys” in the prices and volumes of goods and services. New services may start out in high demand, only to wane, whereas well-established services will falter only to experience a revival.
Periodically, we hear reports of shortages of certain types of doctors: primary care physicians, specialists, and increasingly with aging population – geriatric care specialists. In free markets, the concept of supply shortage has little economic meaning in the long term. If people are clamoring for more supply (that is, if demand is sufficient), new suppliers will enter the marketplace. However, the labor market for physicians does not quite work this way. Physician supply does not respond quickly to demand changes because there are so many impediments to new suppliers entering in any given specialty. The training process for new doctors is long and arduous, and residency is so specialized that doctors cannot switch readily from one specialty to specialty when the market demands it. Moreover, significant barriers to entry play a role in diminishing the number of doctors available (Bhattacharya, Hyde, & Tu, 2014).