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On October 30, 2017, the state of Virginia approved the merger of Wellmont Health System and Mountain States Health Alliance, following the state of Tennessee’s approval. This cleared the way for the two systems to form Ballad Health, the only provider of inpatient general acute care services in the Tri-Cities region of east Tennessee and southwest Virginia. Suppose that Ballad Health is the only supplier of inpatient general acute care in the Tri-Cities region and also the only employer of nurses in the region. Suppose the demand for inpatient general acute care surgeries is q = 1,620 – p, where q is the number of surgeries demanded and p is the price of a surgery. In addition, assume that the only input needed for a surgery is nursing labor. Each nurse hired by Ballad Health supports 4 surgeries and this does not change regardless of how many nurses are hired.

Thus, if nurses are paid a wage of w, the marginal cost of producing one more surgery is w/4 for Ballad Health. Finally, assume that the supply of nurses is L = 5w, where L is the number of nurses supplying their labor for surgeries and w is the hourly wage for a nurse.

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A) As both a monopoly producer of surgeries and the only purchaser of nursing services in the Tri-Cities area, how many nurses will Ballad Health hire? What wage will Ballad Health offer nurses?

B.) How many nurses would be hired if both the market for surgeries and the labor market for nurses were perfectly competitive? What would be the equilibrium wage of a nurse in that situation? Compare your answer to part (A). How do you think nurses would respond to this merger? What types of regulations or accommodations would they demand from the governments of Tennessee and Virginia in order to support this merger? Get Nursing Help Today

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