Concepts for Healthcare Economics and Their Importance to Healthcare Administrators

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Health economics is the primary multidisciplinary aspect that fills the existing gap involving health care practice and economics theory. The concept has faced enormous transformation, with its origin happening many years ago (Jakovljevic & Ogura, 2016). It diversifies further into several areas or methods, such as Cost-Benefit Analysis (CBA), quality-adjusted life year (QALY), cost-effectiveness, and value of life. The subsequent section clarifies these and explains why they are significant to Healthcare Administrators.
Definitions of the Healthcare Economics Concepts
CBA is an economic assessment technique that can help health specialists determine whatever to capitalize on when the goal is to document the effect on people in society. It can also mean an approach to compare an intervention’s benefits and costs (Brent, 2023). CBA estimates the effects and costs of health programs or interventions in the monetary aspect. It always includes putting a monetary value on health gains. CBA, alongside cost-utility analysis, can guide resource allocation choices across various healthcare settings.
Cost-effectiveness is when there is a positive impact after weighing the costs and outcomes of a specific intervention. Its analysis can involve comparing one intervention to another by measuring the amount required to benefit from a health outcomes unit, such as a life year achieved or a fatality avoided. Besides cost-utility, cost-benefit, cost-consequence, cost to the user, and cost-minimization analyses, analyzing cost-effectiveness offer managers a reliable and coherent approach with a theoretical foundation to examine outcomes and costs and allows them to cope with uncertainties (dos Santos Silva et al., 2021).
The quality-adjusted life year (QALY) denotes a measurement unit for evaluating health results. It captures in one estimate a person’s utility benefit from life length and quality enhancement. Cost-effectiveness ratios employing QALYs comparisons of distinct interventions’ value for funds in various medical areas (Culyer, 2014). QALY relies on the supposition that preference-centered standards might be linked to particular health conditions comparable to the time expended in those conditions. Since it in...