Informatics Question of the Week: Healthcare Economics

• Resource Scarcity: unlimited wants, limited resources. Resources are the most important factor in the decision-making process in a healthcare system. Health information technology can better manage resources through scheduling programs, inventory management software, and more.
• Opportunity Cost: the cost of the forgone best alternative. As healthcare practitioners, we know that time, human resources, particular pharmaceuticals, and other necessary resources have varying levels of demand and may frequently be scarce or hard to find. The choices we make (and the choices we don't make) often have a cost in the form of opportunity cost - whether or not we're aware of it at the time.
• Efficiency. Healthcare economics also helps decision makers to reconcile growing demand for healthcare services with available resources and funds.  We aim to get the most efficiency out of all the resources we have.  The efficiency concept is divided in three sub-concepts: technical, productive, and allocative. You can find more resources on these sub-concepts in the recommended readings below.
• Marginal Cost: the increase in total cost when a quantity produced increases by a value of ‘1’ unit. Understanding the concept of marginal cost is important for two reasons: they give a broader view of the issues faced in decision-making, and according to economic theories, people make decisions using marginal principles.
• Supply-Demand: unit price settles at a point where demand is equal to supply. Measures of supply show the amount of care that includes staffing: total number of doctors and nurses, consultants and managers. Measures of demand show the amount of health services the public needs. It is usually divided into two: the legitimate need and the desired demand, which is why healthcare economists interpret measures of demand with caution.

Question

Answer and Explanation

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References and Recommended Readings

Payne TH, Bates DW, Berner ES, et al. Healthcare information technology and economics. Journal of the American Medical Informatics Association : JAMIA. 2013;20(2):212-217. doi:10.1136/amiajnl-2012-000821.

http://www.ncbi.nlm.nih.gov/pmc/articles/PMC3638175/

Palmer S, Torgerson DJ. Definitions of efficiency. BMJ : British Medical Journal. 1999;318(7191):1136

http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1115526/