Healthcare Resources-Economic Evaluation
Economic evaluation can be defined as the assessment of resources’ efficiency and allocation towards different interventions in the healthcare industry. Robertson et al. (2015) describe economic evaluation as “the systematic appraisal of costs and benefits of projects, normally undertaken to determine the relative economic efficiency of programs.” The main reason for economic evaluation is to ensure that healthcare services and outcomes are improved consistently. Different countries use the tool to various degrees. Factors that determine its usage and purposes include the main healthcare system in a country. The healthcare system could be private or public. In less-developed nations, the country’s access to international aid also plays a determining role in the application of economic evaluation. The adoption of economic evaluation is evident in services or interventions that patients have access to, medical devices, pharmacological treatments, and implementation strategies. These implementation strategies are designed to keep the main stakeholders, patients, and care providers informed about the most reliable research evidence and its application in the healthcare spaces (Chisolm & Evans, 2007).
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Most importantly, economic evaluations are critical in decision-making because of the scarcity of resources and the diversity of patient populations. Public and private health officials must adopt a comprehensive and practical approach towards making decisions that relate to the allocation of scarce resources to ensure maximized utilization and provision of benefits to the patients as well as improvement of public health. Economic evaluations can be partial or full. Partial economic evaluations assess the cost of illness and programs. The full economic evaluations include cost-benefit analysis, cost-effectiveness analysis, and cost-utility analysis (Rabarison et al., 2015).
Importance of economic evaluation
Economic evaluation is used to make healthcare decisions because it ensures the maximization of the benefits that are derived from healthcare expenditure. Healthcare consumes a sizable portion of resources due to the need for a healthy population. The government has gone to extreme ends to offer insurance to citizens who are unable to pay for private insurance. For instance, America’s total expenditure for healthcare was $2.8 trillion in 2012. Only 2.7 percent of this expenditure was used for prevention, while the rest was used for treatment. Between 2008 and 2012, at least 60,000 jobs in public health departments were eliminated. This move was meant to provide resources through diversion from payroll to healthcare. However, the statistics indicate a lack of maximization of benefits because primary care received less than half of the allocation. Primary care is critical in the reduction of healthcare spending. Instead of spending so much money on the treatment of preventable diseases, healthcare agencies, and facilities should prioritize prevention (Rabarison et al., 2015). Treatment of diseases should consume a smaller portion of the resources, enabling the healthcare facilities to spread the scarce resources as widely as possible.
Secondly, economic evaluations facilitate the containment of costs and the management of demand. Constant improvement in the healthcare industry is inevitable and manifests in the form of interventions and updated equipment. These contribute to improved care. However, it is important to establish a framework that assesses the necessity of equipment prior to purchase. The continuous development of technology has a positive impact on medical equipment because of advanced products. It is necessary to note that this equipment is expensive. A technology assessment is, therefore, important. Unfortunately, pharmaceutical companies have dominated the assessment of technologies. The government is compelled to conduct economic evaluations that determine the reimbursement of services and drugs as well as service providers (Chisolm & Evans, 2007). Managed Care Organizations have played a significant role in ensuring control of costs that any facility incurred through the chosen providers.
Thirdly, economic evaluations reveal the ineffectiveness that exists in a healthcare system. Healthcare delivery is dotted with numerous inefficiencies, which arise from the frequent use of unnecessary services, medical errors, and underutilization of beneficial interventions. The quality of care is attracting intense debate alongside the cost. As a result, healthcare scholars have conducted empirical studies to investigate these problems and find solutions. However, facilities still must assess each recommendation or find and determine the cost associated with its uptake. The assessment of implementation is investable when relying on evidence-based data (Jamison et al., 2006). This implies that players must make wise tradeoffs since resources cannot cover all projects that are designed to find solutions.
Entities in the healthcare industry must conduct economic evaluations with two questions in mind. First is the utilization of the current resources. Second is the allocation of additional resources if availed. This approach ensures that the healthcare system utilizes the available resources appropriately (Chisolm & Evans, 2007). It also prepares the players for future budgetary allocations since the key issues in the specific are already prioritized.
Cost-effectiveness analysis
The Cost-effectiveness analysis (CEA) compares costs against the health outcomes that occur naturally. Such health outcomes include life years that are saved or the number of cases that are averted. CEAs are unique and play a key role in decision-making because they project natural outcomes as opposed to monetizing them. For instance, cancer prevention directors must choose between various interventions that are designed to address a specific condition. A CEA comes in handy for such individuals because then they can determine the effectiveness of intervention through its capability to revert cancer development or save the lives of ailing patients. Most healthcare analysts use CEA when they cannot conduct a cost-benefit analysis due to numerous factors. For instance, when it is impossible to monetize the benefits, analysts must find other controllable outcomes that can be used as a measurement metric. The results of a CEA are either environmental or social (Rabarison et al., 2015).
It is possible to pinpoint opportunities that have been neglected in the past by emphasizing inexpensive interventions. These affordable interventions may be effective in reducing the burden of disease significantly. For instance, diarrhea kills at least one million children annually due to dehydration. Oral Rehydration Therapy (ORT) plays a key role in reducing diarrhea’s severity and the rate of mortality, even if it does not reduce the incidence of the disease. ORT costs between $2 and $4 and can be ignored regardless of its ability to reduce the burden of diarrhea on the children and the health care system. Such revelations guide healthcare officials on aspects to which they should redirect resources (Jamison et al., 2006).
Cost-benefit analysis
A cost-benefit analysis is different because it assigns a numeral to the outcomes of the programs under assessment. It assesses the costs and benefits of programs in health care with varying results. This type of analysis includes the miracles that occur in the short term and long term. Two measures are used in a cost-benefit study: the cost-benefit ratio and the net help. The cost-benefit ratio expresses the savings that are realized for every dollar that is spent. It can be misleading and is subject to manipulation to ensure the percentages are high. The subtraction of costs from benefits obtains the net help. Healthcare officials are advised that implementation should only occur if the result is less than zero. This measure is difficult to manipulate because it is derived directly from the initial listing of costs and benefits. The cost-benefit analysis is ideal for use when choosing among competing programs. The efficiency of the measure is realized better if the research is conducted prior to implementation. It is also suitable for prioritization during budget setting. The direct benefits include savings realized on medical expenditures. Indirect benefits include productivity increases or revenue increments. Intangible benefits include job satisfaction, improved quality of life, and other psychological benefits that arise from a specific intervention or program (Rabarison et al., 2015).
Personal views on the application of the two approaches in resource allocation
As most economic-related studies have confirmed, resources are scarce. This scarcity calls for a thorough evaluation to determine allocation. In healthcare, the distribution of resources determines a facility’s ability to offer quality services, health outcomes, the application of inexpensive yet effective interventions, and the burden of disease on the population. The cost-benefit and cost-effectiveness analyses provide avenues for healthcare officials to perform economic evaluations. Both are ideal in the healthcare sector because they cover qualitative and quantitative outcomes. Therefore, healthcare officials are well-equipped to assess interventions, programs, equipment, and other aspects prior to implementation. Adopting the approach funnels resources to the critical areas and enables the facility to maximize the benefits.
References
Chisolm, D., & Evans, D. B. (2007). Economic evaluation in health: saving money or improving care? Journal of Medical Economics, 10, 325-337. doi: https://doi.org/10.3111/13696990701605235
Jamison, D. T., Breman, J. G., & Measham, A. R. (2006). Cost-Effectiveness Analysis. In Priorities in Health. The International Bank for Reconstruction and Development / The World Bank.
Rabarison, K. M., Bish, C. L., Massoudi, M. S., & Giles, W. H. (2015). Economic evaluation enhances public health decision-making. Front. Public Health, 3. doi: https://doi.org/10.3389/fpubh.2015.00164
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Question 
Healthcare resources are scarce, and policymakers and health planners make choices between alternative uses of resources. Economic evaluation is important when allocating scarce resources. Cost–benefit analysis, cost-effectiveness analysis, and cost-utility analysis are decision-making tools that help policymakers and planners examine healthcare costs and the consequences of alternative health programs, services, and interventions.
Healthcare Resources-Economic Evaluation
Prepare at least a 5-page overview of cost-effectiveness analysis and cost–benefit analysis as decision-making tools in the allocation of health resources. Address the following:
- Define economic evaluation and explain why it is important in healthcare.
- Discuss cost-effectiveness analysis.
- Discuss cost–benefit analysis.
Share your views on the application of the two approaches in resource allocation.