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The Supply of Health Services

Supply of health care goods and services is different from other

commodities becasue it is composed of MULTIPLE INPUTS.

Cars need steel, rubber, wires and garments and uses labor to
have an end product - a CAR

Health care goods and services are inputs that need to be

combined with each other to produce an end product - BETTER

For a sick person to be healthy, he needs the following inputs:

An expert advice from a physician/health personnel

Hospital/clinic facilities


Medical technology


Health infrastructure

- Facilities needed to carry out the delivery of health services

hospitals, health centers)

- OTC, prescription, herbal drugs


- Other inputs which may be required to produce health like

research and trainings.


Highly-skilled manpower is the most important input in the

supply of health services.

Often there is a trade-off between abundant supply and high

quality manpower.

Physicians play a crucial role.

80% of all spending are influenced by physicians' decisions.

Role of physicians
1. They recommend a particular course of action for their patients
- Patients don't have perfect knowledge of their conditions and would
require the expertise of health professionals.
2. Physicians while making crucial decisions for the patients, also
participate in actual delivery of health services
- Surgery
- Giving immunizations
- Consultations

Unlike other inputs, manpower takes a long time to produce.

It takes years to be a typical specialist physician pratitioner in

the Philippines from high school onwards.

1. 4 years Pre-med
2. 4 years Medical schooling
3. 2 years Internship, Board review and exam
4. 3-5 Residency
5. 2-3 year Sub-specialty training/Fellowship

Highly specialized manpower ten to self-regulate.

PRC (Pofessional Regulation Commission)

Different specialty organizations

Regulatory boards

Specialist physician groups "auto-regulate", meaning they

regulate the production of themselves. Thsi may be used to:
- Assure the quality and skills of specialists

- Distribute specialist manpower more effectively and efficiently

(in different parts of the country)
- "ward off" potential competitors in a certain geographic
medical practice area.

Health Facilities

Hospitals, Clinics, Labs, Ambulatory Centers etc.

SUpply of Hospital Services

- Service Capacities
- Geographic Distribution
- Emphasis on Technology
- Hospital Networking

Technology and Specialization

Technology improvement in diagnostics and therapeutics has

improved the outcomes of medical intervention.

Specialization in specific areas and at all levels of hospital

manpower has increased the accurary of diagnoses and

It also improved the outcomes of medical and surgical


Hospital Capacity and Geographic Distribution

As of early 2000
- 1,942 hospitals (registered in Philippines Hospital Association)
- 90,766 beds

- 80 million Filipinos
- 1 hospital bed = 850 Filipinos

The better the preventive and promotive health programs, the

more likely it is that there will be less peole seeking

Demand side

- Population and the effectiveness of the preventive and

promotive health programs

Supply side

- Depends on the capabilities of each and every hospital bed

who depends on other input like adequacy and competence of medical

manpower, medical technology, pharmaceuticals, among others

Pharmaceuticals (Branded and Generics) and other medical


10-12% of sales are generics and 88-90% are branded

Drugs as Other Inputs

Cost components:
1. Research and development
- Most expensive
- Cost of "inventing" or "innovating" new drugs

- For a new drug to be introduced in the market, company

takes $800 Million in research and development
- To recover a pharmaceutical firm's R&D expenses, "patents"
are awarded to drugs.
- For 15 years, no one is allowed to produce and market a
certain drug-monopoly
- This gives the company the capability of pricing the drug high
- After the patent period expires, monopoly over the drug stops
and the drug becomes "generic".
- This entitles others to produce and sell the same drug,
allowing competition to set it.
- This unpatented drug then becomes a cheap alternative.
2. Drug manufacturing cost - raw materials, packaging
3. Marketing cost
4. Distribution cost

Supplier-Induced Demand

Physicians decides what a patient needs - is also the supplier of

the product/service

- Ex. A pediatrician during consultation, decides or recommends

for a baby patient a vaccine which the pedia may also be supplying