NUR-621 Economic Theories and Models in Health Care

NUR-621 Economic Theories and Models in Health Care

NUR621 Economic Theories and Models in Health Care
NUR621 Economic Theories and Models in Health Care

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Description/Definition Example Related to Health Care Components
1.     Efficiency Efficiency signifies that the economic state of each allocation of financial resources is enough to serve an entity or an individual effectively while reducing wastes and inefficiencies as much as possible (Migowski et al., 2019). Essentially, efficiency is the optimal use of resources to increase output. In a health care system, efficiency implies that there is no alternative use or mixing inputs that could result in the same level of goods and services at a reduced cost. It is the measure used to compare the output in the delivery system to the input such as health care cost, materials, or treatment time (Migowski et al., 2019). For instance, for a better output in health care, a system needs to examine the effect of cost and time of treatment of health care outcomes. In most cases, resources are scarce, and there is increased competition for these limited resources. Therefore, people aim at achieving the optimal use of the sources. Health care efficiency shows the best strategies of using health care resources to obtain the quality of health care delivery (Penner, 2017).

The health improvementis in two different components. The first is allocative efficiency, where interventions are selected to improve health outcomes, and the second is technical efficiency used in determining the leastinputs.

2.     Supply and Demand This is an economic model that defines the relationship between the buyers and sellers. It is used in determining the link between the quantity of a commodity that would sell in a particular market. In health care supplies, healthcare services such as medicine, technology, or even hospitals are available. Increased supply of these components lowers the cost of health care in a particular area. The demand defines the quantity of health care services required in a location (Parmar& Banerjee, 2019). Increased demand would increase the cost of healthcare, while reduced demand would reduce the cost of treatment. The demand and supply in health care are not direct because of other factors that affect health care as welfare. However, supply and demand effectively analyze market structure in terms of perfectcompetition and competition (Parmar& Banerjee, 2019). For instance, many firms are in the market in a perfect competition market, implying that the economic power is distributed.
3.     Economies of Scale


Economies of scale is a measure used in explaining outcome vs. the production efficiency. Economies of scale state that the unit cost decreases with the volume of output. The connection between these two variables is described in various mechanisms such as market position for suppliers and volume on fixed costs and resources. Economies areessential in health care as it measures the means that volume per procedure is related to improved outcome. For instance, buying health equipment when the actual demand is low than the required utilization would not be a better economic decision (Pettigrew et al., 2019). Moreover, health care organizations can save much through bulk buying of hospital equipment. Economies of scale have two main types. The internal and external economies of scale are essential in understanding the theory (Pettigrew et al., 2019). Internal economies are those that the management can control because they are internal to the company. External economies are the external factorsfacingeconomies such as location, government, or industry.
4.     Market Failure This is the economic situation explained by an unregulated market’s inadequate supply and distribution of goods and services (Parmar & Banerjee,2019). The market outcome might be ineffective in the presence of externalities. Market failures emanate from negative and positive externalities, abuse of monopolistic power, inadequate public goods, and environmental reasons. For instance, if a person received COVID-19 vaccine, they are less likely to catch it. This further implies that they are less likely to be the career of the virus, indicating that vaccination is a positiveexternality. The market responds to market failures through development structures that fill gaps that result in such failures. These structures include health insurance and independent physicians.



Migowski, S. A., Gavronski, I., Libânio, C. D. S., Migowski, E. R., & Duarte, F. D. (2019). Efficiency losses in healthcare organizations

NUR-621 Economic Theories and Models in Health Care
NUR-621 Economic Theories and Models in Health Care

caused by lack of interpersonal relationships. Revista de AdministraçãoContemporânea23, 207-227.

Parmar, D., & Banerjee, A. (2019). How do supply-and demand-side interventions influence equity in healthcare utilisation? Evidence from maternal healthcare in Senegal. Social Science & Medicine241, 112582.

Penner, S. J. (2017). Economics and financial management for nurses and nurse leaders. Springer Publishing Company.

Pettigrew, L. M., Kumpunen, S., Rosen, R., Posaner, R., & Mays, N. (2019). Lessons for ‘large-scale’general practice provider organisations in England from other inter-organisational healthcare collaborations. Health Policy123(1), 51-61.