Section FourCASE 4-1
The Health Care IndustryThe health care industry has been going through major
structural changes in order to become more efficient to help
stem rising costs of health care. During the previous decade,
health care organizations hired MBAs to help streamline their
organizations, introduce new efficiencies, and market their
services. In addition, many physicians are obtaining MBAs in
order to help introduce better management into the health care
industry. Health maintenance organizations (HMOs) continue to
hold down costs by emphasizing prevention, by limiting access
to specialists, by requiring copayments to make patients more
sensitive to the costs of health care, and through increased
bargaining power resulting from their size. There also have
been mergers among health care organizations and hospitals.
Unfortunately, many health care organizations have
encountered financial difficulties and some have failed. The
federal government also has tried to hold down costs by
limiting Medicare and Medicaid reimbursements.^1
At the same time that the health care industry is
struggling to become more efficient, the demand for health
care is increasing and is expected to increase in the future
because of an aging population, increased affluence, and