The Importance of Evaluation in Health Economics and the Four Types of Economic Analysis

Evaluation in Health Economics
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Abstract
Resources in the healthcare industry are critical, and there is a need to make an optimal decision on how they are used effectively while maximizing their output. Health economics is concerned with the optimization of resources in healthcare. Economic evaluation, which is a significant facet of health economics, plays an important role in ensuring that the executives in the industry make informed decisions. The major types of economic analysis that are practical in the healthcare industry include cost-minimization analysis, cost-benefit analysis, cost-effectiveness analysis, and cost-utility analysis. Although they serve different purposes, the bottom line for all the types of analysis is to relate the consequences of health programmers and procedures to cost. A significant shift in the policy design in healthcare has also been witnessed in the recent past, with the most decisions being informed by economic analysis. Policies that conflict with the advice of economic evaluation often comes under heavy criticism by health economists. Technology has also had a fair share in the impact of health economics, with the emergence of new analysis techniques, courtesy of technological advancement. This paper examines the role of evaluation in health economics.
Evaluation in Health Economics
Introduction
The activities in a healthcare facility can be perfectly modeled to emulate that of demand and supply. A more practical way is to consider the need for good health as a consumer want and a healthcare facility as the product. It is, therefore, correct to recognize the healthcare industry as a business. Besides, the money matters surrounding the purchase of pharmaceuticals, employees’ salaries, and the most recent medical insurance that has attracted the attention of investors has sealed the economic footprint of the healthcare industry. In this regard, the need for business-minded and economically savvy personnel is paramount, and health economics functions to satisfy this need. Underneath the broad subject of health economics is another important aspect, economic evaluation, which helps in the regulation of the financial intervention in a healthcare institution by establishing the relationship of the outcomes with a common denominator, cost ADDIN ZOTERO_ITEM CSL_CITATION {"citationID":"sj2oLjqf","properties":{"formattedCitation":"(Phelps, 2016)","plainCitation":"(Phelps, 2016)","noteIndex":0},"citationItems":[{"id":1245,"uris":["http://zotero.org/users/local/IBolxqVE/items/AWGI8CJU"],"uri":["http://zotero.org/users/local/IBolxqVE/items/AWGI8CJU"],"itemData":{"id":1245,"type":"book","publisher":"Routledge","source":"Google Scholar","title":"Health economics","author":[{"family":"Phelps","given":"Charles E."}],"issued":{"date-parts":[["2016"]]}}}],"schema":"https://github.com/citation-style-language/schema/raw/master/csl-citation.json"} (Phelps, 2016). The economic evaluations can be classified into four main categories: cost-minimization analysis, cost-benefit analysis, cost-effectiveness analysis, and cost-utility analysis.
Importance of Economic Evaluation in Healthcare
From a general perspective, economic evaluation plays an important role in the assessment of every healthcare program. The process helps the decision-makers pursue an optimal solution out of a chunk of opinions informed by science and economic benefits. The healthcare industry is resource-intensive, and therefore, it requires the intervention of economic experts to assess the significance of allocating or depriving resources to a facility or healthcare operation. Resources include experts, equipment, pharmaceuticals, and money for wages and any other operational costs. Similarly, economic evaluation provides useful insight into the relevance of a product price, providing an opportunity to negotiate business processes within the healthcare industry with facts. Research is a common practice in the healthcare industry, and with the intervention of economic evaluation, data-driven economic models can be developed to capture relevant research information easily ADDIN ZOTERO_ITEM CSL_CITATION {"citationID":"6yI8TvJZ","properties":{"formattedCitation":"(Rabarison et al., 2015)","plainCitation":"(Rabarison et al., 2015)","noteIndex":0},"citationItems":[{"id":1253,"uris":["http://zotero.org/users/local/IBolxqVE/items/I6V4SB6E"],"uri":["http://zotero.org/users/local/IBolxqVE/items/I6V4SB6E"],"itemData":{"id":1253,"type":"article-journal","abstract":"Contemporary public health professionals must address the health needs of a diverse population with constrained budgets and shrinking funds. Economic evaluation contributes to evidence-based decision making by helping the public health community identify, measure, and compare activities with the necessary impact, scalability, and sustainability to optimize population health. Asking “how do investments in public health strategies influence or offset the need for downstream spending on medical care and /or social services?” is important when making decisions about resource allocation and scaling of interventions.","container-title":"Frontiers in Public Health","DOI":"10.3389/fpubh.2015.00164","ISSN":"2296-2565","journalAbbreviation":"Front. Public Health","language":"English","note":"publisher: Frontiers","source":"Frontiers","title":"Economic Evaluation Enhances Public Health Decision Making","URL":"/articles/10.3389/fpubh.2015.00164/full","volume":"3","author":[{"family":"Rabarison","given":"Kristina M."},{"family":"Bish","given":"Connie L."},{"family":"Massoudi","given":"Mehran S."},{"family":"Giles","given":"Wayne H."}],"accessed":{"date-parts":[["2020",8,19]]},"issued":{"date-parts":[["2015"]]}}}],"schema":"https://github.com/citation-style-language/schema/raw/master/csl-citation.json"} (Rabarison et al., 2015). Furthermore, economic evaluation can be a useful parameter in a situation where two or more healthcare operations present themselves concurrently. Holding other factors constant, the operation with most economic output is likely to take precedence.
Types of economic analyses
In a broader perspective, the economic analysis can be classified into the full and partial economic evaluation. In healthcare, the full economic analysis includes cost-minimization analysis, cost-benefit analysis, cost-effectiveness analysis, and cost-utility analysis ADDIN ZOTERO_ITEM CSL_CITATION {"citationID":"0ddzb3Sa","properties":{"formattedCitation":"(Rabarison et al., 2015)","plainCitat...