For Pancreas Transplant, DRG code is 010. For DRG 010, Medicare pays fixed amount of $21,313.50. Outlier threshold for Medicare is $25,800.

(a) John admitted hospital A for pancreas transplant. The charges for John's treatment was 128,000. Cost to charge ratio for Hospital A was 0.10. How much payment hospital A would get from Medicare?

(b) Bryan admitted hospital B for pancreas transplant. The charges for Bryan's treatment was same as John, $128,000, but cost to charge ratio for Hospital B was 0.25. How much payment hospital B would get from Medicare?

If substitution effect is greater than income effect, would physicians spend more time with existing patients or would they switch the more lucrative patients. Explain.

4. What is value-based- purchasing, was it successful for reducing unnecessary utilization.

5. According to economists, competitive market provides best outcome for consumer, lowest possible price with highest possible quantity. Why would this not work with health care market, and concentration of hospitals might be good idea?

6. Give examples of horizontal and vertical integrations in health care systems?

7. If the concentration of hospitals and insurance companies might be necessary, why do we need Department of Justice or Federal Trade Commission to investigate the merger and acquisitions?