In the United States, public health insurance is generally available only to people who are old, disabled, or who earn low incomes. As a result, most Americans must purchase private health insurance.2 Health insurance companies contract with doctors and hospitals to provide care for the individuals they insure. The insurance company and the hospital negotiate the fees that the insurance company pays for this care.

Some insurance plans offer individuals a limited choice of doctors and hospitals they can use. These plans can be purchased at lower prices than "large network" plans. "Large network" plans are offered at higher prices, but include most hospitals - including the very best - in an individual's region. Consumers choose insurance plans based on both price and the size and quality of the hospital network.

Large academic medical centers (AMCs), such as Northwestern Memorial, offer high quality care, especially for patients with very complex, serious, or rare diseases. In recent years, AMCs have made large investments in quality. For example, they have aggressively recruited the best physicians and hired large medical support staffs. They have purchased expensive, state-of-the-art medical equipment, some of which is for extremely specialized uses. They have also improved the luxury and comfort of private rooms and lobby interiors. Local community hospitals (which make up the vast majority of hospitals in any particular region) have not made similar investments.

Health care is very expensive. Health insurance for the average American family now costs approximately $20,000 per year.

Question: Why might AMCs believe that their profits are likely to increase as a result of the investments they have made? Are there investments an AMC could make that would not increase their profits? Explain.