ECONOMICS IN HEALTH CARE:

A PRIORITY SETTING TOOL

ALI DJAMHURI
 What is Health?

“[Health is] the state of complete physical,

mental and social well-being and not merely
the absence of disease or infirmity” (WHO,
1948) and the “extent to which an individual or
group is able to realize aspirations and satisfy
needs, and to change or cope with the
environment. Health is a resource for everyday
life, not the objective of living; it is a positive
concept, emphasizing social and personal
resources as well as physical capabilities”
(WHO, 1984).
Health Indicators, Part I
 Intrinsic factor:
• Genetic
• Psychology

Environmental factor:
• Physical Health Service Model:
• Biological • Liberal
• Economic Health Status • Socialism
• Social, anthropological
• Ergonomic • Family doctor
• Safety

Health Behaviour:
• Food/drinks/smoking
• Sleep
• Physical activity,sports
• Sexual activities
• Recreation
• Work, etc

Factors which affect health status of an individual, family or community

 What are Health Indicators?
With the goal of good health in mind, think of
an indicator as

“…a measure that helps quantify the

achievement of a goal.”
-Mark Friedman

Health Indicators, Part I

 What are Health Indicators?

Power of indicators is comparisons

- over time (trends)
- geographic areas
- groups of people
and the focus on the most essential domains of
health.

Health Indicators, Part I

 Manajemen Rumah Sakit

Suatu proses (perencanaan, pengorganisasian,

pengarahan, pengawasan, pengkoordinasian dan
penilaian) terhadap sumber, tata cara dan
kesanggupan yang tersedia untuk memenuhi
kebutuhan dan tuntutan terhadap kesehatan,
perawatan kedokteran serta lingkungan yang sehat
dengan jalan menyediakan dan menyelenggarakan
berbagai upaya kesehatan di Rumah Sakit yang
ditujukan kepada perorangan, keluarga,
kelompok dan ataupun masyarakat.
 MANFAAT
• Dapat digunakan untuk mengelola sumber
daya dan kemampuan yang dimiliki oleh
Rumah Sakit secara efektif dan efisien
• Dapat memenuhi kebutuhan (need) dan
tuntutan (demand) masyarakat
• Dapat menyediakan dan menyelenggarakan
upaya kesehatan sebaik -baiknya
 Principal Elements of Hospital
and Health Care Management

INPUT PROCESS OUTPUT OUTCOME

Man Medical
Money Planning Service
Materials Organizing Health
Machines Actuating Status
Methods Controlling
Market Health
service

Feed back
 The Challenges of Hospital Institution
• Too expensive,
uncoordinated and
fragmented
• Develop clinical guidelines
and protocols for
effectiveness and efficacy
• Turbulence and
uncertainty of the
external environment
• Structural configuration is
larger, more complex and
multiunit
Common Categorical Grouping:
Administrative Services
Informational Services
Therapeutic Services
Diagnostic Services
Support Services
 Why Priority Setting?
• Resource availability is scarce including resources
in health care
• Though if there is relatively no scarcity in health
care resources, priority setty is still needed
because there are various competing programs
believed to be effective contributor for
community health improvement
• Health care program funding normally involves
both central and local government. Appropriate
health care program selection (priority setting) is
a must
TWO CORE ECONOMIC CONCEPTS
• Opportunity Cost
– Suatu konsep yang menunjuk kepada sejumlah
benefit yang terpaksa dikorbankan karena
diambilnya suatu keputusan tertentu.
Memutuskan untuk melaksanakan program atau
aktivitas A, misalnya, maka salah satu unsur biaya
yang harus diperhitungkan adalah hilangnya
kesempatan mendapatkan keuntungan (manfaat)
dari melaksanakan program B
TWO CORE ECONOMIC CONCEPTS
• Marginal Cost and Marginal Benefit
– Marginal Cost adalah tambahan biaya yang harus
dikeluarkan karena bertambahnya output
program atau kegiatan produktif dengan 1 unit
output.
– Marginal benefit adalah tambahan unit output
yang dihasilkan akibat dikeluarkannya tambahan
biaya ke dalam program atau kegiatan produktif
tertentu dengan satu satuan uang (Rp atau $).
 Managers
Patiens Ethicists

Variying and Balanced,

comprehensive
Clinicians often conflicting approach to
needs priority setting

Organizational Health Health Service

Behaviorists Economists Researchers

Stakeholders Relationship and Basic Objectives

 Benefit
“Return” for
Opportunity Cost
a given use (lost Benefit)
of resources
Benefit “Return”
(Program A) for next best use of
resources
(Program B)

Illustration of Opportunity Cost

 Marginal benefit of
Next unit of resources

Benefit from
Current level
of
funding

Benefit Associated with various programmes

 “Flat of the curve” medicine
B2

B1
Benefit

$0 $ X Healthcare Spending ($) $ Y

 Two Key Objectives of Health Care
Program Spending
1. Efficiency
2. Equity
a. Equality of expenditure per capita
b. Equaliity of inputs per capita
c. Equaliity of inputs for equal need
d. Equaliity of access forequal need
e. Equaliity of utilization for equal need
f. Equality of marginal met need
g. Equality of health
 Economic Evaluation
• Is evaluation toward inputs (cost) and output
(consequences),specifically in selecting the
most appropriate choice (highest benefit or
least cost) due to the scarcity of resource
availability.
• Using other word, economic evaluation is the
comparative analysis of alternative courses of
action in terms of both their cost and
consequences
Basic tasks in Economic Evaluation
1. Identifying cost and benefit (consequences)
of alternatives
2. Measuring Cost and benefit of alternatives
3. Valuing Cost and benefit of alternatives
4. Comparing the cost and consequences of
alternatives
 Techniques in Health Care Economic
Evaluation
1. Cost Minimization Analysis (CMA)
2. Cost Effectiveness Analysis (CEA)
3. Cost Utility Analysis (CUA)
4. Cost Benefit Analysis (CBA)
Different Characteristics of Health care
Economic Evaluation
No Yes
Examine only Examine only
Consequences Costs
No
I A Partial Evaluation I B 2 Partial Evaluation
Outcome Cost Cost – Outcome
Description Description description
3A Partial Evaluation 3 B 4 FullEconomic
Yes Efficacy or Cost Evaluation
Effectiveness Analysis CEA, CUA
Evaluation CBA