policy makers, health care providers, and graduate students. I anticipate that
this
wide audience is more interested in a synthesis of currently available study results
and potential policy ramifications than in new research methods. However, por-
tions of five chapters (2, 4, 5, 8, and 13) are intended for functional specialists
and scholars with interests in technical issues. My hope is that the reader will
come away with a better understanding of the medical economics and financial
management literature and a renewed appreciation of the fact that the behavior
of consumers and medical providers is only partially understood at this time.

The various cost-containment proposals that have been advanced in the 1990s
are examined against the backdrop of the empirical research available to date.
In part I we define the elements that make up the medical cost-inflation problem
and survey a number of models of providers concerning their accounting habits,
purchasing behavior, and product-line specialization. In part 2 we discuss health
maintenance organizations (HMOs) and other managed-care systems, the wide
variety of long-term-care systems, long-term-care insurance, and financial man-
agement issues (chapters 3 and 4). Part 3 considers market analysis, diversifi-
cation trends, strategy selection, and pricing for hospital care and ambulatory
care (chapters 5 and 6).

In part 4 the focus shifts to physician reimbursement, managing physicians,
expenses related to operating teaching hospitals, and the management of medical
schools (chapters 7 and 8). One-quarter of my former students work in this
market niche (and almost 20 percent of our recent graduates work in the fast-
growth long-term-care market). While some information concerning ways to
enhance productivity are contained in chapters 1-4, part 5 (chapters 9-11) con-
siders the link between productivity enhancement, cost control, and quality
control. Chapter I I discusses the Deming method of continuous quality im-
provement and the controversial topic of public disclosure of quality ratings.
The topics in parts 3, 4, and 5 (chapter 5-11) are obviously interrelated: enhanced
productivity will cut costs and improve financial position, and enhanced quality
will improve market share and hopefully increase institutional profitability.

Part 6 (chapters 12-14) focuses on the institutional manager and the impact
that cost containment has had on all hospitals. Most of the emphasis is on hospital
finance. Hospitals have an excessive reliance on debt relative to other sectors
of the economy--for example, 80 percent of total new capitalization is debt
financed. Public utilities borrow on the average about 60 percent of new capi-
talization, and manufacturing firms borrow only 40-50 percent. A number of
financing alternatives are evaluated, including two types of leasing options.
Chapter 13 considers investment decisions, financing decisions, and the impact
of the new Medicare capital payment system for hospitals. Chapter 14 considers
capital structure decisions. Part 7 asks whether the nation is ready for a systematic
reform of the health care system that offers universal coverage, universal access,
cost control, and sufficient flexibility to allow steady quality-of-care improve-
ments (chapter 15).

This book contains 1,200 published references. However, since not everything

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