The Qwik Serve Clinic always has three M.D.s and eight R.N.s working at its 24-hour clinic, which serves customers with minor emergencies and ailments. The clinic has hired an efficiency expert to examine its operations and make suggestions for reducing costs. For some of the medical procedures done at the clinic, experienced nurses can perform the medical tasks approximately as well as the physicians can, as long as the nurses are supervised by MD's. Since MD's are more highly trained than nurses, the marginal product of MD is higher than the marginal product of RN's. The manager of the clinic is confused by the efficiency consultant's report because the report recommends using more RN's and fewer MD's to lower the cost of providing a given level of medical services. Under what circumstnces would it be economically efficient for this clinic to use more RN's and fewer MD's (given MPmd>MPrn)?

I am wondering what supervised means. If there is an MD on each shift, it seems to me that each shift would require an MD (if to supervise if nothing else). So making nurses do more of the work, how is that saving the clinic money, the MD is being paid. The billing cost to the customer might be lowered, but it baffles me how total clinic costs can be reduced with this if the Nurse has to be supervised. Perhaps accountants have a different meaning of supervised that is my understanding.

See my post below to Matty64.

In this scenario, the efficiency expert's report suggests using more Registered Nurses (RNs) and fewer Medical Doctors (MDs) to lower costs while maintaining the same level of medical services. This recommendation might seem counterintuitive since MDs are more highly trained and typically have a higher marginal product compared to RNs (MPmd > MPrn).

To understand the circumstances under which it would be economically efficient for the clinic to use more RNs and fewer MDs, we need to consider a few factors:

1. Cost of Labor: One crucial consideration is the difference in salary or hourly wage between MDs and RNs. If the cost of employing MDs is significantly higher than that of employing RNs, increasing the number of RNs and reducing the number of MDs might result in cost savings.

2. Task Complexity: The report implies that for some medical procedures, experienced nurses can perform the tasks supervised by MDs without compromising quality. If the tasks being performed by the MDs are relatively routine or less complex, it might be more cost-effective to have RNs perform those tasks under MD supervision.

3. Availability of MD Supervision: The efficiency expert's recommendation assumes that MDs will continue to supervise the RNs, ensuring that the medical care provided maintains the required standard. If there is ample availability of MDs to supervise RNs, the clinic can leverage their expertise and reduce the number of MD direct interventions, thereby reducing costs.

4. Utilization of Resources: Another aspect to consider is the utilization of resources. If there is excess capacity with the MDs, meaning they are not fully occupied with their higher skilled tasks, it might be more cost-efficient to utilize more RNs to handle routine cases, allowing the MDs to focus on more critical or complex cases.

In summary, the clinic would find it economically efficient to use more RNs and fewer MDs if the cost of employing MDs is substantially higher than RNs, the tasks performed by the MDs are relatively routine or less complex and can be effectively supervised by RNs, there is ample availability of MD supervision for RNs, and if MDs have excess capacity to handle more critical cases. These circumstances would justify the shift towards a greater utilization of RNs while maintaining a high quality of medical services and reducing costs.