Activities in the healthcare sector have always been economic in nature. People within the healthcare sector invest their time and resources in it hence do expect returns. This fact makes healthcare to be amenable to an economic analysis. There are various economic concepts that are now quite relevant within the field of healthcare. Stakeholders within the healthcare sector must understand the existing demand for it, supply, and price of the service and the association of these economic concepts. It is also vital to note that the economic analysis of the healthcare does not only establish the issues of demand, supply and price, but also reasons for their nature. Economic concepts are still relevant in the efforts of making healthcare affordable and efficient. Today, the economics of healthcare is a major discipline even in universities. In healthcare, the demand for the service is supplier-created. It is the providers of healthcare who directly influence its price and quality.
The economic issue of market failure is also quite relevant within the sector of healthcare (Perlman, 2016). There is market failure in the sector of healthcare when people who have a significant demand for medical service fail to access it as a result of their high risk to the insurers, which pushes the prices for the most basic insurance to very unaffordable levels. It is very important to mention that the economic concept of cost is very much relevant within the healthcare sector. Both the patients as well as the healthcare have become increasingly concerned with the cost of medical services. For the healthcare providers, their aim is to ensure the cost of providing medical services is minimized. On the other hand, the patients are keen to look for healthcare services in hospitals that charge affordable prices. The health care providers are struggling to achieve cost efficiency. The concept of profitability is also highly relevant in healthcare. Health care provision is now a business whose intention is maximize profits through attraction of many patient visits. It is because of this reason that many hospitals now have the finance and planning department. The concept of budgeting is now a common practice in healthcare. Providers now make annual budgets, which guide their investment and operational activities.
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The fundamental concept of opportunity cost is now highly relevant within the healthcare sector. Opportunity cost refers to the value that is sacrificed by choosing not to pursue alternatives, which may have been achieved using the same resources (Feldstein, 2012). This economic concept of opportunity cost leads to the other one of efficiency. When the value of the chosen option is more than the alternative use disregarded, then the selected action is efficient. Cost-benefit analysis is a concept that is quite relevant in the field of healthcare. In cost-benefit analysis, the healthcare providers compare investments that they can use a given available resource. The most profitable and valuable investment is chosen. It is also important to mention that the concept of cost-efficiency is relevant in healthcare.
There is also the economic concept of risk-benefit analysis, which very relevant in the field of healthcare. Risk-benefit analysis involves comparing the probabilities of harm occasioned by a particular course of action and its possible benefits. In this case, the healthcare providers analyze the risks and possible benefits of specific procedures of medical service provision. The doctors ensure that only the right medication, which has minimal risks and maximum benefits to the patient, is administered to them. It is evident that economics has huge relevance in the field of healthcare today. It is quite impossible to run a healthcare facility without application of economic concepts.
References
Feldstein, P. J. (2012). Health care economics . Boston: Cengage Learning.
Perlman, M. (Ed.). (2016). The economics of health and medical care . New York: Springer.
