Welcome to this week’s practice question! Every week we discuss a topic related to healthcare informatics. This week’s topic … healthcare economics.
Healthcare economics deals with economic issues related to efficiency, value and tendencies in the production and consumption of health and healthcare. Health economics studies the operation and functioning of healthcare systems as well as health-affecting tendencies such as drugs, alcohol and smoking.
Let’s review some basic economic terms:
- Resource Scarcity: unlimited wants, limited resources. Resources are the most important factor in the decision-making process in a healthcare system. Health information technology can better manage resources through scheduling programs, inventory management software, and more.
- Opportunity Cost: the cost of the forgone best alternative. As healthcare practitioners, we know that time, human resources, particular pharmaceuticals, and other necessary resources have varying levels of demand and may frequently be scarce or hard to find. The choices we make (and the choices we don’t make) often have a cost in the form of opportunity cost – whether or not we’re aware of it at the time.
- Efficiency. Healthcare economics also helps decision makers to reconcile growing demand for healthcare services with available resources and funds. We aim to get the most efficiency out of all the resources we have. The efficiency concept is divided in three sub-concepts: technical, productive, and allocative. You can find more resources on these sub-concepts in the recommended readings below.
- Marginal Cost: the increase in total cost when a quantity produced increases by a value of ‘1’ unit. Understanding the concept of marginal cost is important for two reasons: they give a broader view of the issues faced in decision-making, and according to economic theories, people make decisions using marginal principles.
- Supply-Demand: unit price settles at a point where demand is equal to supply. Measures of supply show the amount of care that includes staffing: total number of doctors and nurses, consultants and managers. Measures of demand show the amount of health services the public needs. It is usually divided into two: the legitimate need and the desired demand, which is why healthcare economists interpret measures of demand with caution.
A CMIO is choosing between implementing two new patient appointment systems. One costs $250,000 to set up and allows users mobile access to the appointment system, while the other costs $200,000 but is only accessible on a desktop computer. In the end, the CMIO goes with the mobile accessible platform. What is the opportunity cost of his decision?
Answer and Explanation
As reviewed earlier, opportunity cost is the cost of the decision that wasn’t made. In this case, the CMIO chose to forego the $200,000 desktop appointment software suite. Therefore, the opportunity cost of this decision is $200,000. The correct answer is B. $200,000.