Reference book: Health Economics by Jay Bhattacharya, Timothy Hyde,& Peter Tu PA

Question

Reference book: Health Economics by Jay Bhattacharya, Timothy Hyde,& Peter Tu PART 1: SHORT ANSWERS (5 pts each) 1. What is July effect? 2. What are reasons of limited competition in hospital industry? Explain how each reason limits competition in hospital industry. 3. What are three observations one can make that indicate existence of adverse selection in a market? 4. Adverse selection can lead to collapse of health insurance market through adverse selection death spiral. Although adverse selection can be observed in any insurance market, we do not observe adverse selection in many cases. Name reasons why adverse selection may not occur in real markets. Explain each reason. 5. What are three measures researchers used to measure hospital quality? How do they measure competitiveness in hospital industry? 6. What is medical arms hypothesis? What does the literature conclude on hospital competition's effect? Is it in favor of medical arms hypothesis? Why?

Explanation / Answer

Q1) What is July effect?

Answer : The July effect, sometimes referred to as the July phenomenon, is a perceived increase in the risk of medical errors and surgical complications that occurs in association with the time of year in which United States medical school graduates begin residencies. A similar period in the United Kingdom is known as the killing season.

A Journal of General Internal Medicine study, published in 2010, investigated medical errors from 1979 to 2006 in United States hospitals and found that medication errors increased 10% during the month of July at teaching hospitals, but not in neighboring hospitals. Surgical errors did not increase, leading to the hypothesis that medication errors are easier for new personnel to make because they are prescribing drugs on their own, rather than being cross-checked by others.

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