A feedback perspective of healthcare demand/supply relationship and behavior

Abstract

The United States has experienced a dramatic growth both in technical capabilities and in its allocation of resources to the healthcare sector. Because of the aging population, the U.S. fears that demand for healthcare will outstrip available resources suggesting the need for adding more healthcare capacity. However, recent studies have found that more care may not necessarily mean better health. These studies demonstrate that more hospitals in an area lead to more days spent in hospitals with no discernible improvements in health. Interestingly, supply tends to drive demand; more doctors and hospitals lead to more demand for services. This appears to be an unintended consequence or policy resistance to public policy. One contributor to this “vicious circle” is hospitals competing for specialist affiliations, which in turn, compete for patients by offering specialized services. Apart from care, retailing hospitals tend to duplicate services and aggressively expand capacity when their competitors do. The objective of this MBA Project is to further explore the relationship between demand and supply of healthcare in the United States using the System Dynamics feedback loop perspective. Furthermore it discusses how the System Dynamics and Systems Thinking fields of study facilitate understanding the behavior of complex problem structures.