Monopolistically structured JCAHO (Joint Commission on Accreditation of Healthcare Organizations) I chose the monopolistically structured JCAHO (Joint Commission on Accreditation of Healthcare Organizations). They are the only organization that determines whether hospitals or medical facilities are up to their standards enough to receive reimbursement from Medicare and Medicaid. “The Joint Commission is a monopoly because it has unique statutory protection in the USA and collects $113 million in annual revenue; it is the only organization in the USA of this nature” (Joint Commission Requirements, 2009).
This revenue is mainly from the fees it charges US hospitals for evaluating their compliance with federal regulations. Without adherence to these regulations, there is no JCAHO accreditation and without that accreditation, Medicare and Medicaid will not reimburse for health care in that facility (Joint Commission Requirements, 2009). For the amount of people receiving health care reimbursement through Medicare and Medicaid, this lack of accreditation could financially decimate a health care facility without that accreditation and reimbursement.
Their only option would be to not accept Medicare or Medicaid patients. JCAHO will have the some of the same fixed costs as any other business. Fixed costs such as equipment are virtually non-existent, unless you count computers; but with technology always advancing, those cannot really be counted as a fixed cost requiring constant upgrades. As for variable costs, that will be the same as well, labor (inspectors, paperwork processors), buildings & facility costs, traveling costs (to travel to each facility), and all of the other standard variable costs.
This organization will always generate short-run economic profits and will always generate long-run profits because it is the only organization of its kind. It also blocks any other type of organization entering the market because USA government has laws to protect this organization and keep it as the only one. There is not competition in the market for this one. JCAHO makes its revenue through fees for inspecting facilities. These facilities have to be inspected or surveyed every two years in order to keep up with their accreditation.
This is the only accrediting organization in the USA, and every facility has to comply or go under; therefore JCAHO will always have revenue as long as there are health care facilities desiring reimbursement for providing health care. Also, JCAHO will randomly conduct inspections on facilities, especially if they have received complaints on these facilities (Joint Commission Requirements, 2009). Whether the inspection is planned by the hospital or JCAHO randomly shows up, the hospital still has to pay for the inspection.
A hospital will have as many inspections as JCAHO requires for the hospital to prove that it meets the standards required for accreditation. I do not think this JCAHO industry really has economies of scale. Costs aren’t the reason other organizations can’t enter the market; laws are the reason. As for costs, there aren’t “plants”, this organization does not produce any kind of “product”, just a service. No other organization could possibly enter the market because of the legal barriers, not for cost barriers.
If there were no legal barriers, there is no reason that other organizations couldn’t enter the market. For my next market example, I have chosen the oligopoly of the auto industry. There are only a select few large companies dominating this industry. Namely, the “Big Three”: General Motors, Chrysler, and, Ford Motor Co. are the auto industry in the USA (Investopedia, 2009). Oligopolies typically consist of “a few large producers” according to the definition in the textbook. Because of the fewness of companies in this type of industry, which is typical of an oligopoly; they get to make their price.
In the USA, the auto companies certainly do make their own price. This oligopoly produces homogenous products, in this case automobiles; which again, fits the profile. They do produce many types of automobiles, but the product is still homogenous in the aspect that it is only automobiles that these competing companies are producing. As in a typical oligopoly, even though it is a homogenous product, automobiles, they are producing, they still rely on heavy advertising to play up the non-price competition between each companies’ products in order to boost sales.
As for cost structures for this industry, the fixed costs are going to consist of machinery and equipment in order to produce the automobiles. These fixed costs also serve as a barrier of entry into the industry; small firms will not be able to afford the fixed costs. For the variable costs, labor, materials, and advertising are going to be the main costs (Investopedia, 2009). These costs also change according to the output produced; whether the companies cut back on production or increase in production. These costs don’t serve so much as barrier of entry into the industry, but in order to compete in this industry, an entering firm must come up with them on an extremely large scale. Will these companies in this industry generate short-term profits? Not so much; and as for long-term, more likely if a miracle happens. In this economy, the short term is hurting and being cut back largely. But after the cutbacks, the companies will probably be able to maintain a profit in the much extended long-run. As for economies of scale in the long-run, they can reduce in overall average total cost as the firms expand plant sizes and production increases.
But growth and expansion is not likely to happen in this economy; at least not for a really long while. This is one of the first industries that have taken a major hit by the struggling economy in the USA. There we have it, monopolies and oligopolies do exist here in the USA and I am sure my chosen monopoly has come as a surprise. My chosen oligopoly was not, but there are not many oligopolies in the USA to write about and I have no interest writing about the international industries. JCAHO as a monopoly is not one normally thought about when thinking of monopolies.
I chose that one because of the relevance it bears to my future career in health care administration. Health care is an economic industry, and it too has markets as any other industry. Unfortunately or even fortunately, the health care industry is dominated by a monopoly called JCAHO. Works Cited “Joint Commission Requirements. ” Perspectives (2009): March 12, 2009. . “Joint Commission E-dition. ” 2009 Accreditation Standards and Requirements From the Joint Commission (2009): March 12, 2009. . “Investopedia. ” The Industry Handbook: Automobiles (2009): March 12, 2009. .