Hospitals Leave For Greener Pastures

Even non-profit organizations aren’t above the cold hard facts of economics. In this article it mostly discusses the non-profit hospitals having to close doors to some facilities, and open other hospitals in more affluent areas because they can’t keep up the facilities that have such a huge deficit.
Expansion and contraction of businesses is the economic way to adjust in the long term. With hospitals such as these, the marginal cost of taking care of a patient frequently is higher than the marginal benefit, in other words, many times hospitals actually have to pay money to take care of a patient. This causes a very interesting phenomenon for economics. The business must stay open and can’t decline patients services when they are badly needed. They try and cut costs where possible in order to reduce their variable costs.
In detroit there are becoming fewer and fewer hospitals. This trend is probably to adjust to the long term equilibrium in that area. as the demand goes down, or the willingness to pay goes down the supply must also become smaller after time. Initially the amount the hospitals “squeeze their capital” might be the initial response, but over time the amount of capital is decreased to minimize fixed costs.
In the end, non-profit hospitals are in constant flux to move towards a long term equilibrium. They adjust the amount of service by initially reducing the amount in which they squeeze their resources, and later, reducing capital, by doing so they maximize their profitability so that they can continue to take care of the people.