King Rat (gkr) wrote,
King Rat

Eco 200: Cost considerations

(group) When a prominent hospital in New England decided early in the 1980s to turn down a request by staff surgeons to perform heat transplants, the general director of the hospital objected to the statement that this decision was "based largely on cost considerations." On the contrary, he insisted, "the decision was based largely on the limited physical resources and the highly trained personnel of the hospital. For each heart transplantation operation," he pointed out, "would have to turn away a number of other patients who receive less resource-draining open-heart surgery that is more predictably beneficial to them than heart transplants currently are."

  1. Do you agree that the decision was not based on cost considerations?

    No. The hospital administration was at least considering non-monetary opportunity cost.

  2. What is the valuable opportunity forgone when the hospital performs a transplant operation?

  3. vThe hospital cannot perform a more predictably beneficial operation. Sometimes predictability is more valuable than other considerations.</p>
  4. Why didn't the hospital simply hire more surgeons and buy more physical resources if "cost considerations" were not the reason for the hospital's decision?

    I disagree that cost considerations were not the reason for the hospital's decision. Even were they to hire them and money was not the object, there are other opportunity costs to consider for the newly hired surgeons.

  5. What do you suppose prompted the hospital's general director to insist the decision was not based on cost considerations?

    Because when people think of cost, they often think purely in monetary terms. If patients start to believe that the hospital care more about money than it does for the welfare of the patients, they'll start going to other hospitals because they don't want the hospital making their health decisions based on the money the might not be able to pay.

    That and they don't want to look like immoral profiteers.


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