BMZ ACADEMY
BMZ ACADEMY
@061 262 1185/068 053 8213
BMZ ACADEMY 061 262 1185/068 053 8213
, BMZ ACADEMY
Table of Contents
Question 1: Watch video 2.2 in Lesson 2 and discuss the main issues about supplier-induced
demand in South Africa. (10)................................................................................................. 6
Supplier-Induced Demand (SID) in South Africa ................................................................... 6
Main Issues Related to SID in South Africa ........................................................................... 6
Overtreatment and Overutilization of Services .................................................................. 6
Increased Healthcare Costs .............................................................................................. 6
Lack of Regulation and Monitoring .................................................................................... 7
Imperfect agency............................................................................................................... 7
Asymmetric Information..................................................................................................... 7
Medical Aid Schemes and SID .......................................................................................... 8
Impact on Health Outcomes .............................................................................................. 8
Question 2: You are the manager of a private hospital that is part of an oligopoly in a local
healthcare market. Using the kinked demand curve, demonstrate how you might respond to a
competitor’s decision to lower prices. What strategies would you use to maintain your market
share? (10) ........................................................................................................................... 9
Using the Kinked Demand Curve in an Oligopolistic Healthcare Market ................................ 9
Kinked Demand Curve ...................................................................................................... 9
Upper Segment of the Curve (Elastic Demand) ............................................................... 10
Lower Segment of the Curve (Inelastic Demand) ............................................................ 10
Responding to a Competitor’s Price Reduction ................................................................... 11
Avoid Price Matching ...................................................................................................... 11
BMZ ACADEMY 061 262 1185/068 053 8213
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Enhance Non-Price Competition ..................................................................................... 11
Targeted Marketing and Branding ....................................................................................... 11
Patient Segmentation ...................................................................................................... 11
Branding as a Premium Service ...................................................................................... 11
Introduce Value-Added Services ..................................................................................... 12
Patient Convenience ....................................................................................................... 12
Improve Operational Efficiency........................................................................................ 12
Collaborate with Insurers................................................................................................. 12
Question 3: Imagine yourself as a hospital administrator faced with choosing to outsource the
hospital's cleaning services to an external company or continue using in-house staff. Apply
transaction cost economics to help you decide. (20) ........................................................... 12
Transaction Cost Economics Overview ........................................................................... 13
Bounded Rationality ........................................................................................................ 13
Opportunism ................................................................................................................... 14
Asset specificity............................................................................................................... 14
Application of TCE to the Decision ...................................................................................... 15
Production and Direct Costs................................................................................................ 15
Outsourcing..................................................................................................................... 15
Cost Reduction ............................................................................................................... 15
In-house .......................................................................................................................... 16
Labor management ......................................................................................................... 16
Flexibility ......................................................................................................................... 16
BMZ ACADEMY 061 262 1185/068 053 8213
BMZ ACADEMY
@061 262 1185/068 053 8213
BMZ ACADEMY 061 262 1185/068 053 8213
, BMZ ACADEMY
Table of Contents
Question 1: Watch video 2.2 in Lesson 2 and discuss the main issues about supplier-induced
demand in South Africa. (10)................................................................................................. 6
Supplier-Induced Demand (SID) in South Africa ................................................................... 6
Main Issues Related to SID in South Africa ........................................................................... 6
Overtreatment and Overutilization of Services .................................................................. 6
Increased Healthcare Costs .............................................................................................. 6
Lack of Regulation and Monitoring .................................................................................... 7
Imperfect agency............................................................................................................... 7
Asymmetric Information..................................................................................................... 7
Medical Aid Schemes and SID .......................................................................................... 8
Impact on Health Outcomes .............................................................................................. 8
Question 2: You are the manager of a private hospital that is part of an oligopoly in a local
healthcare market. Using the kinked demand curve, demonstrate how you might respond to a
competitor’s decision to lower prices. What strategies would you use to maintain your market
share? (10) ........................................................................................................................... 9
Using the Kinked Demand Curve in an Oligopolistic Healthcare Market ................................ 9
Kinked Demand Curve ...................................................................................................... 9
Upper Segment of the Curve (Elastic Demand) ............................................................... 10
Lower Segment of the Curve (Inelastic Demand) ............................................................ 10
Responding to a Competitor’s Price Reduction ................................................................... 11
Avoid Price Matching ...................................................................................................... 11
BMZ ACADEMY 061 262 1185/068 053 8213
, BMZ ACADEMY
Enhance Non-Price Competition ..................................................................................... 11
Targeted Marketing and Branding ....................................................................................... 11
Patient Segmentation ...................................................................................................... 11
Branding as a Premium Service ...................................................................................... 11
Introduce Value-Added Services ..................................................................................... 12
Patient Convenience ....................................................................................................... 12
Improve Operational Efficiency........................................................................................ 12
Collaborate with Insurers................................................................................................. 12
Question 3: Imagine yourself as a hospital administrator faced with choosing to outsource the
hospital's cleaning services to an external company or continue using in-house staff. Apply
transaction cost economics to help you decide. (20) ........................................................... 12
Transaction Cost Economics Overview ........................................................................... 13
Bounded Rationality ........................................................................................................ 13
Opportunism ................................................................................................................... 14
Asset specificity............................................................................................................... 14
Application of TCE to the Decision ...................................................................................... 15
Production and Direct Costs................................................................................................ 15
Outsourcing..................................................................................................................... 15
Cost Reduction ............................................................................................................... 15
In-house .......................................................................................................................... 16
Labor management ......................................................................................................... 16
Flexibility ......................................................................................................................... 16
BMZ ACADEMY 061 262 1185/068 053 8213
