1. 1. Health Economics & Financial Management: A Broad Overview Denise Hancock, RN, MS, LCCE
2. 2. Economics Social science which studies production, distribution, and consumption of goods and services. Key assumptions in classical economic theory: 1. Resources are scarce in relation to human wants. 2. Resources have alternative uses. 3. Humans have different wants and priorities. Basic problem: How should resources be allocated to best satisfy human wants? (Fuchs, 2011)
3. 3. Two alternative views to classical economic assumptions Romantic view Denies scarcity of resources and inevitable need for choice. Monotechnic view A paternalistic approach, denying diverse human wants and priorities. (Fuchs, 2011)
4. 4. Macroeconomics Scientific study of the behavior of the economy as a whole. Some examples: national income rate of growth gross domestic product inflation price levels labor market (unemployment) markets for health insurance, drugs, services and products
5. 5. Microeconomics Scientific study of factors that affect the decisions and actions of individuals, families, and organizations. Health care providers Hospitals
6. 6. Economics Social science Theory Politics Process of allocating scarce resources Policy End result of political process Finance Determined by policy Economics & Finance are related, but not the same. (Milstead, 2016)
7. 7. Finance vs. Accounting Finance is the study of how to optimally allocate assets. Finance is fundamentally a forward-looking field, concerned with future values. Accounting is the process of communicating financial information about a business. Accounting is fundamentally a backward-looking field.
8. 8. Management Process of planning, directing, controlling, and evaluating people and resources to achieve established outcomes (Yoder-Wise, 2015) Management theories and concepts covered in other courses.
9. 9. Financial Management Managerial activity which is concerned with the planning and controlling of the firm's financial resources TYPICAL GOALS 1. Maximize profit / shareholder value If non-profit, to meet some socially desirable need 2. Minimize costs 3. Maintain market share
10. 10. Health Economics Branch of economics concerned with issues related to efficiency, effectiveness, value and behavior in the production and consumption of health and healthcare. Helps to: Understand behaviors and decisions Evaluate options Inform policy Promote health
11. 11. A few economic terms to know, important to healthcare & health markets Opportunity cost Information assymmetry Adverse selection Moral hazard (Milstead, 2016)
12. 12. Health economics is a tool for solving problems. Three of our biggest problems in US Healthcare today. 1. High and growing costs 2. Lack of access to healthcare 3. Quality (Disparity of health levels) (Fuchs, 2011)
13. 13. The COST problem: economics offers some solutions Increase supply of services Excess hospitals & physicians drive down price through competition Reduce demand for services service utilization by improving population health (public health) Improve consumer cost-consciousness Change physician behaviors Market regulation Administrative controls & planning (Fuchs, 2011)
14. 14. The ACCESS problem is more complex no simple solutions. General Access Issue Access to type of care when and where wanted (primary care, ER, home care & care outside of working hours) Special Access Issues Poverty Rural areas Racial minorities (Fuchs, 2011)
15. 15. QUALITY Also a complex problem, what really determines outcomes? Evidence points to socioeconomic & cultural factors as cause of disparities, not quantity or quality of healthcare Chief killers in US are heart disease, cancer, accidents and violence Healthcare services have not been successful at changing behaviors (Fuchs, 2011)
16. 16. Rational resource allocation decisions require considering the relative prices of various healthcare services with respective marginal benefit to health.
17. 17. Health economics is a useful tool, but we have to determine values. Economics can tell us how to maximize values using information about technological means and ends, inputs and constraints. Economics cannot define our values. Economics cannot tell us what we want. Once we determine our most important values and wants, economics can help us get desired outcomes.
18. 18. References Fuchs, V.R. (2011). Who shall live? Health, economics and social choices (2nd ed.). Hackensack, NJ: World Scientific Publishing Co. Milstead, J.A.( 2016) Health policy and politics: A nurses guide (5th ed.). Burlington, MA: Jones & Baker. Yoder-Wise, P. S. (2015). Leading and managing in nursing (6th ed.). St. Louis, MO: Elsevier.