Reference no: EM13820061

Quandaries in Health Care

Declining Trust in the Health Care System (The Trust Crisis)

Health reform is mired in the morass of multitiered payment systems and multiple modes of access, limited by the ability to seek and to pay. Increasingly, patients are interacting with multiple entities within the system, causing more and more confusion on the part of the patient. According to recent research, patients' trust in the system, providers, and insurers continues to decline. This may result in a decline in individual health and an increase in costs for health care.

Investigate the declining trust in the health care system from an ethical and moral position. You may use the four principles plus attention to scope model of Beauchamp and Childress or any other ethical model that you choose to address this.

Complete the following:

• State what model you will use to investigate this issue.
• Identify 2 or more legal issues contributing to this problem.
• Identify 2 or more economic and financial issues contributing to this problem.
• Analyze the impact of various issues that are contributing to this problem, and rank them in order from greatest to least impact.
• Propose at least 1 modification that would increase trust in the health care system with rationale.

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BUYU Manufacturing has been contracted to provide SAEL Electronics with printed circuit and motherboards (PC) boards under the following terms:

• 100,000 PC boards will be delivered to SAEL in one month.
• In 3 months, SAEL has an option to take the delivery of an additional 100,000 boards by giving BUYU a 30-day notice.
• SAEL will pay $5 for each board it takes.

BUYU manufactures the PC boards through a process called batching, and manufacturing costs are as follows:

• The manufacturing batch run has a fixed setup cost of $250,000, regardless of the run size.
• The marginal manufacturing cost is $2.00 per board, regardless of the size of the batch run.

BUYU must decide whether it should manufacture all 200,000 PC boards now, or if it should manufacture 100,000 now and the other 100,000 boards only if SAEL decides to buy them. If BUYU manufactures 200,000 now and SAEL does not exercise its option, then BUYU will lose the manufacturing cost of the extra 100,000 boards. BUYU believes that there is a 50% chance that SAEL will exercise its option to buy the additional 100,000 PC boards.

1. Discuss the potential profit of manufacturing all 200,000 boards now.
2. Draw a decision tree for the decision that BUYU faces.
3. If BUYU uses its expected profit as the basis for its decision, determine the preferred course of action.
4. Determine the range of values of the probability that SAEL will exercise its option, making the decision found in part c as optimal, and determine the expected value of perfect information about whether SAEL will exercise its option.
5. Assume now that BUYU is constantly risk averse with a risk tolerance of $100,000, and answer parts 3 and 4 again.