MHA 710 EXAM 3 STUDY GUIDE: QUESTIONS &
ANSWERS: LATEST UPDATED
1. What is the equilibrium wage and level of employment under monopsony? - :-
W0 and E0
(Q) If the market were perfectly competitive instead of dominated by a
monopsonist, what would the equilibrium wage and level of employment be? - :-
W1 and E1
(Q) What is the most significant cost of attending medical school? - :-The income
foregone
(Q) Which of the following would increase the supply of physicians? - :-More
scholarships and grants to cover medical school tuition
(Q) Which of the following statements about the distribution of physicians among
specialties is true in the United States? - :-There are twice as many specialists as
there are generalists.
(Q) According to surveys by the Medical Group Management Association, the
average primary care physician earned approximately _______ in 2010. - :-
$200,00
(Q) Surgical specialists earn more than general/family practice physicians. Which
of the following statements is not true regarding this income differential? - :-
Surgeons will always earn more than general practitioners because they are smarter
than general practitioners.
(Q) The rate of return on an investment in medical education - :-is inversely
related to the number of years in the profession.
(Q) Physicians who own their own diagnostic testing facilities tend to order more
tests, charge higher fees for them, and have higher total bills to patients. This
practice of self-referral is an example of - :-a. physician-induced demand.
(Q) The observed variations in practice patterns in different regions of the country
are difficult to eliminate - :-a. because of the many alternative treatment options
available for most ailments.
b. due to the localized nature of most medical practice.
c. because it is difficult to change the preferences of physicians and patients.
d. the observed variations are so minor that they are of little concern to policy
makers.
e. a, b, and c are true.
(Q) To address the shortage of physicians on the horizon, it will be necessary to
- :-a. build more medical schools.
b. provide more grants and scholarships for medical education.
c. allow the admission of more foreign-educated physicians.
all of the above
(Q) In 2010, the medical specialty that earned the highest rate of return on
investment was - :-orthopedic surgery.
(Q) Suppose the number of medical school graduates continues to increase over
the next decade. Which of the following is true? - :-Physicians' salaries will rise if
the demand for medical services rises more than the supply of physicians rises.
(Q) Physicians' salaries increased substantially over the decade 1995-2005 from an
average of $215,000 to $315,000. What is the best explanation for this? - :-The
demand for physicians has increased.
(Q) Starting salaries for female OB/GYNs are higher than those of male
OB/GYNs. What is the best explanation for this? - :-The demand for female
OB/GYNs is greater than the demand for male OB/GYNs.
(Q) Marginal revenue product - :-The change in total revenue resulting from the
sale of the output produced by an additional unit of a resource.
(Q) Relative-value unit - :-Metric used to measure resource use (time, effort, and
investment) involved in the production of physicians' services. Components
measured include work effort, practice expense, and the cost of professional
liability insurance.
(Q) Resource-based relative value scale (RBRVS) - :-A classification system for
physicians' services, using a weighting scheme that reflects the relative value of the
various services performed. Developed for Medicare by a group of Harvard
researchers, the RBRVS considers time, skill, and overhead cost required for each
service. When used in conjunction with a monetary conversion factor, medical fees
are determined.
(Q) Usual, customary, and reasonable (UCR) charges - :-A price ceiling set to limit
fees to the minimum of the billed charge, the price customarily charged by the
provider, and the prevailing charge in the geographic region.
(Q) Relative-value scale (RVS) - :-An index that assigns weights to various
medical services used to determine the relative fees assigned to them.
(Q) Monetary conversion factor - :-A monetary value used to translate relative
value units into dollar amounts to determine a fee schedule
(Q) Arbitrage - :-The practice of simultaneously buying a commodity at one price
and selling it at a higher price.
(Q) Price discrimination - :-The practice of selling the same good or service to two
different consumers for different prices. The price differential is not based on
differences in cost.
(Q) Unbundling - :-Separating a number of related procedures and treating them as
individual services for payment purposes.
(Q) Clinical rule - :-Is a specific practice required of all participating physicians,
such as a policy to refer patients only to a specific panel of specialists.
(Q) Gatekeeper - :-A primary care physician who directs health care delivery and
determines whether patients are allowed access to specialty care.
(Q) This study was the catalyst for the early twentieth-century reform of medical
education in the United States. What was it? - :-Flexner Report
(Q) In the nineteenth century, hospitals had notorious reputations—they were
questionable places to visit, risky places to stay. What advances changed all this?
- :-a. Development of the germ theory of disease
b. Advances in medical technology
c. Availability of health insurance to pay the bills
d. All of the above
all of the above
(Q) The dominant factor affecting medical care delivery and finance in the 1960s
was - :-the creation of Medicare and Medicaid.
(Q) The dominant factor affecting medical care delivery and finance in the 1980s
was - :-prospective payment for hospitals
(Q) The dominant factor affecting medical care delivery and finance in the 1990s
was - :-the explosive growth of managed care
(Q) Which of the following statements is true concerning the trend in hospital care
between in-patient and out-patient services since the mid-1980s? - :-Out-patient
services have increased substantially because admissions are down
(Q) In order to be a successful price discriminator, a provider must have a degree
of market power (depicted by a downward-sloping demand curve) and meet what
other condition(s)? - :-a. Prospective customers must be categorized according to
willingness-to-pay.
b. Opportunities for resale of the good or service must be limited.
c. Customers cannot know that multiple prices are being charged.
d. The provider must have excess capacity to accommodate the extra business.
e. Both a and b.
Both a and b
(Q) Congressional studies report that Medicare payments fall 11 percent below the
cost of treating patients, while private insurance patients pay 29 percent more than
cost. This phenomenon is called - :-Cost shifting
(Q) The predominate organizational form for U.S. hospitals is not-for-profit. Why?
- :-The not-for-profit form provides the most benefits to physicians.
(Q) Using the physician-control model to explain hospital behavior leads to which
of the following conclusions? - :-Other medical inputs tend to be over used to
maximize physicians' productivity.
(Q) The merger of two community hospitals located in the same geographic
market is called - :-horizontal integration
(Q) Economies of scale exist when - :-long-run average costs decline as output
increases.
(Q) Horizontal integration allows firms to do all of the following except - :-fully
integrate with primary care clinics and acute care nursing facilities.
(Q) Consolidation activity in the hospital industry - :-a. occurs for same reasons
that cause consolidation in other industries.
(Q) Economies of scale - :-A situation in a production process where long-run
average costs decline as output expands.
(Q) Ambulatory surgery center (ASC) - :-Medical care facilities offered outside
the hospital setting that provide same-day surgical care, including diagnostic
imaging and preventive care procedures.
(Q) Ramsey pricing - :-A linear pricing scheme where prices to different
customers are computed based on individual price elasticity of demand. Customers
with a high willingness to pay are charged higher prices.
(Q) Cost-plus pricing - :-A pricing scheme in which a percentage profit is added to
the average cost.
(Q) Chargemaster - :-A compilation of hospital specific charges for all items that
the hospital can bill to patients, insurance plans, and other payers. The list includes
all procedures, services, drugs, and tests that are performed at the facility
(Q) Ambulatory payment classification (APC) - :-A congressionally mandated
scheme to classify outpatient services into clinically similar procedures.
(Q) Which of the following statements about the distribution of physicians among
specialties is true in the United States? - :-There are twice as many specialists as
there are generalists
(Q) What is the most significant cost of attending medical school? - :-the income
foregone
(Q) Physicians who own their own diagnostic testing facilities tend to order more
tests, charge higher fees for them, and have higher total bills to patients. This
practice of self-referral is an example of - :-physician induced demand
(Q) Compared to the not-for-profit organizational form, the for profit environment
- :-allows for the transfer of assets
(Q) Changes caused by the shift from charge based rates to negotiated rates has
had which of the following result? - :-Most hospitals experience a gap between the
amount they receive from their payers and the amount billed, with receipts as low
as 20% of amount billed
(Q) The merger of two community hospitals located in the same geographic
market is called: - :-horizontal integration
(Q) This study was the catalyst for the early twentieth century reform of medical
education in the United States. What was it? - :-Flexner Report
(Q) In order to be a successful price discriminator, a provider must have a degree
of market power (depicted by a downward - sloping demand curve) and meet what
other conditions? - :-Markets must be segmentable, identifying differences in
ability to pay
(Q) Economies of scale exist when: - :-long-run average costs decline as output
increases
(Q) The amount that Medicare pays a hospital for treating a Medicare patient is
determined: - :-at the point when the diagnosis is made
(Q) Starting salaries for female obstetricians/gynecologists are higher than those
of male obstetricians/gynecologists'. What is the best explanation for this? - :-The
demand for female obstetricians/gynecologists is greater than the demand for male
obstetricians/gynecologists
(Q) Which of the following statements is true about cost shifting in hospitals? - :-
The ability to cost shift depends on a hospitals payer mix
(Q) The rate of return on an investment in medical education - :-is inversely
related to the length of time spent in formal schooling
(Q) Suppose the market for nursing services in a local community is so dominated
by a single community hospital that, for all practical purposes, it is considered a
monopsony. Using the diagram below, answer the question - :-W1 and E1
(Q) Legislation considered by Congress to restrict legal immigration would: - :-
raise the costs of operating in many of the nations rural and inner city hospitals
(Q) The expanded us of prospective payment in hospital has charged the nature of
competition in that market. Which of the following statements is true? - :-Savings
from prospective payments are substantial and due primarily to fewer hospital
admissions and shorter hospital stays
(Q) Using the physician control model to explain hospital behavior leads to which
of the following conclusions? - :-Other medical inputs tend to be overused to
maximize physicians productivity
(Q) Which of the following statements is true concerning the trend in community
hospital care between inpatient and outpatient services since the mid 1990s? - :-
Outpatient services have been growing, while inpatient services have been
declining
(Q) What is the most important factor leading to rising health care costs in the
United States since 1980? - :-The increased use of expensive medical technology
(Q) Rent-seeking behavior results in - :-lower economic activity by diverting
resource to less-productive uses.
(Q) Of the new drugs introduced in the United States between 1940 and 1990,
what percentage were discovered by U.S. firms? - :-60 percent
(Q) Pharmaceutical companies receive patents as an exclusive right to produce a
drug. This results in - :-monopoly status in the production of the drug.
(Q) The regulatory agency with oversight responsibility for the pharmaceutical
industry is the - :-FDA
(Q) One of the primary reasons that costly technology is being introduced into the
health care system is that - :-third-party insurance finances most of the cost of care.
(Q) The fastest-growing segment of pharmaceutical marketing is: - :-marketing to
the consumer.
(Q) Medicare and Medicaid were enacted by the Johnson administration in 1965
as amendments to which federal law already in existence? - :-Social Security Act
(Q) The only disease-specific group eligible for Medicare are those suffering from
- :-end-stage renal disease.
(Q) One of the most serious weaknesses in the Medicare system is that - :-it
provides poor insurance coverage for unusually long hospital stays.
(Q) The Medicare pay-as-you-go system is jeopardized by - :-the changing
demographics of the U.S. population, with an increasing percentage of individuals
over the age of 65.
(Q) For Part A coverage of Medicare, the patient pays a deductible approximately
equal to the cost of the first day in the hospital; Medicare pays - :-for days 2-60
(Q) Participation in Part B of Medicare is - :-voluntary.
(Q) Possibly, the most serious flaw in the Medicare system is the fact that - :-it
provides no real protection against catastrophic losses resulting from unusually
long hospital stays.
(Q) Physicians who accept assignment on their Medicare patients - :-a. bill
patients for 80 percent of the allowable fee.
b. agree to forego balance billing.
c. accept the allowable fee for all services.
d. agree to charge private insurance patients the same fees as Medicare patients.
both b and c.
Both b and c
(Q) The most important source of funding for Medicare is - :-a 2.9 percent payroll
tax paid by all workers, regardless of their age.
(Q) Food and Drug Administration (FDA) - :-A public health agency charged with
protecting American consumers by enforcing federal public health laws. Food,
medicine, medical devices, and cosmetics are under the jurisdiction of the FDA.
(Q) Return on sales - :-A financial measure of a firm's ability to generate after-tax
profit out of its total sales. Calculated by dividing after-tax profit by total sales.
(Q) Public good - :-A good that is nonrival in distribution and nonexclusive in
consumption.
(Q) Patent - :-An exclusive right to supply a good for a specific time period,
usually 20 years. It serves as a barrier to entry, virtually eliminating all competition
for the life of the patent.
(Q) Spending cap - :-A limit on total spending for a given time period.
(Q) Parallel trading - :-The act of purchasing a product in a market where the price
is low and reselling it in a market where the price is high without the permission of
the intellectual property owner.
(Q) Universal coverage - :-A guarantee that all citizens will have health insurance
coverage regardless of income or health status. Coverage usually requires
mandatory participation.
(Q) Balance billing: - :-Billing a patient for the difference between the physician's
usual charge for a service and the maximum charge allowed by the patient's health
plan.
(Q) Assignment - :-A Medicare policy providing physicians with a guaranteed
payment of 80 percent of the allowable fee. By accepting assignment, physicians
agree to accept the allowable fee as full payment and forgo the practice of balanced
billing.
(Q) Participating physician - :-A physician who agrees to accept Medicare
assignment.
(Q) Actuarially fair premium - :-An insurance premium based on the actuarial
probability that an event will occur.
(Q) Medigap insurance - :-A supplemental insurance policy sold to Medicare-
eligible individuals to pay the deductibles and coinsurance that are not covered by
Medicare.
(Q) By the time a drug enters the clincial trial phase of testing on humans: - :-an
average of five years of the overall patent life has already expired
(Q) How do individuals enroll in Part A of Medicare? - :-Individuals are
automatically enrolled on their 65th birthday as long as they or their spouse has
paid into the Social Security system for 10 years.
(Q) Medicare and Medicaid were enacted by the Johnson administration in 1965
as amendments to which federal law already in existence? - :-Social Security Act
(Q) Which benefits are provided through Part A of Medicare? - :-Medical hospital
insurance
(Q) The Medicare pay-as-you-go system is jeopardized by: - :-The changing
demographics of the United States population, with an increasing percentage over
the age of 65
(Q) Government regulators sometimes set the price of a drug at its marginal cost
of production without including a fair share of the global joint cost of research and
development. Which of the following statements is true about this practice? - :-
This practice is a example of free riding
(Q) What was the main effect of the agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS) on United States domestic policy? - :-It
extended the life of patents from 17 years from the date of grant to 20 years from
the date of application
(Q) Which of the following is a true statement about long-term care? - :-Almost
half of all nursing home residents are over age 85
(Q) Price controls are a common feature in the pharmaceutical industry in most
developed countries. Which of the following statements about price controls is
true? - :-Countries with the most stringent price controls so the least research
(Q) Which of the following services is covered under Part B of Medicare? - :-
Emergency room services
(Q) How much did pharmaceutical companies spend on direct-to-consumer
advertising in 2019? - :-$6.1 billion
(Q) On average, biopharmaceutical companies spend approximately what
percentage of their sales revenue on research and development? - :-5-10 percent
(Q) The only disease specific group eligible for Medicare are those suffering from:
- :-end-stage renal disease
(Q) The majority of pharmaceutical advertising is directed at which of the
following groups? - :-Physicians
(Q) Part B pays what percentage of the allowable fee set by Medicare? - :-80
percent
(Q) Dazon and Furukawa (2003) argue that: - :-pharmaceutical price differences
across countries are roughly in line with differences in per capita gross domestic
product, supporting the predictions of Ramsey pricing practices
(Q) Medical care spending escalates as an individual reaches old age. Which of
the following statements is true regarding medical care spending and the elderly?
- :-Chronic illnesses increase as we age as do the multiplicity of services available
to treat those illnesses
(Q) Finkelstein and McKnight (2008) provide an empirical estimate of the benefits
to seniors of the 1965 introduction of Medicare. Which of the following statements
is true concerning the results of this study? - :-The real impact of the introduction
of Medicare was on the reduction in out-of-pocket health care spending for
households faced with catastrophic events (those top 25 percent of spenders)
(Q) The tax fully dedicated to provide support for Medicare Part A is: - :-a 2.9
percent payroll tax paid by all workers, regardless of their age