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Chapter 2 - Using Economics in Healthcare

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The trade off of doing 'A' vs. 'B' Buying a car vs. saving for retirement ... Which among a series of alternatives is cheaper' For cardiac ailments, is it better to: ... – PowerPoint PPT presentation

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Title: Chapter 2 - Using Economics in Healthcare


1
Chapter 2 - Using Economics in Healthcare
  • Economics attempts to explain human behavior
  • Purchasing decisions
  • Market conditions
  • Complex social issues
  • Value of X vs Y
  • Usually goods for money (or other personal
    investment)

2
Economic Efficiency
  • Based on premise of scarcity
  • The point where average product is maximized
  • AND average variable cost is minimized
  • Several measures
  • Outcomes
  • Production / consumption rate
  • Overall productivity

3
Key Assumptions in Efficiency
  • Rational behavior
  • Prudent decision making
  • Consumers and suppliers
  • Microeconomics
  • Consistent framework in decision making
  • All information to make a decision
  • Omnipotence??
  • Rational ignorance

4
EMS Efficiency Example
  • Unit Hour Utilization (UHU)
  • Time an ambulance is on a call
  • Revenue generating
  • Total calls / Total time on duty
  • 10 calls in 12 hours 0.833
  • Balance is key
  • UHU too high means?
  • UHU too low means?

5
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6
Key Assumptions in Economics
  • Economizing behavior
  • Choose to limit demand for goods services to
    save money
  • Market
  • Transactions
  • Perfect market
  • Wall Street example
  • Enron, Worldcom, Global Crossing example of
    perfect

7
Key Assumptions in Economics
  • Optimizing Behavior
  • Determine the best possible outcome for a given
    situation
  • Cost and availability of resources
  • Intersection of Benefits and Cost
  • Decisions made on 2 levels
  • Micro MD and patient
  • Marco Policy makers and market

8
Marginality
  • Marginal Cost
  • The cost of providing 1 additional unit
  • Emergency Department example
  • Cost allocation issue
  • Marginal Benefit
  • The benefit of providing 1 additional unit
  • Cardiac Cath suite example

9
Example
10
Opportunity Cost
  • The trade off of doing A vs. B
  • Buying a car vs. saving for retirement
  • Coming to class vs. partying
  • Education for the young vs. healthcare for the
    elderly
  • In healthcare
  • Cost of curative measures vs. preventive measures
  • Which is the smarter investment

11
Cost Effectiveness
  • Which among a series of alternatives is cheaper
  • For cardiac ailments, is it better to
  • a) CABG
  • b) Hypertension screening
  • c) Nutrition counseling

12
Opportunity Cost
  • The cost of NOT doing something
  • 45k job vs. 50k job
  • Taking the 45k job 5k of opportunity cost
  • Need vs. Demand
  • MDs make medical decisions based on need
  • Need-based decisions ignore the global resource
    allocation issues

13
Cost/Benefit Analysis
  • Is the benefit of X worth the cost
  • Does kidney transplant yield enough additional
    years of life to justify the expense
  • Rx example
  • Macro vs. Micro

14
Demand and Supply
  • The Law
  • Inverse relationship between the demand for a
    commodity and the sacrifice that must be made to
    obtain it
  • The greater the sacrifice, the lesser the demand
  • Harley exemption
  • Fraternity exemption

15
Price Elasticity
  • How sensitive is the consumer to price?
  • On a brand level
  • On a commodity level
  • Where is healthcare on the elasticity scale?
  • Why?
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