Examination of resource allocation in the health-care industry is complicated because the market characteristics differ from those in a perfectly competitive market. The market for health-care services is considered an imperfect market because — 1) Health care is a heterogeneous product, as the patient can experience a range of outcomes; 2) Patients who are insured have third-party payers covering their direct medical expenses; and 3) A “market price” is lacking, i.e., no feedback mechanism exists that reflects the value of the resources used in health care.
While the perspectives of consumers, producers, and society converge in a perfectly competitive market, hospital patient costs in the health-care market are different for patients (consumers), health-care providers (suppliers), insurance companies (third-party payers), and society.Text: Chapters 3, 4, 5 Shi, L., Singh, D.A. (2015). Delivering health care in America: A systems approach. 6th ed. Jones and Bartlett.