Purchase Solution

Explain how managed care contracts change agents' incentives to control costs. What agency costs are eliminated and what new ones are created?

Not what you're looking for?

Ask Custom Question

1. For question 1 refer specifically and directly to attached Mclean c 2
2. For question 2 refer specifically and directly to attached Mclean c 3

We Will provide a rating after evaluation of responses

1. Explain how managed care contracts change agents' incentives to control costs. What agency costs are eliminated and what new ones are created?

2. Evaluate the following assertion: "We know they're a good, sound outfit. Look, their auditor signed off on their financial statements."

Purchase this Solution

Solution Summary

Two thorough paragraphs for each. Concise. Clear.

Solution Preview

1. Explain how managed care contracts change agents' incentives to control costs. What agency costs are eliminated and what new ones are created?
Managed care contracts change the agents' incentives to control cost because they have their own interests that take precedence over those of the hospital. For example, Dr. Jackson wants PCI to take a huge loan from a big Dallas bank and open an outpatient-imaging center. If PCI makes a profit then it should continue with this center otherwise it should walk away from the project and hand over the assets to the Bank. Dr. Jackson says that there is no additional risk but every loan brings with it a risk. So, the lure of extra profits by the shareholders is changing the incentives of PCI to control costs. In this case the agency cost is the extra interest cost that PCI will incur. In other words, the shareholders are using their position to extra leverage the assets of the company. What is happening is that the agent is turning selfish. A physician orders ...

Purchase this Solution


Free BrainMass Quizzes
IPOs

This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

SWOT

This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.

Basic Social Media Concepts

The quiz will test your knowledge on basic social media concepts.

Writing Business Plans

This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.

Marketing Research and Forecasting

The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.