There are several problems with the current market based approach, not the least of which is that the United States health care economy, while the most market based in the world, is not truly market …show more content…
But the for-profit business model has consequences for small charity hospitals as well. To remain in business in a competitive environment, businesses must be constantly growing. Without the ability to issue stock like a for-profit hospital, non-profits must find other ways to raise capital to do so. This means they must advertise. In 2005, a study using the U.S. News and World Reports list of “America’s Best Hospitals” found that, while the top seventeen were all not-for-profit, all but one advertised aggressively. They understandably used their advertising budget to market their most profitable programs which many times were unproven services or cosmetic procedures (Larson, Welch, Woloshin, & Schwartz, 2005).
These factors serve to continually raise costs, but there are several aspects of the health care industry which also make it difficult to cut costs. Health care is a highly labor dependent industry. For hospitals, labor is the biggest expense. According to economist William Baumol, this indicates that market forces cannot work efficiently due to the fact that care quality and worker quantity are too interdependent (Baumol,