Reference no: EM133083886

1. A single-specialty physician practice operates as a monopoly provider of professional services in a given city. The practice is assumed to maximize its profits by providing services to two different groups of patients: (1) privately insured patients and (2) Medicare/Medicaid (publicly insured) patients. The practice is assumed to negotiate prices directly with private insurers on behalf of its privately insured patients and to function as a price taker for its Medicare and Medicaid patients. Briefly describe how the practice would generally go about maximizing its profit across both groups of patients. 

2. Continuing on with the single-specialty physician practice from question #3, assume that Medicare/Medicaid reduces its reimbursement to the practice from the initial scenario, while there is no change in the price/reimbursement for privately insured patients. How would profit maximization be affected by this change, and how would the practice be predicted to respond, assuming initial monopolist (profit-maximizing) conditions?

3. Suppose that the annual number of admissions can be used as a measure of output for a group of hospitals operating in the same geographic market. Generally, describe the market structure that exists based on the degree of structural competition as measured by the four-firm concentration ratio and the Herfindahl-Hirschman Index. 

Hospital	Number of Admissions (in thousands)
Saving Grace Hospital	4,000
Mercy Me Hospital	3,000
Price Plus Hospital	1,500
Health Mart Hospital	750
Health Depot Hospital	1,000
Health R Us Hospital	1,500