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ADVANCED HEALTH CARE ECONOMICS

St. Paul University Philippines


Tuguegarao City, 3500 Cagayan North

GRADUATE SCHOOL
Master of Science in Nursing
AY 2013-2014

MODULE
IN
ADVANCED HEALTH CARE ECONOMICS

ANUNCIACION T. TALOSIG, DNS


Professor

ANA MARIE BESA BATTUNG


Student
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MODULE A

Introduction:

Health is defined often simply as the lack of illness, but unless illness is itself defined, this is not

helpful. There are many different ways of defining illness and each may be related to the

different actors supplying the definition. For example, the medical model of illness, as proffered

by the medical profession, defines illness in terms of physical and mental disorders. The

presence or absence of disease and the stage of its invasiveness dominate such definitions which

are pathologically based. Other definitions, however, may be more functionally based. It is

possible to define illness in terms of its effects upon the way in which individuals function in

their daily lives. For example, emphasis would be placed upon the amount of pain suffered or the

degree to which individuals are restricted in undertaking normal activities.

Economic is the study of how people make choices. It is also the study of scarcity and choice,

finally helps how to use scarce or limited resource. The subject matter of economics lies on the

production, distribution and consumption of economic goods. How much should be spent on

education, health, books, travel, food or clothing is of course a matter of political, social or

simply personal judgment as well as a question for the economist. However, as soon as people

have the necessity to choose between having relatively more in the way of health services at

the cost of having relatively less leisure or less to spend on education, they are “economizing”.

“Health economics” can be defined as the application of Economic theories, tools and concepts

of economics as a to the topics of health and health care. Since health economics is concerned

with issues related to the allocation of scarce resources to improve health, this includes both
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resource allocation within the economy to the health sector and within the health care system to

different activities and individuals.

The economic perspective in usefulness in the context of health care:

 Health economics examines the problem of scarcity as it arises with respect to health and

health care.

 It examines how we as individuals and societies confront the fact that while the resources

available to us are limited, the alternative uses for these resources are unlimited. Thus,

health economists are interested in some very important questions. How is health

produced? What role does health care play in its production? What is the value of health?

How do we go about measuring health status? What influences for health and health

care? What influences the supply of health care? How can equilibrium between demand

and supply be achieved? The discipline of health economic is the study of these questions

and the answers to them that individuals and societies have put forward.

1. The chapter begins by asserting that four preconditions are necessary for the

establishment of modern medical care: effective medical technology , sufficient wealth,

low risk of death, and insurance financing. Explain why each is necessary? How are they

interrelated?

To make effective for the establishment of modern medical care, the following are

necessary.
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a. Effective Medical Technology

Effective medical technology is one of the preconditions necessary for the establishment of

modern medical care because of the reason that as modern technologies are being discovered

nowadays,some brought about by technological innovations, these technologies which are

deemed necessary for better health care delivery. As society nowadays are becoming health

conscious,being aware with their health conditions. On the other hand, as the emergence of new

diseases and there would be a need for better technology, in a way that it helps in finding the

solution for curing the ailments in the swiftest manner.

b. Low Risk of Death such that improving Health is worthwhile

Dating back in history ,where humans were living in a crude life and technologies are not as

modernized nowadays, come to a point that when they have contracted a disease and no life

measure is accessible they came to a point that death is their final destination. In contrast,

nowadays, where modern technologies has been discovered, new medicines are being

formulated, it means to say that health is worthwhile .

c. Adequate wealth to pay for advanced medical treatment

Health care as a commodity takes effect in the free market. Like for example, those who are

undergoing knee replacement for osteoarthritis. Since knee replacement is costly those who can

afford will dwell to it and for those who can not afford will just bear the pain of having arthritis.
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d. Financial organization/insurance to pool funds from many people

In a our country, once you enter a hospital, the admitting section will ask you ask if you have

health insurance. One particular is the Phil health once you are a premium member there are

benefits that only premium members are qualified to utilize. The implication of this is that many

if the benefits will outweigh the cost then perhaps many people will enrol to this kind of

membership.

2. It is economic development that creates the foundation for modern medicine. Explain.

The connection between health and national development are complex. The interaction is a two-

way phenomenon with health being both influenced by and influencing economic development.

Improved health has been considered solely a result of economic growth, a part of the product of

growth rather than one of its causes. Every country has their own programs in connection to the

health sector. Like for example the vaccines for pneumococcal. In the rich countries like the

Kingdom of Saudi Arabia. Any Saudi who would like to receive such vaccine would be given

freely because their government can afford the amount. In comparison to the Philippines where

such vaccines are limited. You can only have it unless you buy for the vaccine. One

manifestation is that a wealthy country would invest so much on researches for the benefits of its

constituents other than the country with low socio economic status.

3. Economic development, population growth and medical technology are linked. The growth of

humanity is divided into four periods.


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A. Stone Age

The Stone Age is a broad prehistoric time period during which humans widely used stone for tool

making. Stone tools were made from a variety of different kinds of stone. For example, flint and

chert were shaped (or chipped) for use as cutting tools and weapons, while basalt and sandstone

were used for ground stone tools, such as quern-stones. Wood, bone, shell, antler and other

materials were widely used, as well. During the most recent part of the period, sediments (like

clay) were used to make pottery. A series of metal technology innovations characterize the later

Chalcolithic (Copper Age), Bronze Age and Iron Age. The period encompasses the

first widespread use of tools in human evolution and the spread of humanity from East Africa to

the rest of the world. It ends with the development of agriculture, the domestication of certain

animals, and the smelting of copper ore to produce metal. It is termed prehistoric since humanity

had not yet started writing — the traditional start of recorded history. The date range of this

period is ambiguous, disputed, and variable according to the region in question. While it is

possible to speak of a general 'stone age' period for the whole of humanity, some groups never

developed metal-smelting technology, so remained in a 'stone age' until they encountered

technologically developed cultures. However, it is believed that this period began somewhere

around 2.5 million years ago with the first hominid tool makers in Africa. The transition out of

the Stone Age occurred between 6000 BC and 2500 BC for much of humanity living in North

Africa, Asia and Europe.


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B. Agricultural Age

At the beginning of this age, the planet has warmed from the Ice Age to the temperatures of

today. In Alaska, the ice prison has broken up and the humans began migrating to the rest of the

continent. In northern Africa, the lush plains of the Sahara turned into the desert of today. To the

retreating peoples, the Nile River valley beckoned. Climate change caused large stands of wild

grain grew throughout the Middle East. Around 8000 people in northern Iraq began to

deliberately plant these grains. The nearby Tigris and Euphrates Rivers provided irrigation. After

harvest, the grains were ground into flour which kept for long periods of time. Historians call this

age "The New Stone Age" or in Latin the "Neolithic Age". I don't think that advances in

stonework was the determining factor in this era. It was warming of the planet and the

subsequent development of farming. Agriculture provided stability. It supported more people. It

allowed people to congregate into cities. City folk were able to perform specialized tasks.

Organization for defense and for commerce was needed. And people's imaginations were freed to

pursue academic pursuits. Agriculture is the foundation that allows workers of other skills to

prosper. Jericho (yes, the one of the Bible) may be the world's oldest city, dating back to 8000.

Possessing all of 10 acres and 2,500 people, it was the must-see metropolis of 7500. By

6000, pottery was developed. In the Far East, humans independently developed the farming of

rice. In the Sixth Millennium the Sumerians took over the Iraq region and established a network
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of cities. In 4000 they founded the city of Ur and made it into the largest city in the world. Egypt

united under its first ruler in 3100. The Chinese established their first cities along the Yellow

River about this time. Cities began in the Indus River Valley. Towards the end of this era, the

lands around the eastern Mediterranean began civilizations. In 4000 world population reached

the unprecedented number of 85 million people. They lived in isolation from other civilizations.

C. Industrial Age

Industrial Revolution was a period from the 18th to the 19th century where major changes in

agriculture, manufacturing, mining, transport, and technology had a profound effect on the

socioeconomic and cultural conditions starting in the United Kingdom, then subsequently

spreading throughout Europe, North America, and eventually the world.

The Industrial Revolution marks a major turning point in human history; almost every aspect of

daily life was eventually influenced in some way. Most notably, average income and population

began to exhibit unprecedented sustained growth. In the two centuries following 1800, the

world's average per capita income increased over 10-fold, while the world's population increased

over 6-fold. In the words of Nobel Prize winning Robert E. Lucas, Jr., "For the first time in

history, the living standards of the masses of ordinary people have begun to undergo sustained

growth. ... Nothing remotely like this economic behavior has happened before." Starting in the

later part of the 18th century, there began a transition in parts of Great Britain's previously

manual labor and draft-animal–based economy towards machine-based manufacturing. It started

with the mechanization of the textile industries, the development of iron-making techniques and

the increased use of refined coal. Trade expansion was enabled by the introduction

of canals, improved roads and railways. The introduction of steam power fuelled primarily by
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coal, wider utilization of water wheels and powered machinery (mainly in textile manufacturing)

underpinned the dramatic increases in production capacity. The development of all-

metal machine tools in the first two decades of the 19th century facilitated the manufacture of

more production machines for manufacturing in other industries. The effects spread

throughout Western Europe and North America during the 19th century, eventually affecting

most of the world, a process that continues as industrialization. The impact of this change on

society was enormous. The first Industrial Revolution, which began in the 18th century, merged

into the Second Industrial Revolution around 1850, when technological and economic progress

gained momentum with the development of steam-powered ships, railways, and later in the 19th

century with the internal combustion engine and electrical power generation. The period of time

covered by the Industrial Revolution varies with different historians. Eric Hobsbawm held that it

'broke out' in Britain in the 1780s and was not fully felt until the 1830s or 1840s, while T. S.

Ashton held that it occurred roughly between 1760 and 1830. Some 20th century historians such

as John Clapham and Nicholas Crafts have argued that the process of economic and social

change took place gradually and the term revolution is a misnomer. This is still a subject of

debate among historians. GDP per capita was broadly stable before the Industrial Revolution and

the emergence of the modern capitalist economy. The Industrial Revolution began an era of per-

capita economic growth in capitalist economies. Economic historians are in agreement that the

onset of the Industrial Revolution is the most important event in the history of humanity since the

domestication of animals and plants

D. Information Age
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The Information Age (also known as the Computer Age, Digital Age, or New Media Age) is a

period in human history characterized by the shift from traditional industry that the industrial

revolution brought through industrialization, to an economy based on information

computerization. The onset of the Information Age is associated with the Digital Revolution, just

as the Industrial Revolution marked the onset of the Industrial Age.

During the information age, the phenomenon is that the digital industry creates a knowledge-

based society surrounded by a high-tech global economy that spans over its influence on how the

manufacturing throughput and the service sector operate in an efficient and convenient way. In a

commercialized society, the information industry is able to allow individuals to explore their

personalized needs, therefore simplifying the procedure of making decisions for transactions and

significantly lowering costs for both the producers and buyers. This is accepted overwhelmingly

by participants throughout the entire economic activities for efficacy purposes, and new

economic incentives would then be indigenously encouraged, such as the knowledge economy.

The Information Age formed by capitalizing on the computer microminiaturization advances,

with a transition spanning from the advent of the personal computer in the late 1970s, to the

Internet's reaching a critical mass in the early 1990s, and the adoption of such technology by the

public in the two decades after 1990. This evolution of technology in daily life, as well as of

educational life style, the Information Age has allowed rapid global communications and

networking to shape modern society.The Information Age has impacted the workforce in several

ways. First, it has created a situation in which workers who perform tasks which are easily

automated are being forced to find work which involves tasks that are not easily automated.

Second, workers are being forced to compete in a global job market. Lastly, workers are being

replaced by computers that can do the job more effectively and faster. This poses problems for
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workers in industrial societies, which are still to be solved. However, solutions that involve

lowering the working time usually find high resistance.Jobs traditionally associated with the

middle class (assembly line workers, data processors, foremen, and supervisors) are beginning to

disappear, either through outsourcing or automation. Individuals who lose their jobs must either

move up, joining a group of "mind workers" (engineers, doctors, attorneys, teachers, scientists,

professors, executives, journalists, consultants), or settle for low-skill, low-wage service jobs.

The "mind workers" are able to compete successfully in the world market and command high

wages. Conversely, production workers and service workers in industrialized nations are unable

to compete with workers in developing countries and either lose their jobs through outsourcing

or are forced to accept wage cuts. In addition, the internet makes it possible for workers in

developing countries to provide in-person services and compete directly with their counterparts

in other nations.This has had several major consequences, including increased opportunity in

developing countries and the globalization of the workforce.Workers in developing countries

have a competitive advantage which translates into increased opportunities and higher

wages. The full impact on the workforce in developing countries is complex and has downsides.

In the past, the economic fate of workers was tied to the fate of national economies. For example,

workers in the United States were once well paid in comparison to the workers in other

countries. With the advent of the Information Age and improvements in communication, this is

no longer the case. Because workers are forced to compete in a global job market, wages are less

dependent on the success or failure of individual economies.


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A. FACTORS AFFECTING HEALTH CARE COSTS AND IMPLICATIONS

INSTRUCTION:
Before proceeding further, get the most recent data from the Department of Health

in terms of Morbidity and Mortality for the country where you live.

MORBIDITY: 10 Leading Causes, Number and Rate*


5-Year Average (2000-2004) & 2005
Diseases 5-Year Average (1955- 2005
1959)
Number Rate Number Rate
1. Acute Lower Respiratory 694,209 884.6 690,566 809.9
Tract Infection and
Pneumonia**
2. Bronchitis/Bronchiolitis 669,800 854.7 616,041 722.5
3. Acute watery diarrhea 726,211 928.3 603,287 707.6
4. Influenza 459,624 587.0 406,237 476.5
5. Hypertension 314,175 400.5 382,662 448.8
6. TB Respiratory 109,369 139.7 114,360 134.1
7. Diseases of the Heart 43,945 56.1 43,898 51.5
8. Malaria 35,970 46.1 36,090 42.3
9. Chicken Pox 79,236 41.1 30,063 36.3
10. Dengue fever 15,383 19.6 20,107 23.6
* per 100,000 population
** Does not include ALRI, Pneumonia cases only from 2000-2002

MORTALITY: TEN (10) LEADING CAUSES


NUMBER AND RATE/100,000 POPULATION
Philippines
5-Year Average (2004-2008) & 2009
5-Year Average
2009*
CAUSES (2004-2008)
Number Rate Number Rate
1. Diseases of the Heart 82,290 94.5 100,908 109.4
2. Diseases of the Vascular System 55,999 64.3 65,489 71.0
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3. Malignant Neoplasms 43,185 49.6 47,732 51.8


4. Pneumonia 35,756 41.1 42,642 46.2
5. Accidents** 34,704 39.9 35,990 39.0
6. Tuberculosis, all forms 25,376 29.2 25,470 27.6
7. Chronic lower respiratory diseases 20,830 24.0 22,755 24.7
8. Diabetes Mellitus 19,805 22.7 22,345 24.2

9.Nephritis, nephrotic syndrome and nephrosis 11,612 13.4 13,799 15.0

10. Certain conditions originating in the perinatal


12,590 14.5 11,514 12.5
period
Note: Excludes ill-defined and unknown causes of mortality
* reference year
** External causes of Mortality

Health Status – is the actual health status of an individual or a population. Health status can be

Measured by:

• Morbidity- number of individuals who are ill

• Mortality- number of individuals in a population who passed from one

State (alive) to the other (dead)

• Health Outcome- net impact of health care on health status

Two activities can be measured: Cost of medical care and cost of illness-

QUESTION 1: The economy as a whole is measured by the Gross National Product. From 2005

to 2012, what percentage of the GNP was allocated to Health? What is Gross National Product?

Gross National Product- It is a term denoting the total money value of the goods and services

produced by a nation during a given year. GNP is used for many purposes, but the most
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important one is that it measures the overall importance of an economy. The Gross National

Product (GNP) is the most comprehensive measure of a nation’s total output of goods and

services. It is the sum of the monetary values of consumption, investment, government purchases

of goods and services and net exports. It is denoted in the formula as:

Y = C+I +Ge+ (X- M)

Y – Out put

C - Consumption

I – investment

Ge – government purchase

(X – M) - Net export

GROSS NATIONAL GROSS


INCOME per capita NATIONAL
BUDGET FOR PERCENTAGE
 YEAR PPP or Purchasing PRODUCT
HEALTH FOR HEALTH
Power Parity (current at current
international $) price
2005 3030 $86.9B 9,725,318,000 3.45%
2006 3210 $98.8B 9,457,285,000 3.65%
2007 3480 $122.21B 11,398,771,000 3.4%
2008 3,670 $149.359B 18,912,010,000 3.35%
2009 3,670 $173.602B 23,666,655,000 3.6%
2010 3,950 $168.333B 24,649,765,000 3.61%
2011 4,120 $199.589B 31,828,616,000 4.4%
2012 4400 $224.754B 42,155,963,000 4.1%
P34.983B as of 2nd
2013 $250.265B 51,269,491,000 3.5%
Quarter2013

QUESTION 2: It is clear that national health expenditures rise with income per capita. Do health

outcomes improve in the same way? Explain

Per capita health spending varies widely among countries. In general, simple correlations

indicate that there is little or no connection between health spending and both life expectancy

and infant mortality, whether one is comparing developed nations. Multivariate analyses that
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include such additional determinants of health as incomes, environmental quality, and personal

habits do not change this conclusion. The connection between spending and health outcomes

could be loose for several reasons. One could be that health care is not an important determinant

of health outcomes; however, several studies suggest that this conclusion is false. Another might

be that areas that deliver technologically sophisticated—and costly—care are inefficient in

delivering less-sophisticated care. A third reason might be that much health spending goes to

relieve conditions, such as joint deterioration, cataracts, and some forms of angina, that cause

disability, not death.

QUESTION 3: In terms of health care expenditure, how much had government and the

private sector spent for health care. From the public sector,

39%was spent for preventive research, teaching and training

61% for curative research, teaching and training

How does this compare to the private sector which spent

10% for preventive research, training and teaching

90% curative research, training and teaching

The price of health care is determined by the cost of accessing and utilizing health care. It is

important to know that seeking health care includes costs other than what people pay health

providers for health services rendered or goods assured. (Policarpio, 2006)

So, there are factors that can be considered that can cause high cost of health care.
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QUESTION 4:

Discuss why and how these 11 factors identified have contributed to high cost of health care.

1. Increased use of health care agencies

Increase use of health care agencies being identified to contribute in high cost of health care

in a way that since health care is specifically an singularly consumed on the presumption of

investment benefits in the health care status it will turn out that the demand for healthcare

will take effect on the consumption of health . Health care being a commodity in the free

market and the doctor being the middle man to the people as consumer ,the doctors will offer

options of regimens that could help man in optimizing his health status and so given the

options man will try these options and so frequent use of this will contribute to high cost of

health care.

2. Inflation

Inflation means a reduction in the value of money; in other words, a rise in general price levels.

The literal meaning of the word inflation is to blow up or get bigger. If the amount of money in a

country - the money supply - grows faster than production in that country, the average price will

rise as a result of the increased demand for goods and services. Inflation can also be caused by

higher costs being charged on to the end-user. These might be raw material costs or production

costs which have risen, but could also be higher tax rates. These price rises cause the value of

money to fall. You can therefore buy less with the same amount of money. But this does not need

to have an immediate effect on purchasing power. Purchasing power only declines if wages rises

less rapidly than prices, limited inflation is good for the economy. But high inflation is less
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beneficial. High inflation can cause the population’s confidence in their own currency and

economy to decline, and it can be less appealing for foreign investors to invest in the country

concerned. High inflation therefore often has a harmful effect on economic growth. If inflation

gets too high, a country’s central bank will often intervene by raising its interest rates and thus

discourage the creation of money.

3. Population Increase

Since 2009, the balance of the world's population now lives in urban areas, creating a series of

new challenges for governments and the healthcare sector. In Africa, Asia and Latin America,

urbanization has resulted in vast shantytowns and slums with little to no access to health

services, freshwater or sanitation services. And as urban populations swell, so too does the

incidence of illness such as hypertension, heart disease, obesity, diabetes and asthma.

Increasing affluence has also created a series of new challenges for the healthcare industry as the

gap widens between the rich and the poor, resulting in a disparity in the availability and quality

of care. And as more people move into the ranks of the middle class, the impact on the disease

profile has been dramatic as changing diets result in increasing levels of obesity and diabetes.

Responding to growing needs for healthcare services requires investment in those services and in

the infrastructure required to support it.

4.Demography

As we get older, we tend to need more medical care. The baby boom generation is heading into

retirement, with enrollment in Medicare set to grow by an average of 1.6 million people
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annually. Additionally, nearly half the world’s population has one or more chronic conditions,

among them asthma, heart disease or diabetes, which drive up costs. And two-thirds of adults are

either overweight or obese, which can also lead to chronic illness and additional medical

spending.

5.Focus on illness care

Focusing on illness care would be a factor in increasing healthcare for the reason that

Most insurers -- including traditional Medicare -- pay doctors, hospitals and other medical

providers under a fee-for-service system that reimburses for each test, procedure or visit.

Coupled with a medical system that is not integrated, this encourages overtreatment, including

repetitive tests and sometimes these test aren’t included in medicare program.

6.Cost reimbursement

Reimbursement is the standard method of payment to health care providers. The payer is often an

insurance firm or government entity. How these payments are made is a central concern. Another

important issue is the continued trade­off between an organization's efficiency and bottom­line 

profit versus the freedom of patients and providers. In the Philippine setting, there are times  

when some of the benefits in the Phil health insurance that are beyond the coverage or sometimes

they exceed the limit of such coverage and so cost reimbursement is also a factor for increasing 

cost of health care.

7. Fee for service reimbursement

Fee for service reimbursement increases the cost of healthcare holds true when a certain medical

profession such as doctor is working on a private firm.The doctor being the mediator between the
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patient and his health,the doctor who is all knowing and knows the possible solution for

optimizing health. Professional fee or service fee is being charged every visit and sometimes it is

coved in the insurance and so it would be a factor for increase cost of health care.

8. Technology

Technology increases range of possible treatments. Newer technology, means more expensive.

In cases such as those with kidney problems that needs for kidney transplants. The emergence of

these transplants would mean expensive than the dialysis and so it can contribute to increase cost

of health care.

9. Indigent care

It is one of the rights of every citizen that health is accessible to them, regardless of their status

in life. Indigent care is a factor for the increasing of health care cost because of the reason that

since the indigent are exempted from paying taxes for revenues needed for the programs

implemented for indigent care therefore the tax payers will be paying more taxes thus increasing

health care cost.

10.Malpractice

Malpractice can be a factor for increase cost of health care. Just in the case of patients who

have undergone surgeries where strict aseptic technique is necessary, if not sustained it would

arise to further infection and so increase cost of healthcare will be the effect.
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11.Health pattern changers (Impact on HIV-AIDS, SARS, and DENGUE etc.)

Nowadays,AIDS has caught the attention of the public that HIV cases has increased rapidly

than in the earlier years,the need to combat this type of illness is very costly,in a way that

sophisticated machines,frequent laboratory workouts and expensive medicines are needed..


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MODULE B

OBJECTIVE:

Discuss the changing role of management and the competencies required to function in the

managerial role as well optimize utilization of resources.

Standard cost profile

Cost determination

Patient care classification

Cost center

Quality indicators

Revenue center

Standard Cost profile

 Identifies required resources of nursing hours needed for different categories of patients.

It is a method used for grouping patients according to the amount and complexity of their

nursing care requirements over a given period of time.

Cost Center

 These are the smallest units of activity of area of responsibility for which costs are

documented. We can also refer to them as service sections of units. They are identified

based on this type of activities they provide as well as its geographical location within a

health facility. Each unit has its own set of activities to perform, a mission to fulfill and
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manager to supervise its operations. Unit supervisors are responsible for the operation,

maintenance and control of accounts under theory responsibility.

Patient Classification System (PCS)

 The PCS is a method of grouping patients according to the amount and complexity of

their nursing care requirements. It is a measurement tool used to articulate the

nursing workload for a specific patient or group of patients over a specific period of time.

Patient acuity is the measure of nuring workload that is generated for each patient. As

a patient becomes sicker, the acuity level rises, meaning the patient requires more nursing

care. As a patient acuity level decreases, the patient requires less nursing care

Quality Indicators

 Define the care that is provided for patient. These indicators must be measurable and are

necessary to determine if the care provided is of quality.

Revenue Center

 Summarizes the income management expected to generate during the planning period.

A. CONCEPT of COST:

Costs are expenses or assets having utility for future periods

1. Cost information in relation to time frame

2. Costs that change in relation to volume or time

3. Cost data utilized for product pricing


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4. Costs related to strategic and operational planning and control

B. WHAT IS COST MANAGEMENT?

 It is an ongoing process of planning, monitoring and controlling operations to meet

strategic directions of the organization. Uses are product pricing, inventory valuation and

income determination as well as product planning and control.

There are 5 functions of cost management systems:

a. Cost determination

b. Activity forecasting

c. Functional Cost - Center Budgeting

d. Performance reporting on a product level

e. Performance reporting on a functional level

Cost Determination

 The calculation of the unit cost of the activity by dividing the total cost of the function by

the measurement unit or base.


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Activity forecasting

 It is an activity to calculate or estimate in advance or foretell, it may be projected income

statement, projected or forecast balance sheet, financial forecasts for external users or

expenditures.

Performance reporting on a functional level

 Monitor and control the cost to produce a procedure most appropriate for variable cost,

direct cost and indirect fixed costs center costs.

QUESTION 1.

Explain the 5 functions of cost management. You may use any journal on Health

Economics, on managing health care costs, quality and technology.

WHAT IS COST MANAGEMENT?

It is an ongoing process of planning, monitoring and controlling operations to meet strategic

directions of the organization.Uses are product pricing, inventory valuation and income

determination as well as product planning and control. There are 5 functions of cost management

systems
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26

Cost Determination

 The calculation of the unit cost of the activity by dividing the total cost of the function by

the measurement unit or base.

Activity forecasting

 It is an activity to calculate or estimate in advance or foretell, it may be projected income

statement, projected or forecast balance sheet, financial forecasts for external users or

expenditures.

Performance reporting on a functional level

 Monitor and control the cost to produce a procedure most appropriate for variable cost,

direct cost and indirect fixed costs center costs.

*In activity forecasting, Level I refers to product (demand) and Level II procedure (admissions,

meal, medical record processing, billing, housekeeping, IV therapy, laundry/linen, nursing care

by levels, EKG, X-ray and laboratory)

QUESTION 2:

Select a unit of your hospital (e.g. ICU, NICU, DR, OR, Ward, etc.) and answer the

following questions: In case of those who are working in Health Centers you may get

your own workplace and the same with those in the academe- the Skills Laboratory.
ADVANCED HEALTH CARE ECONOMICS
27

C. WHAT IS SETTING PROCEDURE STANDARD COST PROFILES?

WHAT IS FUNCTIONAL COST CENTER BUDGETING?

You need to peruse the literature for the above concepts before answering the question

below.

QUESTION: Final Product Nursing Care

Select a unit of your hospital and answer the following questions:

QUESTION:

Select a unit of your hospital and answer the following questions:

The selected unit is Emergency Room of Tuguegarao City People’s General Hospital,

Tuguegarao City, Cagayan.

Final product Nursing Care

1. What are the clinical nursing needs?

 Clinical nursing needs include insufficient of staff nurses to patients ratio, unavailability

of medicines for patients some medical equipments are lacking and needs to be upgraded.

2. What is their prevalence?

 There are 3 staff nurses available from the approximately 80 patients per 8 hours duty.

the average of patients in 8 hour shift. In cases such as wounds, in which there is a need
ADVANCED HEALTH CARE ECONOMICS
28

for anti tetanus injections and tetanus toxoid injections, mostly the patients need to buy it

outside. There were times when there is a need to transfer patients for treatments to a

larger hospital because medical equipments are lacking.

3. What are the diagnosis problems and how are they resolved?

 The most common diagnosis problems are vehicular accidents, intoxication, wounds such

as gunshot wounds ,stabbing, concussion, contusion, difficulty of breathing or shortness

of breath, hypoglycemia,burns,cardiac arrest, and some trauma. They are resolved

through provision of quality nursing care and compliance of patients to its treatment

regimen.

4. What are the therapy options?

 In a case to case basis ,the therapy options , oxygen therapy, fluid therapy ,diet therapy

and physical therapy.

5. What are the costs of developing or continuing to develop the product?

Continuous maintenance of supplies, medicines and therapies depending on the case of each

patient are the costs of developing or continuing to develop the product.

6. What are the costs of producing the product?

 The use of medicines, food, and shelter are the cost of producing the product.
ADVANCED HEALTH CARE ECONOMICS
29

7. What resources are required?

 There must be enough budgets to survive the treatment. In Tuguegarao City People’s

General Hospital, monetary aid comes Philippine Charity Sweepstakes Office and from

the pork barrel of the government. Non government organizations like the Rotary club

also extend their help to TCPGH.

8. What new information must be learned?

 Informations must be provided by the attending physicians,and other health care

providers if there are needs with regards to patiens conditions anf if if there is a need to

update the information then it is possible that they must attend trainings or lectures

9. What are the critical success factors?

 Nurses must provide a quality care needed by the patient and through the cooperation of

the patient and significant others.

10. What is the likelihood of success?

 Likelihood of success is only possible if only if full cooperation is being given by the

patient and significant others by following the treatment regimen accordingly necessary

for the health care condition.

6. QUALITY AND COSTS

E. NATIONAL HEALTH INSURANCE PROGRAM – Republic Act 7875


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30

For foreign students they may discuss their own health insurance program available in their

country.

QUESTION:

A. Discuss the NHIP in terms of:

1. Purpose

2. Coverage

3. Nature

4. National Health Insurance Program Fund

(where, whom and percentage how the fund is appropriated)

1. PURPOSE

 Promote health insurance coverage and ensure affordable, acceptable, available and

accessible care services. “The State shall adopt an integrated and comprehensive

approach to health development which shall endeavor to make essential goods, health and

other social services available to all the people at affordable cost.”

2. COVERAGE

 All citizens of the Philippines.

3. NATURE

 Tax-exempt attached to the Department of Health for policy coordination and guidance.
ADVANCED HEALTH CARE ECONOMICS
31

4. NATIONAL HEALTH INSURANCE PROGRAM FUND

1. Contribution for program members.

2. Current balances of the NHIP from GSIS/SSS.

3. Appropriations by national and local government.

4. Donations/grants-in-aid.

5. Twenty-five (25%) of the increment in total revenues collected under RA7654 to be

appropriated solely for the NHIP.

6. Congress appropriation

B. Answer the following questions based on your readings on NHIP:

1. Several guiding principles were adopted in the pursuit of NHIP. Explain each one:

a. Allocation of national resources for health

b. Universality

c. Equity

d. Responsiveness

e. Social Solidarity

f. Cost Sharing

g. Professional responsibility of health care providers

h. Quality of services

i. Cost Containment
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32

j. Maximum community participation

1. Several guiding principles were adopted in the pursuit of NHIP. Explain each one.

Allocation of national resources for health

The NHIP shall underscore the importance for bringing about faster economic development and

improving quality life.

Universality

The NHIP shall provide all citizens with the mechanism to gain financial access to health

services, in combination with other government health programs. The NHIP shall give the

highest priority to achieving coverage of the entire population with at least a basic minimum

package of health insurance benefits.

c. Equity

The NHIP shall provide for uniform basic benefits. Access to care must be a function of a

person’s health needs rather than ability to pay.

d. Responsiveness

The NHIP shall provide for uniform basic benefits. Access to care must be a function of a

person’s health needs rather than ability to pay.

Social Solidarity
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33

The NHIP shall be guided by community spirit. It must enhance risk sharing among income

groups, age groups, and persons of different health status, and residing in different geographic

area.

Cost Sharing

The NHIP shall continuously evaluate its cost sharing schedule to ensure that costs borne by the

members are fair and equitable and that the charges by health care providers are reasonable.

Professional responsibility of health care providers

The NHIP shall assure that all participating health care providers are responsible and accountable

in all their dealings with the Corporation and its members.

The NHIP shall promote the improvement in the quality of health services provided through the

institutionalization of programs of quality assurance at all levels of the health service delivery

system. The satisfaction of the community, as well as individual beneficiaries shall be a

determinant of the quality of service delivery.

Cost containment

The NHIP shall incorporate features of cost containment in its designs and operations and

provided viable means of helping the people for health care services.

Maximum community participation


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34

The NHIP shall build on existing community initiative for its organization and human resource

requirements.

2. A requisite for accreditation – is the existence of a formal ongoing quality assurance

program (QAP). The objective of the program is to:

2.1 ensure health care professionals of accredited health care institution possess the

training and credentials to render quality health care services

2.2 Work towards the promotion of uniform health care standards

2.3 Ensure appropriateness of medical procedures and administration of drugs and

medicines consistent with generally accepted standards of medical practice and

ethics

3. During inspection the Phil Health monitors and verifies compliance to the requisite of a

Quality Assurance Program (QAP)

4. Gross violation of this QAP requisite shall constitute a ground for suspension/ revocation

of accreditation.

QUESTION: Identify 10 activities of the program (QAP) in each institution:

Reference: Rule XVII , section 92 of the Revised Rules and Regulations implementing the

National Health Insurance Act of 1995 (R.A. 7875). Activities of Quality Assurance

Plan specific for health care providers. (Or a more appropriate law existing in the

country where you are)

1. The proper review of credentials of individual health care professionals working in the health

care institution.

2. The provision of referral and practice guidelines for the health care providers.
ADVANCED HEALTH CARE ECONOMICS
35

3. A utilization review and monitoring scheme for the performance of health care provider.

4. A measurement of health outcomes and patient satisfaction including mortality, morbidity,

infection rates and other related activities.

5. A data gathering and retrieval system form the health records to support performance

monitoring and outcomes measurement activities.

6. A system of feedback to the health care professionals and mechanism for change in practice

patterns as needed.

7. The appointment of a specific person responsible for quality assurance in the institution.

8. The implementation of remedial measures to correct defects identified in the health system.

9. A documentation of regular meetings for members of quality circles or QAP Committee.

10. The documentation of processes installed.

F. MONITORING NURSING CARE QUALITY

Nursing often has taken the lead in patient care quality assurances by investigating the quality of

service delivered by practitioners.

QUESTION:

Briefly discuss the following issues related to the development of criteria and methodologies in

patient care quality assurance

G. Quality Nursing Care

A review mechanism should replace group accountability and care activities maybe tracked for

individual patients and compared against a set of clearly defined standards. Such a system

provided an excellent framework for quality assurance systems.

How can nursing establish an environment and structure that facilitates QA mechanism?
ADVANCED HEALTH CARE ECONOMICS
36

1. Communication through rapid and accurate data retrieval and analysis

An automated retrieval system through the use of sophisticated software. The system connects to

computer network and its easy to use interface ensures rapid access to information.

2. Technology such as bedside based automation, etc

These are used to improve patient care by enhancing operational efficiency, include systems for

physician order management, automated pharmacy retrieval, medication and supply dispensing,

nursing workflow automation at the bedside, and Web-based procurement. These solutions

enable healthcare facilities to reduce errors, operate more efficiently and decrease costs

ultimately contributing to improved clinical and financial outcomes.

These are equipment used in the hospital which provides easy handling of heavy weight patients

especially for bedridden patients.

Diagnostic and monitoring devices will be brought closer to bedside.

What are the advantages of automation in quality assurance mechanisms?

1. It can improve quality and cost-effectiveness of patient care and the morale of those rendering

the nursing care.

2. It can yield processing results in the nursing profession.

3. Assist nurses and other direct caregivers in performing their duties more efficiently.

4. Sets the stage for an accurate, objective, and dynamic patient classification.

5. Assist nurses in the selection of an appropriate problem list for each patient.

6. It can create patient care schedule management scheme.


ADVANCED HEALTH CARE ECONOMICS
37

7. It can perform clerical task instantly.

9. It can generate many quantitative and qualitative nursing care services.

10. It can assess all future care for the patient by tracking against the care plan and therefore

allow updates in reaction to individual responses.

H. CONTROLLING HOSPITAL COSTS THROUGH REGULATION Please explain each one

of these:

1. Phil Health Corporation created by the R.A. 7875 (NHIP)

This Corporation was created to adopt an integrated and comprehensive approach to health

development to provide uniform basic benefits to all people at affordable cost. It will deliver a

payment mechanism where fixed rate, whether per person, family, household or group,

negotiated by Corporation with a health care provider who shall deliver or arrange the delivery

of health services due to a covered person under the terms of a health care provider contract.

2. Budgetary Review

Re-examination, reconsideration and restudying the outputs or services provided by the program

on departmental area in determining the costs of these services.

3. Utilization Review

Refers to a formal evaluation of the necessity, cost appropriateness and efficiency of the use of

medical services, procedure and/ or facilities, on a prospective, concurrent or retrospective basis

including but not limited to examination of the clinical application of medical knowledge as

revealed by medical records.


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38

4. Administered Prices (Preferred Provider Organization-PPO/ Health Maintenance Org.-HMO)

A preferred provider organization, which is a network of providers whose services are available

to enrollees at a lower cost than the services of non network providers. PPO enrollees may

choose any network provider at anytime.

A healthy maintenance organization (HMO), which is an entity that provides, offers or arranges

for coverage of designated health services needed by plan members for a fixed-pre-paid

premium.

Summary:

Health care providers should identify the inefficiencies that have developed in the industry,

largely because of the manner in which hospitals have been financed. Prospective Payment

(PhilHealth) is designed to encourage hospital administrators to manage the process in the most

cost-effective method possible while simultaneously assuring quality health care. Nurses have a

significant impact on quality assurance programs. Nurses are the only providers who directly

care for the patient 24 hours a day from admission through discharge. Therefore, they are in a

position to identify inefficiencies, redundancies, and omissions. Nurses must develop a formal

review mechanism that will trace the care of specific patients by specific nurses.

Resources:

http://www.philhealth.gov.ph/

http://www.ancient.eu.com/Stone_Age/

http://www.princeton.edu/~achaney/tmve/wiki100k/docs/Industrial_Revolution.html
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39

http://www.princeton.edu/~achaney/tmve/wiki100k/docs/Information_Age.html

http://www.investopedia.com/terms/g/gnp.asp

http://www.wpro.who.int/philippines/areas/health_systems/financing/philippines_health_system

_review.pdf

http://whatis.techtarget.com/definition/cost-management

Culver, A. J. and J. P. Newhouse . Handbook of health economics.Amsterdam; New York:

Elsevier, 2000.

Davies, H. T. O., M. Tavakoli, et al. Quality in health care : strategicissues in health care

management. Aldershot, Hants, England ;Burlington, VT: Ashgate, 2001.

Davis, J. B. The social economics of health care. London ; New York:Routledge, 2001.

Detwiler Group. and Hatherleigh Company. Detwiler's directory of health and medical

resources. New York, NY: Hatherleigh Press, 1997.


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