Health Status and The Demand for Health
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Health Status and The Demand for Health
You are the administrator for a medical practice. Assume all of your practice’s patients are covered by insurance. Insurance pays, on average, 80% of your fee for a physician visit for which your practice charge is $100. The patient is responsible for the $100 fee but receives 80% back from the insurer. Currently, your practice’s volume for this service is 1,500 per year. Answer the following question in regard to this assumption:
- Estimate what would happen to the volume of services and the expected revenue to the practice, should the area’s health insurers increase patient cost sharing from 20% to 30% of this charge. Use the concept of price elasticity to make the projection.
For your calculations, use the following as the price elasticities for physician visits:
- –0.35, for patients in good or excellent health, and
- –0.16, for patients in fair or poor health (taken from Wedig’s, 1988).
After a quick survey, you decide that 65% of the practice’s patients are in at least good health and account for 1,000 of the 1,500 visits. The remaining patients are in fair or poor health. In light of this survey, write out all the steps of the calculation. Write answers separately for patients in each category of health status—excellent, good, fair, and poor—for all patients.
Reference:
Wedig, G. J. (1988). Health status and the demand for health: Results on price elasticities. Journal of Health Economics, 7(2), 151–163. Retrieved from http://ideas.repec.org/a/eee/jhecon/v7y1988i2p151-163.html
LEARNING TEAM REFLECTION 1
LEARNING TEAM REFLECTION 3 Learning Team Reflection
Augusto Alvarez, Ani Hakobyan, Stephanie Kirk, Cristina Linares, Debbie Voeks
FIN/571 Foundations of Corporate Finance
June 23, 2014
Clifford Merchant
Learning Team Reflection
Introduction
Turning tangible assets into investments is nothing new, investors did the same thing during previous market downturns, and they did not always come out ahead. A year ago, 49 years old Peggy Parks, who worked as a building code auditor got tired of watching her retirement savings investments going in the wrong direction and resulting in losing half of her 401(K) investments. To recover from that lost, Peggy Parks made an unconventional investment after learning how robust the Alpaca’s business can be. According to Peggy, “with Alpacas it is something tangible that you have on hand and always going to be there” (University of Phoenix, 2014).
Diversification
Peggy lost almost half her retirement in the stock market and decided to turn to the Alpaca business for her new retirement plan (University of Phoenix, 2014). She had made a good return the first year of business. There is a risk involved with investing in only one asset. Stable Money Makers demonstrated this when it mentioned how investors lost significant money from investing in Emus in the 1990’s. Diversification is reducing risk by investing in two or more assets whose values do not always move in the same direction at the same time (Parrino, Kidwell, & Bates, 2012, p. 214). Investing in another asset in addition to the Alpacas would improve Peggy’s business. If Peggy wants another tangible asset investing in cattle or production of hay are good options. They are not directly related to the Alpacas so if prices fall on Alpacas, and Peggy still has cattle or hay to sell. By investing in more than one asset Peggy decreases her risk and improves her retirement plan.
Other step that Peggy could take in order to improve the capital is to sell additional offspring from the current herd, and reinvested the revenue into more diverse bloodlines. This step will help the herd size to grow and more wool to be produced. It is anticipated that Peggy will incur costs associated with land use, feed, nutritional supplements, supplies and veterinary bills. As her herd expands she will need to expand capacity of her facilities in the form of a new barn. Construction expense for expansion should be approximately $40,000. This capital expense will provide Peggy with the space and capacity to increase her herd size as well as act as a central hub for the alpaca business in her community. Peggy is hoping to add to her revenue stream by doing grooming and wool harvest for other farmers, charging stud services as well as increasing the size of her own herd. Also since the animals are insurable than Peggy’s investment and business can be protected by insurance.
Peggy needs to maximize her tax advantages because that can help with capital improvement. All the feed, fertilizer, and veterinary bills can be written off if the alpacas are raised for profit. Items such as barns, fences, ranch repairs and maintenance will count towards tax write offs as well as tractors, and trailers which have scheduled write offs. Peggy could send her alpacas to a breeder instead of raising them on her own which would help with expenses. She would still make the decisions on sales, care, and feeding.
Reference
Parrino, R., Kidwell, D.S., & Bates, T.W. (2012). Fundamentals of Corporate Finance (2nd ed.). Hoboken, NJ: Wiley.
Rolling Hills Alpacas. (2014). The Financial Aspects of Alpaca Ownership. Retrieved from
http://www.rollinghillsalpacas.com/financialaspect.html
University of Phoenix. (2014). “Corporate Finance Video: Stable Money Makers” [Multimedia]. Retrieved from University of Phoenix, FIN571-Corporate Finance website.
Health Status and The Demand for Health
RUBRIC
Excellent Quality
95-100%
Introduction 45-41 points
The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.
Literature Support
91-84 points
The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.
Methodology
58-53 points
Content is well-organized with headings for each slide and bulleted lists to group related material as needed. Use of font, color, graphics, effects, etc. to enhance readability and presentation content is excellent. Length requirements of 10 slides/pages or less is met.
Average Score
50-85%
40-38 points
More depth/detail for the background and significance is needed, or the research detail is not clear. No search history information is provided.
83-76 points
Review of relevant theoretical literature is evident, but there is little integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are included. Summary of information presented is included. Conclusion may not contain a biblical integration.
52-49 points
Content is somewhat organized, but no structure is apparent. The use of font, color, graphics, effects, etc. is occasionally detracting to the presentation content. Length requirements may not be met.
Poor Quality
0-45%
37-1 points
The background and/or significance are missing. No search history information is provided.
75-1 points
Review of relevant theoretical literature is evident, but there is no integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are not included in the summary of information presented. Conclusion does not contain a biblical integration.
48-1 points
There is no clear or logical organizational structure. No logical sequence is apparent. The use of font, color, graphics, effects etc. is often detracting to the presentation content. Length requirements may not be met
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