Why use a mix of within-the-firm employees and outside-the-firm independent contractors for physician services?

but make your assumptions explicit. Show more If you dont have information you think you need then assume itbut make your assumptions explicit. Remember I am solely interested in your economic thought process (i.e. the hows and whys of your answer). Business: UAMS Background: Under the UAMS brand name resides a College of Medicine a College of Pharmacy a College of Nursing a College of Health Professions and a College of Public Health. Also UAMS is home to an Eye Institute Myeloma Institute Psychiatric Research Institute Institute on Aging Cancer Institute and a Spine and Neuroscience Institute. You can if you want go to UAMS for medical services such as primary care various surgeries neonatal ICU and womens health. And more. (1) Agency question: weve been talking about agents as individuals but lets go up a level or two. The UAMS Colleges are also agents for the principal (which is the UA System). Suppose you were Chancellor of UAMS. Suppose the UA System approved a 2% raise pool and grants you the authority to allocate the 2% across the 5 UAMS Colleges. How do you decide which College gets more than 2% in additional salary and which College gets less than 2% in additional salary? To simplify this further you can consider just the College of Medicine (trains physicians) and College of Nursing (trains nurses). How do you determine which College deserves a bigger raise pool? Be sure to think explicitly about moral hazards. (2) Horizontal Dimension question: Recently Arkansas State University received approval to open a medical school to train osteopathic physicians. The graduates of the program (DOs) have the same basic training as MDsso for the sake of the question we will call them equals. Arkansas State said the new medical school is necessary because Arkansas ranks 49th in the country for physicians per capitawhich implies that the demand for more doctor education exists and we will assume Arkansas State is correct. So assuming UAMS has competent leadership the only explanation for why UAMS did not expand its Medical School to meet the unmet demand must be on the cost-side. What cost-side factors should UAMS consider before expanding its Medical School? Would these cost-side factors tend to yield economies of scale or diseconomies of scale? (You can assume that medical school education is just like an MBA but with more live hands-on applications. Or if youd rather you could answer the same question but for all the different nursing schools in Little Rockwhy not just have one? Or if you prefer answer the same question about the MBA programwhat does cost-side factors say about the best size of the UALR MBA program?) (3) Vertical Dimension question: UAMS has its own physicians but also outsources a lot of physician serviceslike surgeryto outside suppliers. Typically the services occur within facilities operated by UAMS but the physicians themselves are fundamentally independent contractors. So why would UAMS do this? Why use a mix of within-the-firm employees and outside-the-firm independent contractors for physician services? Be sure the words agency scale and transaction costs appear in your answers. Show less