title: Division or department: a microeconomic analysis.
abstract: BACKGROUND
  In this article, the authors present a microeconomic analysis of the effects of the administrative status on plastic surgery units within academic medical centers, comparing the departmental versus subdepartmental status. The objectives are to introduce decision-making tools of microeconomics and use them to explore the potential effects of administrative status on academic plastic surgery services.
  
  
  METHODS
  Real financial data over a decade were used to construct total cost (TC), average total cost (ATC), and total revenue (TR) curves. From these, the authors derive the efficiency scale and express the fiscal performance by examining profitability, and the commonly used ATC curve. Mathematical modeling is then used to examine the effects of departmental versus subdepartmental status, assuming that (1) a plastic surgery unit exists in a competitive market; and (2) TR > TC for the plastic surgery unit to self-sustain in the long term. The variables considered are total clinical production (Q), gross collection rates (GCR), personnel cost, and departmental tax.
  
  
  RESULTS
  The sustainability (Q against GCR) is a hyperbolic curve with Q × GCR = TC at break-even. The TC/TR = f(TR) curve resembles the ATC curve. Sectional versus departmental status for a plastic surgery service in an academic medical center depends greatly on the shape of their TC/TR = f(TR) curve.
  
  
  CONCLUSIONS
  With most competing clinical units within the same academic medical center having departmental status, and most competing private surgeons having no institutional "taxes," the essential requirement for academic medical center plastic surgery services is to ensure that their TC/TR = f(TR) curve is comparable to that of their competitors.
authors: Augusta and Atlanta, Ga. From the School of Medicine and the Section of Plastic Surgery, Medical College of Georgia, and Georgia Institute of Technology.
authors: Philip L
authors: PL
authors: Mar
authors: Robert A
authors: RA
authors: Yu
authors: Jack C
authors: JC
authors: Yu
references: McConnell CR, Brue SR. Microeconomics of product and resource markets. In: Economics: Principles, Problems, and Policies. 12th ed. New York: McGraw-Hill; 1993:383–578.
references: Miller SH. Competitive forces and academic plastic surgery. Plast Reconstr Surg. 1998;101:1389–1399.
references: Roberts RR, Frutos PW, Ciavarella GG, et al. Distribution of variable vs. fixed costs of hospital care. JAMA 1999;281:644–649.
references: Mankiw NG. Firms in competitive markets. In: Principles of Microeconomics. 5th ed. Mason, Ohio: South-Western Cengage Learning; 2009:289–307.
references: Jacobs R, Smith PC, Street A. Measuring Efficiency in Health Care: Analytic Techniques and Health Policy. Cambridge, England: Cambridge University Press; 2006.
references: Webb TP, Brasel KJ, Redlich PN, Weigelt JA. Putting a price on education: Hours and dollars for a general surgery curriculum. Am J Surg. 2010;199:126–130.
references: Weissman JS. The trouble with uncompensated hospital care. N Engl J Med. 2005;352:1171–1173.
references: Gaynor M, Anderson GF. Uncertain demand, the structure of hospital costs, and the cost of empty hospital beds. J Health Econ. 1995;14:291–317.
references: Smith A. Wealth of Nations. First published in 1776 under the title: Inquiry into the Nature and Causes of the Wealth of Nations. Amherst, NY: Prometheus Books; 1991:534–538.
references: Ruberg RL. Can academic plastic surgery survive? Ann Plast Surg. 2004;52:329–330.
references: Dranove D. Economics of scale in non-revenue producing cost centers: Implications for hospital mergers. J Health Econ. 1998;17:69–83.
references: Kim TH. Factors associated with financial distress of nonprofit hospitals. Health Care Manag (Frederick) 2010;29:52–62.
references: Krieger LM. Discount cosmetic surgery: Industry trends and strategies for success. Plast Reconstr Surg. 2002;110:614–619.