HCM 320 Module 2 Supply and Demand Short Paper Example

Why the Openings Stay Open: Supply, Demand and Primary Care at Valley Community Health Center

[Student Name]

Southern New Hampshire University

HCM 320: Healthcare Economics

Module Two Short Paper

[Instructor Name]

[Date]

The organization, setting and figures below are a composite written as a model document. No real employer, client, colleague or patient is described.

Why the Openings Stay Open: Supply, Demand and Primary Care at Valley Community Health Center

Valley Community Health Center has advertised two family physician positions for fourteen months. The third-next-available routine slot, a standard access yardstick, now sits 31 days out. The medical director calls it a shortage. This paper uses the basic tools of supply and demand to explain why the shortage exists, why it persists and what might ease it.

Supply and Demand in Brief

In economics, demand describes how much of a good or service buyers want at each price, and supply describes how much sellers offer at each price. In a freely working market, price adjusts until the quantity demanded equals the quantity supplied. A shortage occurs when, at the going price, more is demanded than supplied. Changes in factors other than price, such as population or technology, shift the entire demand or supply curve.

Two Markets at Once

The primary care shortage involves two linked markets. In the market for primary care visits, patients demand appointments and clinics supply them. In the labor market, clinics demand physicians, nurse practitioners and physician assistants, and clinicians supply their labor. A shortage of visits reflects a shortage of clinicians willing to work in primary care at the wages clinics offer.

What Is Shifting Demand

Several forces have shifted demand for primary care outward. The population is aging, and older adults need more visits. Chronic conditions such as diabetes and hypertension require ongoing management. Wider coverage has cut what patients owe when they walk in, increasing the quantity of visits demanded. Petterson et al. (2012) projected that population growth, aging and insurance expansion would require tens of thousands of additional primary care physicians in the United States by 2025.

Why Supply Lags

Supply responds slowly. Training a physician takes at least seven years after college, and the number of residency positions limits how many can enter each year. Many medical graduates pick fields with higher incomes and steadier hours. Bodenheimer and Pham (2010) described primary care as burdened by rushed visits, heavy administrative work and lower pay than specialty practice, making it less attractive to new physicians, and argued that these conditions drive the shortage as much as raw numbers.

Why Wages Do Not Clear the Market

In a textbook market, a shortage would push wages up until enough physicians chose primary care. But primary care revenue is largely set by payers, especially Medicare and Medicaid, whose fee schedules pay less for office visits than for procedures. Valley Community Health Center, which serves mostly Medicaid and uninsured patients, cannot raise its prices to fund higher salaries. The wage it can offer sits below what would attract enough clinicians, so the shortage persists.

Elasticity of Supply

Economists describe how quickly supply responds to price using the elasticity of supply. In the short run, the supply of physicians is highly inelastic: even a large salary increase cannot produce new physicians this year, only move existing ones between employers. Over a decade, supply is more elastic, since higher pay and better working conditions can influence which specialties medical students choose and whether clinicians stay in primary care or leave for administration or specialty practice. This is why short-term fixes focus on redistributing and extending existing clinicians, while long-term fixes focus on training and career attractiveness.

Competition for the Same Clinicians

Valley competes for the same small pool of clinicians as two hospital systems and a growing number of retail and urgent care clinics. The hospitals can pay more because their commercial revenue subsidizes primary care, and retail clinics offer shorter hours and fewer complex patients. Each competitor raises its offers, and the center, with fixed revenue, falls further behind. In economic terms, demand for clinicians in the regional labor market has increased, pushing up the market wage beyond what a Medicaid-heavy clinic can pay.

Numbers at Valley

The table summarizes the local picture. Demand for visits has grown faster than the center's capacity, and the gap shows up as waiting time.

Table 1. Primary Care Demand and Capacity at Valley Community Health Center

Note. Composite data for illustration.

What the Shortage Costs

Shortages are not only inconvenient. Basu et al. (2019) found that across U.S. counties, greater supply of primary care physicians was associated with longer life expectancy and lower mortality from cardiovascular disease, cancer and respiratory disease, while the supply of primary care physicians per person declined in many areas over the study period. At Valley, long waits push patients toward emergency departments and delay diagnosis of chronic disease.

Responses on the Supply Side

Several responses aim to shift supply outward. Federal loan repayment programs reward clinicians who work in shortage areas. Nurse practitioners and physician assistants can provide much primary care; Valley could hire two nurse practitioners for roughly the cost of one physician. Team-based care, in which nurses, medical assistants and health coaches handle more routine work, lets each clinician care for more patients. Bodenheimer and Pham recommended exactly this kind of redesign.

Responses on the Demand Side

Other responses reduce the demand placed on clinicians' time without reducing care. Group visits for diabetes, nurse-led blood pressure checks and telehealth follow-ups can meet needs more efficiently. Reducing missed appointments, currently 18% at Valley, frees capacity that is already paid for.

Equity Considerations

Shortages fall hardest on patients with the fewest alternatives. Commercially insured patients in the region can go to private practices, while Valley's uninsured and Medicaid patients often cannot. Any response should be judged partly by whether it improves access for them.

Recommendation

Valley should pursue three steps: recruit two nurse practitioners while continuing to seek one physician, apply for loan repayment eligibility for all clinician positions and expand team-based care so each clinician's panel can grow safely. Together these steps address both the supply of clinician time and the demand placed on it.

Conclusion

The primary care shortage reflects demand growing faster than supply in a market where administered prices keep wages from adjusting. Supply and demand explain why the openings stay open, and they point toward solutions that expand clinician capacity and use it more efficiently.

References

Basu, S., Berkowitz, S. A., Phillips, R. L., Bitton, A., Landon, B. E., & Phillips, R. S. (2019). Association of primary care physician supply with population mortality in the United States, 2005-2015. JAMA Internal Medicine, 179(4), 506-514. https://doi.org/10.1001/jamainternmed.2018.7624

Bodenheimer, T., & Pham, H. H. (2010). Primary care: Current problems and proposed solutions. Health Affairs, 29(5), 799-805. https://doi.org/10.1377/hlthaff.2010.0026

Petterson, S. M., Liaw, W. R., Phillips, R. L., Rabin, D. L., Meyers, D. S., & Bazemore, A. W. (2012). Projecting US primary care physician workforce needs: 2010-2025. Annals of Family Medicine, 10(6), 503-509. https://doi.org/10.1370/afm.1431