How to reason a decline in the share of privately insured patients?

Question

If costs are constant, revenues are decreasing and the number of patients is constant, too, ultimately resulting in a lower revenue per customer, how do you reason that this is due to a shift in the ratio of privately insured patients vs. the publicly insured patients?

Since the number of patients stays constant, such a shift would in turn mean that physicians refer more patients with public insurance to the hospital and less patients with private insurance. However, I see no reason why a physician would actually behave in this way and suggest more publicly insured patients to visit a hospital they have an indifferent or negative opinion about. In my opinion, more plausible would be the idea that the number of patients would in total decrease as neither patient group is referred to the hospital.

So, how can one come up with this idea? What would be the logical thought of the physicians referring more patients to a hospital they have an indifferent / negative opinion about?

Thanks for your help!

Answer 1

Hi there,

Always be careful with the cases you pick - every case is not the holy grail (they're all written by somebody!)

Take cases as thought experiments and practice, but always look at them with a grain of salt.

Good thought process here!

Answer 2

I agree, it doesn't make any sense. The case assumes you have a fixed number of clients no matter what, and if you have less privately insured clients, you'll have more publicly insured clients to compensate. I don't think this is realistic.

P.S. Watch out for the suggested structure on the case. It is a complete joke.

Answer 3

Hello!

I agree with Pedro, by looking at other parts of the case, I am quite confident disagreeing… ;)

Cheers,

Clara