To gain market share, Mountain Valley Hospital, a 200 bed community hospital plans to recruit and/or employ physicians to join their non-profit hospital's newly organized professional medical practice plan (PMPP). The strategy is to expand market share as well as a preventive approach as physicians on staff are being approached by a large regional teaching hospital. The hospital's physician marketer approached all interested private practice providers on the medical staff about their interest to become employed by PMPP. The hospital desired to prioritize primary care (for general referral) and specialists whose expertise could have an impact on consultation services or potential surgical or medical care. Ten physicians/group practices agreed to have Mountain Valley assess their office financials. They also expressed interest in affiliation because the private practice expenses keep growing and revenue is shrinking. Financial data was released, and the hospital engaged a healthcare economist with appropriate expertise to review the data and prepare a report on findings and acquisition strategies. The physicians understood that as employed physicians, they would be expected to use the hospital as a referral center as normal protocol unless authorized otherwise. The physician practices will be branded with the hospital. As the economics consultant, prepare a technical report that provides an economic analysis approach to a process as a component of merger and acquisition strategy. The board is seeking a recommendation.

1. What is being evaluating (overview). Comment on potential of outlying county patients switching to new practice group being significant enough to influence market outcomes for the hospital.

2. How could one use behavioral economics to increase the number of insured persons in the new medical practices? If the demographics showed significant elderly population, how would one do use behavioral economics to increase Medicare patient preference for utilization of new services?

3. Why would a hospital assume that merger or acquisition of practices reduce costs? Why would a merger increase patient revenue for the hospital? Why do many mergers and acquisitions of physician practices fail, nonetheless?

4. Are market forces strong enough to deliver efficient healthcare?

5. Consumers generally favor direct-to-consumer advertising, and healthcare professionals generally oppose it. Does this difference in attitudes make sense?

6. Pick up to 4 practices for best return on investment. Which would one recommend as most likely to have an impact on admissions and services?

7. Conclude with recommendations.