Health economics and financing

HEALTH ECONOMICS AND FINANCING
MOHAMED DAUD MOHAMUD
MHSM, PGD HRM

HEALTH ECONOMICS AND FINANCING Page I
TABLE OF CONTENTS
CHAPTER ONE: INTRODUCTION TO HEALTH ECONOMICS 1
Concepts and Definitions
 Economics
 Health economics
Branches of Economics
 Macro-economics
 Micro-economics
 Positive economics
 Normative economics
Central issues in economics
Exercise
CHAPTER TWO: DEMAND, SUPPLY AND PRICE SYSTEM 10
Definition of demand
Definition of supply
Law of demand
Law of supply
Demand curve
Supply curve
Elasticity of demand
Elasticity of supply
Exercise

HEALTH ECONOMICS AND FINANCING Page II
CHAPTER THREE: HEALTHCARE RESOURCES AND COSTS 27
Basic Concepts and Definition
 Inputs
 Output
 Cost
 Labor
 Capital
Types of costs
 Direct cost
 Indirect cost
Costs of production in healthcare
 Fixed cost
 Variable cost
 Total cost
 Marginal cost
 Average cost
Exercise
CHAPTER FOUR: THE MARKET AND HEALTHCARE 35
Meaning of market
 Market as physical place
 Market as institution
The basic neo-classical model
The institutional requirements of markets

HEALTH ECONOMICS AND FINANCING Page III
Types of market structure
 Perfect competition
 Monopoly
 Oligopoly
Healthcare markets
Ideal market conditions to healthcare
Market structure in healthcare
 Product marketability
 Information asymmetry
 Adverse selection
 Moral hazard
 Independent demand and supply determination (supply induced
demand)
 Consumer rationality and ability to make the best jusdgemt about their
welfare
 Externalities
 Predetermined consumer tastes
 Profit motive
Interventions to reduce effects of market failure
Exercise
CHAPTER FIVE: TECHNIQUES OF ECONOMIC EVALUATION 65
Cost minimization analysis (CMA)
Cost effectiveness analysis (CEA)
Cost utility analysis (CUA)
Cost benefit analysis (CBA)
Exercise

HEALTH ECONOMICS AND FINANCING Page IV
CHAPTER SIX: BUDGET AND BUDGETTING PROCESS 80
Definitions and Basic Concepts
 Budget
 Budgeting
 Forecasting
Purpose of budgeting
Types of budgets
 Capital budgets
 Operating budgets
 Cash budgets
 Sales budgets
 Personal budgets
Budgeting techniques
 Incremental budgeting
 Zero based budgeting
 Flexed budgeting
Sample budget format
Exercise
CHAPTER SEVEN: HEALTHCARE FINANCIAL MANAGEMENT 90
Definitions and Meanings
 Finance
 Health finance
 Healthcare financial management
 Policy
 Procedure
Objectives of healthcare financial management

HEALTH ECONOMICS AND FINANCING Page V
Functions of healthcare financial management
Accounting and financial basics in healthcare
Cash flow
The chart of accounts
 Assets
 Liabilities
 Equity
 Income
 Expenses
Standard accounting reports
 The balance sheet
 The income statement
Sources of data for reporting
Exercise
CHAPTER EIGHT: HEALTH INSURANCE 109
Definition of health insurance
Types of health insurance
Glossaries of health insurance
Exercise
CHAPTER NINE: HEALTH FINANCING FOR UNIVERSAL HEALTH
COVERAGE 117
Definition of Universal Health Coverage (UHC)
Importance of UHC
Tools and Guidance

HEALTH ECONOMICS AND FINANCING Page VI
The policy cycle
Exercise
CHAPTER TEN: HOSPITAL PROVIDER PAYMENT MECHANISM 129
Payment per procedure: Fee-For-Service
Payment per day: Per Diem
Payment per episode of hospitalization: Diagnostic related groups (DRGs)
Payment per patient: Capitation
Payment per institution: Global budget
Exercise

HEALTH ECONOMICS AND FINANCING Page 1
CHAPTER ONE
INTRODUCTION TO HEALTH ECONOMICS
Economic considerations play a key role in all aspects of life: in agriculture,
housing, industry, trade and in health. In addition, the nature and level of a
country's economic development is a major determinant of the health status
of its inhabitants and is associated with the level of health service and
health-related activities a country can support.
At the same time, the health of a population can itself influence economic
progress. Health programs have therefore come to be seen as part of a
comprehensive strategy aimed at improving the social and economic welfare
of populations. Such a strategy demands the selection of those programs
which improve health most efficiently: health services, the provision of other
infrastructure such as water and sanitation, or actions aimed at improving
nutrition, for example. Health economics can help to evaluate such choices.
Health economics is the application of theories, tools and concepts of
economics as a discipline to the topics of health and health care. Since
health economics is concerned with issues related to the allocation of scarce
resources to improve health, this includes both resource allocation within the
economy to the health sector and within the health care system to different
activities and individuals.

The need for health care is increasing due to rapid population growth and
changes in disease pattern. Related with this, health care costs are expected
to be rapidly increasing. Apart from explosion of costs, inequity,
misallocation and inefficiency are believed to be serious challenges to the
health care system. These problems put a considerable strain on our limited
health care resources.
Concept and Definition of Health Economics
The best starting point for consideration of the contribution of health
economics to health planning is a definition of economics. Samuelson, the
author of one of the most widely read textbooks of economics, defines
economics as:
"The study of how people and society end up choosing, with or
without the use of money, to employ scarce productive resources
that could have alternative uses, to produce various commodities
and distribute them for consumption, now or in the future, among
various persons and groups in society. It analyses the costs and
benefits of improving patterns of resource allocation."
This definition does not restrict economics to any one kind of human
activity: it applies to all activities where scarcity exists and there is thus a
need for making choices. Indeed, economics is often described as the study
of scarcity and choice.

Health Economics is the allocation of resources within the health system in
the economy, as well as the functioning of the health care markets.
Healthcare market is interaction between providers and consumers of
health care services (and insurers).
Health system is set of interrelated elements (environment, education,
labor conditions, etc) having as objective the transformation of some
sanitary resources (inputs) into a health status (final output) through the
production of health care services (intermediate output).
Health care is provision of services (such immunization program, feeding
program or MCH) to improve health status of individuals.
Economic agents: Decision makers in the economy such Individuals,
households, enterprises (for profit, nonprofit; production, distribution) State.
Decisions: these are the fundamental decision questions in economic:
- What to produce/consume (Allocative efficiency)?
- How to produce/consume (Technical efficiency)?
- When to produce(Timeliness)?
- For whom to produce/consumes (Equal distribution and justice)?
- How much to produce/consume (quantity or coverage)?
Branches of economics
Economics has the following parts
1. Macroeconomics
2. Microeconomics

3. Positive economics
4. Normative economics
1. Macroeconomics: The study of the behavior of the entire economy and
concerned with the behavior of the economy as a whole or with the broad
aggregate of economic life such as national output, income, the overall price
level, unemployment, and foreign trade.
2. Microeconomics: Deals with the behavior of individual prices and
quantities (Issues at individual level). Our knowledge of economics helps us
to manage our personal lives, to understand society and to design better
economic policies.
3. Positive economics: describes the facts and behavior in the economy.
What percentages of health workers are unemployed? What will be the effect
of higher cigarette taxes on the number of smokers?
4. Normative economics: involves ethics and value judgments. Should the
government give money to poor people? Should the public sectors
(government) or the private sector (business) provide extra jobs for
unemployed health workers? Should higher taxes or lower spending reduce
the budget deficit?
In conclusion health economics concerns:
The allocation of resources between various health-promoting activities
- The quantity of resources used in health delivery
- The organization and funding of health institutions

- The efficiency with which resources are allocated and used for health
purposes
- The effects of preventive, curative and rehabilitative health services on
individuals and society.
UNLIMITED WANTS AND NEEDS:
A basic condition of human existence which means that people are never
totally satisfied with the quantity and variety of goods and services they
consume. It means that people never get enough, that there's always
something else that they would want or need. Unlimited wants and needs
are one half of the fundamental problem of scarcity that has plagued
humanity since the beginning of time. The other half of the scarcity problem
is limited resources.
Unlimited wants and needs essentially mean that people never get enough,
that there is always something else that they would like to have.
For example, once Ahmed eats a hearty breakfast of Beer and Canjeero, is
he satisfied? Perhaps. But then in a couple of hours he wants a soor and
caano for lunch. Then he wants canbulo for dinner.
Before long, the morning sun pops up and Ahmed is hungry. It is breakfast
time all over again. Quite obviously, no one EVER permanently satisfies that
old hunger need.

What about other needs, like clothing, cars, or kitchen appliances. Once
Ahmed has a car, then he HAS a car and his car need is satisfied, right?
Perhaps, once he has a car, then he needs gasoline, and motor oil, and
insurance, and new tires, and an oil change, and more gasoline, and... the
list of needs goes on.
To understand why wants and needs are unlimited, consider the following:
 Needs: Needs are best thought of as physiological or biological
requirements for maintaining life, such as the need for air, water,
food, shelter, and sleep.
 Wants: Wants are then the psychological desires that are not essential
for life but that make life just a little more enjoyable e.g. car.
Motivation
The vast number of unsatisfied wants and needs is important because it
provides people with the motivation to take action. Being hungry in the
morning motivates Ahmed to whip up some beer and canjeero. Being hungry
before bedtime motivates Ahmed to seek out canbulo. Similar motivations
exist for lunch and dinner. Ahmed buys a car because he needs to travel,

For economics, the pursuit of satisfaction, the act of satisfying wants and
needs, is extremely important. It motivates people to take action, to buy
goods, to work, to produce, to consume.
People always want and need more than they have. Throughout history,
there is no documented case of anyone ever becoming fully, completely, and
absolutely satisfied. Once human eats a food more, then needs chewing gum
to make the stomach empty. Once he owns car, then he needs gasoline...
There is always something else that human wants or needs.
Unlimited wants and needs do not just motivate mundane activities such as
these. They are ultimately responsible for motivating people to find
employment, seek education, run for political office, explore new worlds, and
well... just about everything else people do.
In fact, without unsatisfied wants and needs no one would ever do anything.
No one would do anything because no one would NEED to do anything. Why
bother doing anything when wants and needs are already satisfied.
Alternatives
One of the most important aspects of unlimited wants and needs is not so
much the philosophical question whether or not wants and needs are
ultimately limited or unlimited, but the pragmatic observation that the
number of unsatisfied wants and needs is so vast that alternatives run

rampant. If tea leaves if very expensive then people buy coffee (Qahwa) as
alternative.
Central Issues in Economics
 Unlimited wants
 Scarcity of resources
 Choice or prioritization
 Opportunity cost

EXERCISE
1. Define the following terms:
a. Health economics
b. Healthcare market
c. Health System
2. Outline four (4) parts of economics?
3. Identify fundamental decision questions of economics?
4. Discuss central issues in health economics?
5. Explain in detail the importance of economics to health care?
6. With relevant examples in healthcare, describe opportunity cost?
7. State scarcity of resources in the context of healthcare?

CHAPTER TWO
DEMAND, SUPPLY AND THE PRICE SYSTEM
For many people in the world, market conjures up a picture of a town square
with lots of small stall holders selling everything from fruit and vegetables to
meat and fish. For economists, the term has a much wider meaning. It is
used to describe any process of exchange between buyers (patients) and
sellers (Doctors and Nurses). Formally, a market can be defined as any set
of arrangements which allows buyers and sellers to communicate and thus
arrange exchange of goods, services or resources.
A free market is where such exchange occurs without interference from the
government. Information is a vital ingredient for any market. Both buyers
and sellers need to have access to sufficient information to allow them to
make rational decisions.
So a market for health care must involve two groups: the buyers and the
sellers, who interact to trade health care. Who would the buyers and sellers
be in such a market? We all want good health and so most of us would be
prepared, if necessary, to purchase medical treatment to cure an illness.
This suggests that everybody is potentially a buyer (or consumer) of health
care. More precisely, at any moment, a buyer would be anybody who was ill
or who wanted preventative medical treatment such as vaccination or who
wanted guidance about their health.

The sellers would be those people who could provide medical and health care
services, such as doctors, nurses, physiotherapists, dentists
Basic Concepts of Supply and Demand in Health Care
1. Definition of Demand: Need + ability and willingness to pay for a
commodity. The schedule of amounts of any product that buyers (patients or
people with diseases) will purchase at different prices during some stated
time period. In health sector, it refers to the willingness of users to
purchase a particular combination of healthcare services at a given price (or
fee).
Desire refers to people’s willingness to own a good.
Demand is the amount of a good that consumers are willing and able to buy
at a given price.
Law of demand: if the price of a good/commodity i.e. health service
increases, quantity demanded falls; likewise, as the price of a good
decrease, quantity demanded will increase. In health care, normally people
are willing to purchase more of a commodity (e.g. health care) when the
price falls, and less when the price is increased.

Factors that influence demand (WHEN THE PRICE IS FIXED)‫‏‬
:
 Prices of related goods e.g. Complements and Substitutes
 Change in tastes such New information (e.g. health education)‫‏‬ and
Ageing
 Population growth
 Time spent to get care or the commodity
 Insurance (has cushioning effect)‫‏‬
 Change in healthcare quality
Demand Curve
Demand
Q
0
P

Demand Table
Price per Amoxicillin syrup Quantity per day
2.00 $ 100
3.00 $ 90
4.00 $ 80
5.00 $ 70
6.00 $ 60
7.00 $ 50
8.00 $ 40
9.00 $ 30
10.00 $ 20
11.00 $ 10
12.00 $ 0
Therefore, if the price of amoxicillin is decreased, the number of patients
demanding that drug increases and if the price increases, the number of
patients demanding will reduce.

Price elasticity of demand: is measured by expressing the percentage
change in quantity demanded (Qd) as the proportion of the percentage
change in price (P).
Price elasticity of demand = % change in Qd
% change in P
 If the percentage change in Qd is greater than the percentage change in
price, the demand for a good is elastic (Ed > 1).
Example
A situation where a fall in price from $20 to %18 causes the quantity
demanded to increase from 100 units to 150 units, find elasticity of demand
and its which kind of it?
150
100
0 Quantity
Price
18
20

Solution
Percentage change in the quantity demanded
50 X 100 = 50%
100
Percentage change in the price
2 X 100 = 10%
20
Elasticity of demand = 50
10
Therefore, the price range from $20 to $18, the demand is elastic.
What happens in the total revenue?
When the price is $20, total revenue = $20 X 100 = $2000
When the price is $18, total revenue = $18 X 150 = $2700
So when demand is elastic
 A rise in price will reduce total revenue
 A fall in price will increase total revenue
 If the percentage change in Qd is less than the percentage change in
price, the demand is inelastic (Ed<1)

Example
A situation where a rise in price from $4 to $6 causes quatity demanded to
fall from 200 units to 160, find the elasticity of demand and indicate which
kind of it?
Solution
The percentage change in the quantity demanded
40 X 100 = 20%
200
The percentage change in the price
2 X 100 = 50%
4
Elasticity of demand = 20 = 0.4
50
Therefore, in the price range from $4 to $6, the demand is inelastic.
200
160
0 Quantity
Price
4
6

What happens to the total revenue?
When the price is 4, total revenue = 4 X 200 = $800
When the price is 6, total revenue = 6 X 160 = 960
So when demand is inelastic
 A rise in price increases total revenue
 A fall in price reduces total revenue
 If the percentage change in price is similar the percentage change in Qd,
the demand is unitary elastic (Ed= 1)
2. Definition of Supply: the amounts of provider/producer (health workers
such doctors or Nurses) are willing and able to sell at a given price.
Law of supply: if the demand for a commodity/good i.e. health service
increases, the price of the quantity supplied will raise, therefore it will
become more scarce.
Supply Curve
Supply
Q
0
P

Supply Table
Price per Amoxicillin syrup Quantity per day
2.00 $ 10
3.00 $ 20
4.00 $ 30
5.00 $ 40
6.00 $ 50
7.00 $ 60
8.00 $ 70
9.00 $ 80
10.00 $ 90
11.00 $ 100
12.00 $ 0
Factors that can influence the supply
 Progress in technology e.g. X-ray vs CT-Scan
 Whether conditions i.e. unfavorable whether such earthquake
 Taxes
 Subsidies

Elasticity of supply
This term refers to the way in which the quantity supplied responds to a
change in price. Elasticity of supply can be treated in much same way as
elasticity of demand, but remembering that in this case, the quantity
supplied moves in the same direction as price.
The measurement of elasticity of supply makes use of a formula similar to
that used to measure elasticity of demand.
Elasticity of supply = % change in Qs
% change in P
If the percentage change in the quantity supplied is greater than the
percentage change in the price, the supply is elastic (Ed > 1)
Example
When the price increases from $10 to $11 and quantity demanded increases
from 1000 units to 1300 units, find the elasticity of demand and indicate
which kind of it?

Solution
Percentage change in the quantity supplied is
300 X 100 = 30%
1000
The percentage change in the price is:
1 X 100 = 10%
10
Elasticity of supply = 30 = 3
10
Therefore, in the price range $10 to $11 the supply is elastic
If the percentage change in the quantity supplied is less than the percentage
change in the price, the supply is inelastic (Qs <1)
Example
In a situation that there is fall in the price from $15 to $14% also there is
fall in the quantity supplied from 200 to 180, find the elasticity of supply and
indicate which kind of it.

Solution
The percentage change in the quantity supplied
20 X 100 = 10%
200
Percentage change in the price
1 X 100 = 20%
5
Elasticity of supply = 10 = 0.5
20
Therefore, in the price range from $15 to $14, the supply is inelastic.
If the percentage change in the quantity supplied is similar to the
percentage change in the price, the supply for the commodity is unitary
(Qs = 0)
In general the supply of a good or service is elastic when the amounts
offered for sale can be easily and quickly changed. This is true of many
manufactured goods (unless the industry/Hospital is working full capacity).

The supply of a good or service will be inelastic when the supply of it
cannot be easily and quickly changed. This is true of the supply of labor to
occupations which require long periods of training.
Market Equilibrium
Definition of Equilibrium: the situation when quantity supplied equals
quantity demanded at a particular price.
The supply and demand forces in the market place will produce an
equilibrium price and equilibrium quantity, or market equilibrium.
 The market-equilibrium comes at that price and quantity where the
supply and demand forces are in balance.
 At such a price and quantity the amount that buyers wish to buy is just
equal to the amount that sellers wish to sell.
 At the equilibrium price and quantity tend to stay the same, as long as
other things remain equal, until something operates to change supply and
demand.

We can now put the demand and supply curves together. This will give us a
picture of the market for healthcare (see figure). Notice that there is only
one price at which the quantity of treatments people want to buy is the
same as the quantity the services want to sell. This is called the equilibrium
price Pe. The corresponding quantity is the equilibrium quantity - Qe.
The equilibrium is a state of rest where there is no pressure for change. At
any other price either buyers or sellers are dissatisfied and act to change the
quantity demanded or supplied.

Excess Demand (Shortage)
At lower price, Suppliers(Doctors/nurse) will be unwilling to sell and
consumers (patients) will demand more hence we have a situation of excess
demand which many users(patients) who would otherwise have been willing
to pay will not pay therefore, this will tend to push prices UP
If there is excess demand, consumers bid up the price. In the Figure below,
at price P consumers demand Q. The price is low so a lot of people are
willing and able to buy treatments. However, the low price means that there
aren’t enough amount of treatment.

Excess supply (surplus)
At higher prices, Consumers (patients) will demand less and providers
(doctors and nurses) have incentives to produce more hence supply is in
excess. Some goods or services will remained unbought Prices will fall and
providers will want to cut on production

EXERCISE
1. Define the following terms:
a. Demand
b. Supply
c. Desire
2. What are the factors that influence both demand and supply?
3. Discus in detail law of demand?
4. Describe states of elasticity of demand and how it changes based on the
price?
5. Taxes influence the supply of commodity, discuss in detail?
6. Excess demand leads shortage of goods, rationale?
7. What is the difference between demand law and supply law (contrasts)?
8. How market is equilibrium regarding market forces (patients and
doctors/nurses/midwives)?

CHAPTER THREE
HEALTH CARE RESOURCES AND COSTS
Introduction
The 30th
anniversary of the Alma-Ata Declaration - a declaration arising out
of the International Conference on Primary Health Care (PHC) in Alma-Ata,
Kazakhstan. This declaration called for “the attainment by all peoples of the
world by the year 2000 of a level of health that will permit them to lead a
socially and economically productive life” - i.e., calling for “Health for all” by
2000. However, eight years beyond this target date, in many parts of the
world, people lack adequate food and do not have access to clean water -
both critical components of good public health.
One billion people live in developing countries on less than US$1 a day, and
2.5 billion are living on less than $2 a day; more than 2.6 billion people lack
access to toilets and other sanitation facilities; and 30,000 children under
five-years of age die every day, mainly from dehydration,
undernourishment, and preventable diseases. Where there are clinics and
hospitals, they are too few, and they are inadequately staffed and equipped.

Resources (or factors of production or inputs) are every item within the
economy that can be used to produce and distribute goods & services. They
are classified as:
 Labour (human resources)‫‏‬ e.g Doctors, Nurses, Midwives and
lab technicians
 Capital (goods that are used to produce other goods or
services); Land (all natural resources)‫‏‬
 Enterprise (the ability to combine the other factors in the
production process)‫‏‬
Basic Concepts and Definitions
Inputs: are the various resources such as manpower and equipment that
are available for use in a productive activity.
Process: describes the transformation or productive technique which
changes inputs into the desired outputs.
Output: refers to the end result of production.
Cost is the expenditure of something such as time or labor which are
necessary for the attainment of a goal.
Cost is an amount that has to be paid or spent to buy or obtain something.
Or the total money, time and resources associated with activity.
Economists define a cost as the value of resources used to produce a good
or services. However, the way these resources are measured can differ.

There are two main alternatives with respect to measurement of these
resources:
1. Financial cost represents actual expenditure on goods and services
purchased. Costs are thus described in terms of how much money has been
paid for the resources used in the project or services. In order to ascertain
the financial costs of a healthcare service, we need to know the price and
quantity of all the resources used and the level of expenditure on these
services.
2. Economic costing (opportunity cost): is the next best alternative
foregone. If you invest $1million in treating for pancreatic cancer, the
opportunity cost is that you can’t use that money to invest in developing a
cure for skin cancer. The phrase used mostly “time is money”
Types of costs
Costs can be defined in many ways but generally can be considered as
direct and indirect costs.
Direct costs are those immediately associated with an intervention such as
staff time, consumables etc.

Example of direct costs
 Project staff
 Consultants
 Project supplies
 Publications
 Travel
 Electricity
Indirect costs might include a patient’s work loss due to treatment.
Example of indirect costs
 Utilities
 Rent
 Generator
 Security
 Telephone
 Bill expense
 Transport and Conveyance Expenses
 Internet and Data Cards
 Mobile or communication Expenses
For simple way when we apply for the students at the university:
Direct costs include: Tuition fees, books and supplies, room and board

Indirect costs typically include: personal expenses (such as clothing,
laundry, etc.), transportation (to and from school-not including a car
payment) and miscellaneous expenses associated with attending college
Costs of production in health care
1. Fixed Costs (FC) is the costs which don’t vary with changing output.
Fixed costs might include the cost of building a factory, insurance and legal
bills. Even if your output changes or you don’t produce anything, the fixed
costs stay the same. In the above example, fixed costs are always £1,000.
2. Variable Costs (VC) are the costs which depend on the output
produced. For example, if you want to establish or open a hospital in a
place, you need to employ more health workers such doctors, nurses and
midwives.
3. Total Costs (TC) = Fixed + Variable Costs
4. Marginal Costs is the cost of producing an extra unit. If the total cost of
3 units is 1550, and the total cost of 4 units is 1900. The marginal cost of
the 4th unit is 350.
5. Average cost is the cost per unit of output. It is obtained when the total
cost is divided by the number of units produced.
How changes in output affect on costs
Assume that a private hospital with a fixed amount of land and capital
steadily increases it’s out by employing more Doctors, Nurses and Midwives
(variable factors).

The following table shows how the different costs might be affected by
change in output:
Units of
output
(per week
Fixed
costs
Variable
cost
Total cost Marginal
cost
Average
cost
0 1000 ____ 1000 ____ ____
1 1000 350 1350 350 1350
2 1000 560 1560 210 780
3 1000 740 1740 180 580
4 1000 1000 2000 260 500
5 1000 1400 2400 400 480
6 1000 2000 3000 600 500
7 1000 2850 3850 850 550
8 1000 3960 4960 1110 620
Points to know (the table)
 When output falls to zero, the total cost does not fall to zero, as long
as the hospital is working, it must meet its fixed cost even if
temporarily ceases providing health services.
 As output increases, the total cost continues to increase, as more
services is providing - more health workers such doctors, nurses and

midwives employed as well as more materials, fuel, power and other
resources used, therefore the total cost must increase.
 As output increase the marginal and average costs fall, because
productivity (health services) is increasing.
Example
In Hospital XYZ have a land, building and equipments which their cost is $
50,000. In order to provide health services to patients with diseases the
administration of the hospital planned to employ 100 health workers which
consists doctors and nurses in a cost $ 10,000 for the first year and 15,000
for the next year. As shown this table:
Output Fixed costs Variable costs
1 $ 50,000 $ 10,000
2 $ 50,000 $ 15,000
Find the Total cost, Marginal cost and Average cost
Solution
Fixed cost = $ 50,000
Variable cost = $10,000 and $15,000
To find total cost, marginal cost and average cost, we make a table:
Output Fixed
costs
Variable
costs
Total cost Marginal
cost
Average
cost
1 $ 50,000 $10,000 $60,000 $10,000 $60,000
2 $ 50,000 $15,000 $65,000 $5,000 $32,000

EXERCISE
1. Define the following:
a. Labor
b. Cost
c. Process
d. Output
2. Explain in full direct and in direct cost?
3. What is the effect of output on costs?
4. With classification, Describe factors of production?
5. Identify (2) two broad categories to measure costs?
6. Why productivity in healthcare is increasing today?

CHAPTER FOUR
THE MARKET AND HEALTHCARE
Meaning of Market
When people talk about markets, they may be referring to a number of
different meanings of the word, from very concrete to very abstract. In the
language of economics there are at least two different uses of the word
"market," and the appropriate meaning must be judged from the context in
which it appears.
1. Market as physical place
The most concrete and commonsense definition of a market is the idea that
a market is a location—that is, a place where people go to buy and sell
things. This is historically appropriate: Markets such as Bakara and Hamar-
weyne for people who wish to make exchange transactions. The same
criterion applies today, even when the “market” has become a shopping
center or mall, with many retail stores sharing one huge building, or a stock
or commodity exchange, where brokers stand on a crowded floor and wave
signals to each other. A market, as suggested by these examples, can be
defined as a physical place where there is a reasonable expectation of
finding both buyers and sellers for the same product or service.

Definition: Market (first meaning): a physical place where there is a
reasonable expectation of finding both buyers and sellers for the same
product or service.
2. Market as institution
Institutions are ways of structuring the interactions between individuals and
groups. Like markets, institutions can also be thought of in concrete or
abstract terms. A hospital can be considered an institution that structures
the interactions between doctors and patients. A university is an institution
that structures the interactions between professors and students.
When we think of markets as institutions, we see that a market does not
need to be a physical location. Private hospitals and pharmacies are market
institutions that bring buyers (patients) and sellers (health workers)
together.
Definition: Market (second meaning): an institution that brings buyers and
sellers into communication with each other, structuring and coordinating
their actions.

The basic neoclassical model
The basic neoclassical model is a model of market exchange that-- while
abstracting away from many real-world factors, it portrays in a simple and
elegant way some important aspects of markets.
Neoclassical economics arose during the late 19th and early 20th century. It
took the earlier classical idea that economies can be thought of as systems
of smoothly functioning markets.
The prefix “neo-“ means “new.”) In this model, the world is simplified to two
kinds of economic actors. Households are assumed to consume and to
maximize their utility (or satisfaction). Firms are assumed to produce and to
maximize profits.
Households are considered to be the ultimate owners of all resources, and
they sell or rent these to firms, receiving monetary payments in return.
Firms produce goods and services, which they sell to households in return
for monetary payments. This model can be portrayed in the circular flow
diagram in the following Figure. The model further assumes that there are so
many firms and households involved in the market for any good or service
that a situation of “perfect competition” reigns, in which prices are
determined purely by forces of supply and demand.

In this idealized world, goods and services are produced, distributed, and
consumed in such a way that the market value of production is as high as it
can be. The model combines important observations about markets with
assumptions about human values and human behavior (as both producers
and consumers).
Full social and economic efficiency is said to arise because:
 The prices set by the forces of supply and demand in smoothly
functioning markets carry signals throughout the economy,
coordinating the actions of many individual decision-makers in a highly
decentralized way.

 The profit motive gives perfectly competitive firms an incentive to look
for low cost inputs and convert them into highly valuable outputs.
Production decisions are thus made in such a way that resources are
put to their most (market) valuable uses.
 Consumption decisions made by individuals and households are
assumed to maximize the “utility” or satisfaction of consumers.
 Maximizing the market value of production is assumed to be a
reasonable proxy for maximizing human well-being.
The Institutional Requirements of Markets
Contemporary large-scale markets do an amazing thing: they allow
many, many separate decision makers, acting from decentralized
information, to coordinate their behavior, resulting in highly complex
patterns of voluntary exchange transactions. They do not, however,
operate in a vacuum. Economists have identified a number of even more
basic institutions that market institutions require in order to function. We
will classify these in four broad groups:
1. Individualist institutions related to property and decision making.
2. Social institutions of trust.
3. Infrastructure for the smooth flow of goods and information.
4. Money as a medium of exchange.

1. Individualist institutions related to property and decision making
For markets to work, people need to know what belongs to whom. Private
property is the ownership of physical or financial assets by nongovernment
economic actors. Actors must also be allowed to make their own decisions
about how to allocate and exchange resources. Prices, in particular, must
not be under the complete control of guilds or central bureaus, but must,
rather, generally be allowed to be set by the interactions of market
participants themselves.
Private property: ownership of assets by nongovernment economic actors.
The institutions of private property and individualist decision making exist
both formally, as in codes of law, and informally, in social norms. For
example, some Western economists expected markets to grow quickly in the
countries of the former Soviet Union as soon as communism was dismantled
and opportunities for markets opened up. However, many people were
accustomed to being told where to work and what to do by the state. Norms
of individual initiative and entrepreneurship, it turns out, do not just arise
naturally but need to be fostered and developed.

2. Social institutions of trust
A second critical institutional requirement for markets is that some degree of
trust must exist between buyers and sellers. When a buyer puts down
his/her payment, he/she must trust that the seller will hand over the
merchandise and that it will be of good quality.
A seller must be able to trust that the payment offered is valid, whether it is
in the form of currency, personal check, credit card charges, or other kinds
of promise of future payment. Social institutions must be created to reduce
the risk involved. Again, trust is an institution that exists both in social
norms and formal establishments.
Cultural norms and ethical or religious codes can help establish and maintain
an atmosphere of trustworthiness. One-on-one exchanges between
customers and businesses help build trust and make future transactions
smoother. Many companies have built up a reputation for making quality
products or providing good service. Marketers try to capitalize on the
tendency of buyers to depend on reputation by using advertising to link
certain expectations about quality and price to a recognizable brand name
and thus creating “brand loyalty” among repeat customers.
In modern complex economies, contracts are often needed to define the
terms of an exchange. An informal or implicit contract exists when the terms
of an exchange are defined verbally or through commonly-accepted norms

and traditions. Explicit contracts are formal, usually written, agreements that
provide a legally-enforceable description of the agreed-upon terms of
exchange. For formal contracts to work there must be laws that define
contracts, state the legal obligation to honor contracts, and establish
penalties for those who fail to do so, and a system for enforcing those laws.
Implicit contract: an informal agreement about the terms of exchange,
based on verbal discussions and on common norms, traditions, and
expectations.
Explicit contract: a formal, often written, agreement that states the terms
of exchange and may be enforceable through a legal system.
In highly marketized economies many other institutions have evolved to deal
with the issue of trust. For example, credit bureaus keep track of consumer
credit trustworthiness, Better Business Bureaus keep track of complaints
against businesses, “money back” guarantees give consumers a chance to
test the quality of a good before they commit to purchasing, and escrow
accounts provide a place where money can be put until goods or services are
delivered.
However, even in complex transactions among large groups of strangers,
social norms are still essential. Detailed formal contracts are costly to write
and costly to enforce. It is not practical to police every detail of every
contract, and it is impossible to cover every conceivable contingency. The

legal system can work smoothly only if most people willingly obey most laws
and believe that it is dishonorable to cheat. In effect, relationships, social
norms, and the governmentally-created apparatus of law are institutions
that must exist side by side, reinforcing one another. None of these alone
can carry the whole burden of making complex contracts work, and hence
make markets possible.
3. Infrastructure for the smooth flow of goods and information
A third set of basic institutions for market functioning have to do with
making possible a smooth flow of goods and information. Most obviously,
there needs to be a system of physical infrastructure for transportation and
storage that provides the basic foundation for moving goods around. Such
infrastructure includes roads, ports, railroads, and warehouses in which to
store goods awaiting transport or sale. This sort of infrastructure can be
most noticeable when it is absent, such as in economies ravaged by war.
Physical infrastructure: the equipment, buildings, physical communication
lines, roads and other tangible structures that provide the foundation for
economic activity.
In addition, there needs to be an infrastructure in place for the flow of
information. Producers and sellers need information on what, and how much,
their customers want to buy; in a well-functioning marketized economy, this

information indicates what, and how much, should be produced and offered
for sale.
At the same time, consumers need to know what is available, and how much
of something else they will have to give up (i.e., how much they will have to
pay) to get the products that are on the market. In fact, ideally consumers
should be able to compare all potential purchases, as a basis for deciding
what to acquire and what to do without.
4. Money as a medium of exchange
The final critical institution required for markets to operate smoothly is a
generally accepted form of money. Many different things have been used as
money in the past. Early monetary systems used precious or carved stones,
particular types of seashells, or other rare goods. Gold, silver, and other
metal coins were the most common choice for many centuries; more
recently, paper currency has become important.
Today, financial instruments such as bank account balances play an even
larger role; in a developed country, the amount of money that changes
hands in the form of business and personal checks is several times as great
as the volume of transactions conducted with paper and metal currency. The
use of credit cards (a form of debt, to be later paid by a bank account draft),
electronic bank transfers, and payments over the Internet further ease the
making of payments in exchange.

What makes something money? One obvious criterion is that money must be
widely accepted as a medium of exchange; money is whatever everyone else
thinks it is. Yet this alone is not enough.
Definition: Money is something that people trust has value and so will
accept in exchange for goods or services. It is desirable that it also be a
durable store of value and have minimal handling and storage costs.
Types of market structure
1. Perfect competition
Perfect competition is a market structure where many firms offer a
homogeneous product. Because there is freedom of entry and exit and
perfect information, firms will make normal profits and prices will be kept
low by competitive pressures.
Features of perfect competition
 Many firms.
 Freedom of entry and exit; this will require low sunk costs.
 All firms produce an identical or homogeneous product.
 All firms are price takers, therefore the firm’s demand curve is
perfectly elastic.

 There is perfect information and knowledge.
2. Monopoly
Monopoly – One firm dominates the market, barriers to entry, possibly
supernormal profit. A pure monopoly is defined as a single seller of a
product, i.e. 100% of market share.
Features of Monopoly
 Higher Prices: Firms with monopoly power can set higher prices than
in a competitive market.
 Allocative Inefficiency: A monopoly is allocatively inefficient because in
monopoly the price is very high. In a competitive market the price
would be lower and more consumers would benefit.
 Diseconomies of scale: It is possible that if a monopoly gets too big it
may experience dis-economies of scale. – higher average costs
because it gets too big.
 Lack of incentives: A monopoly faces a lack of competition and
therefore, it may have less incentive to work at product innovation and
develop better products.
3. Oligopoly
Oligopoly is an industry dominated by a few firms, e.g. supermarkets, petrol,
car industry etc.

The main features of oligopoly:
 An industry which is dominated by a few firms.
 Interdependence of firms, firms will be affected by how other firms set
price and output.
 Barriers to entry, but less than monopoly.
 Differentiated products, advertising is often important
 Most common market structure
HEALTH CARE MARKETS
Health care has several interdependent markets such as: education,
manpower, institutional, pharmaceutical and others.
The education market determines how many doctors, nurses and other
professionals are trained every year and therefore how many such
professionals are available to provide services. In this market, prices can be
viewed in terms of tuition and other costs to the individual seeking training
to be a physician, a nurse or other professional.
Manpower markets determine labour prices (salaries and wages) paid to
professionals.
Institutional markets determine prices for hospital stays, or stays in nursing
homes. In the pharmaceutical markets, prices of medications are
determined. One can identify many other markets in health care. Because of
the nature of the product for sale and the structure of health care markets

most of these markets do not meet the ideal perfect market conditions that
facilitate efficient resource allocation.
IDEAL MARKET CONDITIONS – WITH REFERENCE TO HEALTH CARE
Several conditions facilitate the efficient workings of the market leading to
efficient resource allocation. The main set of conditions can be viewed in
terms of market structure. Other conditions include: marketability of all
goods and services; demand certainty, i.e. The demand that is regular and
predictable; supply certainty, i.e. the known or predictable quality of the
product; avoidable risks; the customer’s ability to test the product before
consumption; information symmetry (between buyers and sellers); no price
discrimination (charging consumers different prices for the same product),
and that all suppliers in the market have a profit motive.
Other implied conditions are: consumers have sufficient information to make
good choices; consumers can accurately predict the results of their
consumption decisions; individuals are rational; a person is the best judge of
his/her own welfare; there are no externalities; consumer tastes are
predetermined; supply and demand are independently predetermined; firms
do not have monopoly power; there are no increasing returns to scale, and
others.

MARKET STRUCTURE IN HEALTHCARE
The structure of the market in which the firm is operating has a significant
effect on efficiency.
Market structure is defined by: the number and size of the firms in the
market; the ease with which firms may enter and exit the market; the
degree to which firms’ products are differentiated; and the information
available to both buyers and sellers regarding prices and product
characteristics.
The ideal economic structure is perfect competition which has the following
characteristics:
 Many sellers (firms) and many buyers and each one individually too
small to affect price levels so they are all price-takers not price-
setters;
 Homogeneous products such that buyers are unable to discern any
difference between products sold by different sellers/firms; firms can
enter and exit the market freely without restriction from regulations or
costs so that new suppliers can enter the market to increase
competition, or be forced to leave the market if they are inefficient;
 Perfect knowledge/information about prices, and technology so that
consumers and firms can access such information at zero cost, and no

externalities (spill-over effects, e.g. smoking affects non-smokers) in
production and consumption.
These characteristics define an ideal market structure that might not exist in
its pure form in real life, but has normative value and provides an
understanding of how equilibrium prices and quantities are determined by
market forces.
Economists can demonstrate mathematically (First Fundamental Theorem of
Welfare Economics)3 that perfect competition leads to Pareto optimality.
Consumers get the “best bang for their buck” and producers produce at the
lowest per unit cost. Inefficient producers are weeded out (go out of
business because they make heavy losses) so that only the efficient
producers survive, i.e. survival of the efficient.
If the conditions of this market are not met, the market is unable to attain
efficiency. For example, if there are barriers to entry or exit, new producers
cannot get into the industry to increase competition. Prices and costs of
production remain high and inefficient producers stay in business because
they are protected from having to compete with more efficient producers.
With higher prices, consumers do not get the best value for their money.
There is inefficiency in production and in consumption.

Perfect competition attains efficiency because producers compete and
increase production, which lowers the prices that consumers pay. Lower
prices force producers to be efficient (produce at lower average costs) so as
to make a profit.
The structure of markets in health care is not competitive. There are barriers
to entry and exit. Some barriers come from professional licensing, long and
expensive training and expensive investment requirements (e.g. hospitals
are expensive to build). The barriers might protect inefficient producers from
being weeded out so that efficient resource allocation does not occur
automatically. There might be a few hospitals in a city (oligopoly) or only
one hospital in a rural location (monopoly) and a drug company with a
patent is a monopoly with the power to set prices.
Other conditions of perfect competition are contravened in health care:
product homogeneity—the services of one physician are not identical to
those of another; rather than perfect information, there is information
asymmetry which can be a serious source of market failures as
demonstrated later.
Price discrimination is common in health care (consumers pay different
prices for the same service depending on their incomes or bargaining
power). Obviously, health care markets do not meet the conditions of perfect
competition. In health care, there are firms that have market power and are

able to move and set prices. For example, a rural community that has only
one hospital is essentially a monopoly within that geographic area. Such a
hospital is not facing serious competition so it will be able to set prices high
enough to suit its revenue needs. More importantly, it does not have to be
efficient in production because it is not necessarily going to be driven out of
the market by more efficient producers.
Another example is a pharmaceutical company that has a patent on a drug.
The company is a monopoly by virtue of the fact that no other company can
legally produce and sell that drug until the patent runs out. For the duration
of the patent the drug company is a monopolist. It is a price-setter for that
particular drug, it can earn high profits and it will not have to be efficient in
production because it is not facing any competition.
Because of the structure of health care markets, producers are not forced to
be efficient. The market does not punish inefficiency as would be the case
under perfect competition.
There are other market structures that lead to sub-optimal resource
allocation because some agents have enough power to set prices by shifting
demand or supply. For example, if there are only a few large sellers in the
market (oligopoly) the sellers have enough market power to set prices and
the market fails to allocate resources efficiently.

A good example of oligopolies is in the US health insurance industry which is
dominated by a few large companies. In some local areas, there might be
only one company which essentially means that they are monopolies. Thus
the condition that everyone in the market is a price taker is contravened in
health care and that does lead to market failures.
PRODUCT MARKETABILITY
Health care as a product or service is not consumed because it provides a
consumer with satisfaction (it might even be unpleasant or painful), but
because the individual wants to retain good health. The demand for health
care is derived from an individual’s wish to regain good health. The qualities
of the product (health) make it difficult for markets to meet the ideal market
conditions.
Health is not a marketable product, that is, it cannot be exchanged between
consumers. Since demand for health care is derived from the demand for
health, the non-marketability of health reduces the power of market forces
(demand and supply) to determine prices and quantities. Consequently the
ability of the market to determine resource allocation is greatly reduced.

INFORMATION ASYMMETRY
There are several information asymmetries in health care, but we will
examine two:
 Between the doctor and the patient, and
 Between the consumer and the health insurance company.
Doctors (suppliers) know more about illness and treatments than their
patients. Patients depend on the doctor to act in their best interest, but
there is a conflict of interest because the doctor is selling a service to the
patient.
The doctor is in a position to determine demand for the service (acting on
behalf of the patient, presumably for the patient’s welfare) and the doctor is
also the supplier of the services. In this case demand and supply are jointly
determined by the same individual at the same time which can result in
market failure. For example, if the doctor is driven by the profit motive, or is
seeking higher income, the doctor might order more services than necessary
(e.g. if he/she owns a laboratory or imaging equipment). This market failure
is termed “supplier induced demand”.
There are several studies that indicate evidence of supplier-induced demand
in health care. In a Japanese study, Izumida, Urushi and Nakinishi found
that increases in the number of physicians per capita significantly increased
use of inpatient services and outpatient services.8This implies that when

more doctors moved into an area they had to share the patients so they
increased demand for their services in each encounter by inducing demand
from the patients under their care.
Information asymmetry between individuals purchasing health insurance and
the insurance company results in two market failures termed adverse
selection and moral hazard.
a. Adverse selection
Individuals in poor health have a greater incentive to purchase health
insurance than those in good health. Individuals in poor health make greater
utilization of health care than the healthy, leading to higher payouts by the
insurance company.
To avoid incurring losses, insurance companies might raise premiums.
Higher premiums will further discourage healthy individuals from purchasing
health insurance so that only the very ill buy insurance leading to losses by
insurance companies and eventually this might mean the demise of a
market. This market failure can be corrected by universal coverage, i.e.
everyone buys coverage so that insurance companies have a pooled risk
which on the average is lower than the risk from covering only the very ill.
The other solution is screening and experience rating that allows insurance
companies to change different premiums according to risk levels.

b. Moral hazard
Individuals covered by insurance tend to use more health care and they
might not take necessary precautions to stay healthy because they know
they have insurance coverage. This leads to inefficient use of resources.
Insurance companies try to correct this by employing gate-keepers who
monitor and restrict health care access and by charging co-payments and
deductibles. Unfortunately, these are applied to everyone including those not
overusing services, which make these solutions inefficient.
INTERDEPENDENT DEMAND AND SUPPLY DETERMINATION
An increase in demand for health care (e.g. due to an influx of population, or
an epidemic) can lead to higher prices for such care. The increase in prices
might result in the physician supplying less hours of work. For example, if a
physician wants to earn $100,000 per year, he may usually earn that much
by seeing 100 patients a week. If the price for services goes up, he might be
able to earn that income by seeing only 80 patients a week. He/she will then
be able to hit the target income by supplying less hours of work—thus
seeing fewer patients and spending more of his/her time on leisure. This
situation results in the famous “backward bending” labor supply curve. Thus
supply and demand in health care are not determined independently leading
to market failures.

CONSUMER RATIONALITY AND ABILITY TO MAKE THE BEST
JUDGMENTS ABOUT THEIR WELFARE
Consumers seeking care are not always in a position to make the best
judgment about their welfare even if they have the ability and freedom to do
so. For one, they lack necessary information about their illness or the
effective treatment.
Moreover, there are some situations of extreme stress making it impossible
for the individual consumer to make the judgment (e.g. someone in a car
accident, passed out on the roadside). Furthermore, consumers cannot
accurately predict the results of consuming health care.
When visiting a doctor for a particular condition, the consumer is not able to
predict accurately what the results of the visit will be, even if they have been
through similar circumstances before. A treatment regimen that worked
previously might not work the same way.
Economists consider an individual to be rational if they made consistent
and transitive decisions.
Consistent means that when faced with the same conditions they make the
same decisions every time.
Transitive is used in the mathematical logic sense that, in a relation
between three elements, if it holds between the first and second, and it also
holds between the second and third, it must necessarily hold between the

first and third. For example, an individual is offered three choices A, B, and
C. If they prefer choice A over B and they also prefer choice B over C then
they must prefer choice A over C. Economists would consider an individual
rational if they decided/acted in this manner.
EXTERNALITIES
Externalities are spill-over effects of consumption or production. Positive
externalities occur when the actions of one individual result in a spill-over
that improves the well being of another individual and negative externalities
impose a cost on another individual.
Smoking is an example of a negative consumption externality because one
individual’s consumption (smoking) affects other people’s health negatively
(effects of second-hand smoke).
An example of a positive externality is immunization. If some individuals are
immunized they provide “herd immunity” in the sense that they do not get
the illness therefore they do not pass it on to others. Their immunization
provides a benefit to others—a positive externality.
With the presence of externalities, individual production or consumption
decisions are not optimal because they are made without consideration of all
costs or benefits. Often, spill-over effects are not included in decision-
making because they are not visible to the producer or consumer.

In the case of a negative externality, the external spill-over costs are not
included and in the case of positive externality, the spill-over benefits are
excluded. Therefore, the consumption or production level selected is not
optimal or efficient.
In cases of positive externality, the production or consumption level is below
the optimal while with negative externalities the level is higher than optimal.
Therefore externalities lead to inefficiency and so to market failures.
The market is usually not able to correct inefficiencies arising from
externalities. To correct failure due to externalities, the consumer or
producer has to consider both the private and the external (spill-over) costs
or benefits.
Such considerations in the decision-making process would result in
production or consumption at optimal levels. One method of making the
producer or consumer consider total benefits or costs in production is to
provide subsidies in case of positive externalities, or taxes in the situation of
negative externality.
The subsidy makes the external benefit part of the private benefits that the
consumer or producer will consider in decision-making so as to arrive at
optimal production/consumption quantities. The tax serves to make the
producer aware of the extra costs that they impose on society so that they
can arrive at optimal quantities in their decision-making. Thus taxes or

subsidies might eliminate the effects of externalities and lead to efficient
allocation of resources. However, these usually require government action.
The way taxes are used (allocated and distributed) has an effect on societal
welfare.
PREDETERMINED CONSUMER TASTES
Another implied condition is that consumer tastes are already determined at
the time the consumer enters the market. This condition is not met in health
care and consumer tastes are malleable. For example, consumers might
demand newer, more expensive technologies rather than older ones that are
equally effective, but less expensive. Such demands lead to unnecessary
increases in health care costs—an inefficient use of resources (market
failure).
PROFIT MOTIVE
According to economic theory, the objective of a producer is to make as
much profit as possible (profit maximization). Producers who seek to
maximize profits are forced to be efficient because they need to reduce
production costs so as to increase their profits.
Under perfect competition, they are driven to be efficient, not only by the
profit motive, but also by the need to stay in business. In doing so they use

resources efficiently thus improving social welfare; however, in health care
not all firms are profit driven.
In the USA, a large number of nursing homes are for profit and so is the
health care product market (pharmaceuticals and equipment). Therefore the
US health care industry is not all profit driven but has for-profit enclaves.
This would imply that the profit motive condition is also contravened in
health care. Firms do not always strive for efficiency.
In the USA, there are disparities in health status and access to care. Minority
populations (African Americans, American Indians, Hispanics and others)
experience poor health status and poorer effective access to health care
than the majority white population.
Moreover, there are geographic disparities (lower access in rural than in
urban areas) and socioeconomic disparities with the poor having worse
health than the rich.
There are also gender disparities with women experiencing worse health
care access than men although they have longer life expectancies. There is
therefore an unequal distribution of health and health care that is not
approved by society.
Some of the reasons for the unequal distribution are economic while others
might be historical. The minority health disparities seem to be experienced

by other countries as well such as the UK, India, Australia and others.
Disparities might not be corrected by the market.
INTERVENTIONS TO REDUCE EFFECTS OF MARKET FAILURE
Consistent with economic theory, markets respond to failures by developing
structures that fill the gaps resulting from such failures.
Examples of such structures in the US include:
 Independent physicians,
 Cost-based reimbursement for hospitals and managed care.
 To some degree, health insurance is a structure that covers market
failure due to large unavoidable risks of illness.
 Market structures are not always successful in closing such gaps. They
might even create other inefficiencies as is the case of health
insurance (adverse selection, moral hazard and stinting)
Governments can and do intervene in markets to correct market failure. The
intervention might come in the form of taxes, subsidies, regulations and
providing services directly.

However, government intervention is not always successful in correcting
market failure. There are government failures due to reasons such as:
 Poor information about the type and size of services needed to correct
the failure.
 Political exigency focusing on short term effects (e.g. in an election
year) rather the long run goals;
 Administrative costs and bureaucracy;
 Inefficiency because there are no incentives to be efficient;
 Multiplicity of conflicting objectives in government, and changes in
government policy as a result of the political business cycle.

EXERCISE
1. Define the following:
a. Market
b. Money
c. Monopoly
2. With market factors, Discuss neo-classical model?
3. Explain structures of health market?
4. State how moral hazards and externalities affect market?
5. Describe in detail what mean market failure and give example in Somalia?
6. How perfect condition is significant in the context of healthcare?

CHAPTER FIVE
TECHNIQUES OF ECONOMIC EVALUATION
Definition: Economic evaluation is the identification, measure, and
comparison of the costs (i.e. resources consumed) and outcomes (clinical,
economic, and humanistic) of interventions (pharmaceuticals, non-drug
therapies, public health programs).
Techniques of economic evaluation
The techniques used economic evaluations are the following:
1. Cost-minimization analysis
Is a method of calculating drug costs to project the least costly drug or
therapeutic modality. Cost minimization also reflects the cost of preparing
and administering a dose. This method of cost evaluation is the one used
most often in evaluating the cost of a specific drug. Cost minimization can
only be used to compare two products that have been shown to be
equivalent in dose and therapeutic effect. Therefore, this method is most
useful for comparing generic and therapeutic equivalents or «me too» drugs.
In many cases, there is no reliable equivalence between two products and if
therapeutic equivalence cannot be demonstrated, then cost-minimization
analysis is inappropriate.

If a new therapy were no safer or more effective than an existing therapy
(i.e. there is no incremental benefit), it would normally justify the same
price as the existing therapy. An example would be the introduction of a new
ACE inhibitor with essentially the same properties as existing members of
the class; the price would be equivalent to that of the existing drug(s). This
is often not as simple as it may seem, as it requires sound trial-based
information on the doses of the two drugs required for equivalent efficacy.
An alternative is to use the PDDs for the two drugs in the marketplace to
determine the relative prices. This is a pragmatic approach, but assumes
that the two drugs are actually used at equivalently effective doses, and this
may not always be the case
2. Cost-effectiveness analysis
Cost-effectiveness analysis involves a more comprehensive look at drug
costs. While cost is measured in monetary terms, effectiveness is
determined independently and may be measured in terms of a clinical
outcome such as number of lives saved, complications prevented or diseases
cured.
Cost-effectiveness analysis thus measures the incremental cost of achieving
an incremental health benefit expressed as a particular health outcome that
varies according to the indication for the drug.

Examples of ICERs using this approach are:
 the cost per extra patient achieving a 10 mm Hg fall in blood pressure;
 the cost per extra asthmatic patient achieving a reduction in oral
corticosteroid use
 the cost per extra episode of febrile neutropenia avoided; or
 The cost per extra acute rejection episode avoided in patients with
kidney transplants.
3. Cost-utility analysis
Cost-utility analysis is used to determine cost in terms of utilities, especially
quantity and quality of life. This type of analysis is controversial because it is
difficult to put a value on health status or on an improvement in health
status as perceived by different individuals or societies. Unlike cost-benefit
analysis, cost-utility analysis is used to compare two different drugs or
procedures whose benefits may be different.
Cost-utility analysis expresses the value for money in terms of a single type
of health outcome. The ICER in this case is usually expressed as the
incremental cost to gain an extra quality-adjusted life-year (QALY). This
approach incorporates both increases in survival time (extra life-years) and
changes in quality of life (with or without increased survival) into one
measure. An increased quality of life is expressed as a utility value on a

scale of 0 (dead) to one (perfect quality of life). An increased duration of life
of one year (without change in quality of life), or an increase in quality of life
from 0.5 to 0.7 utility units for five years, would both result in a gain of one
QALY. This allows for easy comparison across different types of health
outcome, but still requires value judgements to be made about increases in
the quality of life (utility) associated with different health outcomes. The use
of incremental cost-utility ratios enables the cost of achieving a health
benefit by treatment with a drug to be assessed against similar ratios
calculated for other health interventions (e.g. surgery or screening by
mammography). It therefore provides a broader context in which to make
judgements about the value for money of using a particular drug.
4. Cost-benefit analysis
Cost-benefit analysis is used to value both incremental costs and outcomes
in monetary terms and therefore allows a direct calculation of the net
monetary cost of achieving a health outcome. A gain in life-years (survival)
may be regarded as the cost of the productive value to society of that life-
year using, for example, the average wage. The methods for valuing gains in
quality of life include techniques such as willingness-to-pay, where the
amount that individuals would be willing to pay for a quality-of-life benefit is
assessed. However, the techniques used to value health outcomes in

monetary terms remain somewhat controversial, with the result that cost-
benefit analysis is so far not widely used in pharmacoeconomic analyses.
Economic analyses such as those described above may be trial based or
modeled. A trial based analysis uses the incremental benefits and use of
resources in a clinical trial to calculate an ICER, but this may not be as
relevant to the use of the drug as it would be in the marketplace. A modelled
analysis is used to apply the benefits and use of resources to a local clinical
situation, and to extend the time frame beyond that of a clinical trial. This is
particularly important where the benefits of treatment may not be realized
until sometime in the future. Two examples are the avoidance of liver cancer
or transplantation for patients with hepatitis C and the prolongation of life
for hypertensive patients. Short-term surrogate outcome measures
(clearance of virus and lowering of blood pressure, respectively) are used in
clinical trials, and need to be translated by modeling into the longer-term
outcomes, which are more relevant to patients and policy-makers.
Cost effectiveness analyses
Cost Effectiveness Analysis (CEA) is a type of economic evaluation that
examines both the costs and health outcomes of alternative intervention
strategies.

CEA compares the cost of an intervention to its effectiveness as measured in
natural health outcomes (e.g., "cases prevented" or "years of life saved").
 CEA results are presented in a cost-effectiveness ratio, which
expresses cost per health outcome (e.g., cost per case
prevented and cost per life year gained).
 CEA is generally used to either:
 compare alternative programs with a common health
outcome, or
 assess the consequences of expanding an existing program.
CEA was created in the 1970s as a tool for healthcare decision making,
primarily to avoid controversy regarding valuation of health-related
outcomes in dollars.
CEA was initially applied in the clinical arena but has recently been used to
evaluate health policies, programs, and interventions.
Why Is CEA Important?
Decision makers are often faced with the challenges of resource allocation.
Resources are scarce; therefore, they must be allocated judiciously. CEA is
used to identify the most cost-effective strategies from a set of options that
have similar results.

For example, the federal government might have to allocate scarce
resources to:
1. Provide a new facility to assist in the development and
procurement of vaccines, or
2. Enhance the current public health vaccine delivery.
These options have a common health outcome: the number of cases of a
disease prevented by the vaccine. CEA can be used to identify the option
that prevents the most cases at the least cost.
CEA differs from cost benefit analysis (CBA) and cost utility analysis (CUA)
in that:
 CEA expresses outcomes in natural units (e.g., "cases
prevented" or "number of lives saved"), whereas
 CBA assigns dollar values to the outcomes attributable to the
program, and
 CUA is a specialized form of CEA that includes a quality-of-life
component associated with morbidity using common health
indices such as quality-adjusted life years (QALYs) and
disability-adjusted life years (DALYs).

Advantages of CEA over CBA and CUA
Compared with CBA and CUA, CEA is:
 less time- and resource-intensive,
 easier to understand, and
 more readily suited to decision making.
Because CEA uses a particular outcome measure that must be common
among the programs being considered, its value is limited when the
programs have different outcomes.
To overcome this limitation, CEA uses more general summary measures
(e.g., "number of lives saved").
For example, compare a smoking prevention program targeted at
adolescents with a smoking cessation program targeted at committed
smokers.
The prevention campaign results might be presented as "cost per student
smoker averted" whereas the smoking cessation program might be
measured by "cost per quitter."
To compare programs and better allocate resources, you could present
results of both programs using a common outcome measure (e.g., "cost per
life-year gained").

A CEA Example
This table lists factors that should be considered by a decisionmaker when
choosing between alternative programs: expanding access for a breast
cancer screening program to women with risk factors aged 40–69 years
rather than 50–69 years.
National Breast and Cervical Cancer Early
Detection Program (NBCCEDP)
Factor Value
Decision maker NBCCCEDP
Resources Congressional appropriations
Alternatives Women aged 40–69 versus 50–69 years
Group affected Low income women
Cost of including
women aged 40–49
years
Resources that could be used to:
 screen more women for cervical cancer,
 increase the percentage of eligible women
aged 50–69 years receiving breast cancer
screening, and
 Expand the program to cover treatment
costs.
Benefits of including
women aged 40–49
years
 increase in early detection rates, and
 Possible decreased mortality attributable
to breast cancer that is left untreated for
too long.

CEA could be used by the decision maker to provide empirical results that
account for the costs and consequences associated with alternative
programs.
The decision maker's role is to arrive at the choice that will maximize the
health benefits to the population.
A host of factors goes into the decision-making process (e.g., timing and
political consequences).
Beside these, individual or group value judgments also play a part in arriving
at the final decision.
For instance, it might NOT be cost effective for a managed-care provider to
cover mammographies for all beneficiaries aged 50–69 years, compared with
covering just those who are at high risk (e.g., having a family history of
breast cancer, white race, or late age at menopause).
Nevertheless, political and social pressures might force the provider to
adhere to the recommendation of the NBCCEDP and cover all female
beneficiaries aged 50–69 years.

When Can We Use CEA?
CEA is used most appropriately in situations having:
Interventions with Shared Goals
CEA is useful when the primary objective of the study is to identify the most
cost-effective strategy from a group of alternatives that can effectively meet
a common goal and are often competing for the same resources.
For example, to increase smoking cessation among adult smokers, a policy
maker could compare a self-help treatment plan with a group-based
intervention.
A Specific Population
CEA results might not be generalizable to all populations. Because each
population has specific characteristics (e.g., prevalence of disease, or access
to care), each might have different program costs, productivity losses, and
medical expenses,
Inequalities in risk factors and exposure levels can also result in different
outcomes.
For example, a mass media campaign might be the best intervention to
increase smoking cessation among adolescents, whereas a prenatal health
education program might be a better intervention to increase smoking
cessation among pregnant women.

Why Should Economic Evaluations Be Conducted?
Economic evaluations provide us with criteria for deciding between
alternative strategies that have different costs or consequences.
The diagram below illustrates how a comparison of costs and consequences
of two alternative programs provides a basis for a decision.
Decision makers need to know the inputs or costs that the programs will
need as well as the outputs or benefits that the programs will produce to
make informed decisions.
When an economic evaluation is used in the public health sector to ensure
that limited resources are allocated as efficiently as possible, decision
makers need to ensure that the benefits are worth the costs.
In an economic evaluation, the principles from multiple disciplines (e.g.,
biology, epidemiology, decision sciences, and economics) are used. By
combining these disciplines, the researchers can conduct an economic
evaluation to produce comprehensive results that are scientifically sound.

How to Determine Which Form of Evaluation To Use?
The decision is made on the basis of
1. the alternatives to be compared and whether outcomes are to be
examined, and
2. The decision-making level.
The Alternatives To Be Compared and Whether Outcomes Are To Be
Examined
CBA, CUA, and CEA compare at least two alternatives and evaluate the costs
and consequences of each. In contrast, CA examines only the net
costs relevant to either a single intervention or in a comparison of 2
programs.
The economic evaluation tools table below illustrates the association of these
four types of economic evaluation.
By the Decision-Making Level
The decision-making tiers diagram below depicts the relationship
between CBA, CUA, and CEA as they relate to the informational needs of the
decision maker.

Steps used economic evaluation
 Establish the perspective
 Describe or specify the alternatives
 For each alternative, specify the possible outcomes and the probability
of their occurrence
 Specify and monitor the health-care resource consumed in each
alternative
 Assign dollar values to each resource consumed
 Specify and monitor nonmedical resources consumed by each
alternative
 Specify the unit of outcome measurement
 Specify other noneconomic attributes of the alternatives, if appropriate
 Analyze the data
 Conduct a sensitivity analysis

EXERCISE
1. What is economic evaluation and its importance to healthcare?
2. With merits and demerits, Discuss in full for the following:
 Cost Effectiveness Analysis (CEA)
 Cost Benefit Analysis (CBA)
 Cost Utility Analysis (CUA)
 Cost Minimization Analysis (CMA)

CHAPTER SIX
BUDGET AND BUDGETTING PROCESS
Many associate the word “budget” with “dread” or “drudgery.” Perhaps the
word “budget” should be avoided altogether. Words like “financial map” or
“operational guide” might be suitable alternatives. No doubt, some
employees will question the need for a budget. The process of budget
preparation is sometimes seen as painful, and it is not always clear how the
effort that is required leads to any productive output. Furthermore, budgets
can be seen as imposing constraints that are hard to live with and
establishing goals that are hard to meet!
Despite these dismal remarks, it is imperative that organizations carefully
plan their financial affairs to achieve financial success. These plans are
generally expressed as “budgets.” A budget is a detailed financial plan that
quantifies future expectations and actions relative to acquiring and using
resources.
Definitions and Basic Concept
A budget is a financial document used to project future income and
expenses.
A budget is a quantitative expression of a plan for a defined period of time.
It may include planned revenues, resource quantities, costs and expenses,

assets, liabilities and cash flows. It expresses strategic plans of business
units, organizations, activities or events in measurable terms.
Budgeting is the process of identifying, gathering, summarizing, and
communicating financial and nonfinancial information about an
organization's future activities
Forecasting - uses accumulated historical data to predict financial
outcomes for future months or years.
Purpose
Budget helps to aid the planning of actual operations by forcing managers to
consider how the conditions might change and what steps should be taken
now and by encouraging managers to consider problems before they arise. It
also helps co-ordinate the activities of the organization by compelling
managers to examine relationships between their own operation and those
of other departments. Other essentials of budget include:
1. To control resources
2. To communicate plans to various responsibility center managers.
3. To motivate managers to strive to achieve budget goals.
4. To evaluate the performance of managers
5. To provide visibility into the company's performance
6. For accountability

Types of budget
A budget is a plan that forecasts future expenses and helps organizations to
effectively allocate resources to meet those expenses. Organizations prepare
budgets to plan how they will allocate funds for the next budget year.
Budgets are also used to evaluate performance and compare actual spending
with budgeted amounts. There are many different types of budgets and each
1. Capital Budgets
A capital budget estimates all capital asset acquisitions and summarizes all
expenses and costs of major purchases for the next year. Capital assets
include items that have useful lives of more than 12 months, such as
buildings, building improvements, land, furniture, fixtures, equipment,
computers, works of art and books.
2. Operating Budgets
Operating budgets indicate the products and services a Organization expects
to use in a budget period. It describes all the income-generating activities of
a Organization, including production, sales and inventories of finished goods.
An operating budget typically has two distinct parts: the expense budget and
the revenue budget. The expense budget indicates all expected expenses of
a Organization for the coming year, while the revenue budget shows all
projected revenues for the coming year.

3. Cash Budgets
A cash budget projects all cash inflows and outflows for the next year. Cash
budgets have four distinct elements: cash disbursements, cash receipts, net
change in cash and new financing. A cash budget is important, because it
allows administrators to timely identify periods with cash overages and
shortages so they can take necessary remedial action.
4. Sales Budgets
Sales budgets indicate the sales a Organization expects to make in units and
dollars for a budget year. They detail the quantities of products or services a
Organization expect to sell, revenues incurred from those sales and all
expenses accrued during selling. A sales budget is a planning instrument and
a control mechanism. Sales budget forecasts determine sales potential, or
the maximum number of sales a Organization can make. This information is
then used to plan resource allocations to achieve those sales levels. Sales
budgets serve as benchmarks or yardsticks against which actual sales
performance is measured and variables such as sales volume, profitability
and selling expenses are controlled.
5. Personnel Budgets
Personnel budgets, or salary and wage budgets, are cost estimations related
to labor. They forecast the costs of recruitment, hiring, training, assignment,
salaries, overtime costs, additional benefits and discharge. Calculating

personnel budgets includes estimating the number of staff, staffing ratios
and overheads.
Budgeting Techniques:
A budget is basically a plan of action for the forthcoming business period and
budget planning should involve the whole organisation. The ability to budget
effectively is crucial both in terms of performance and profitability as without
having an awareness of costs it is all too easy to spiral down into losses over
a period of time.
There are three main budgeting techniques:
1. Incremental budgeting
2. Zero-based budgeting
3. Flexed budgeting
1. Incremental Budgeting
The incremental approach to budgeting combines the costs identified from
the previous accounting period with percentage additions. These percentage
additions are utilised to cover two key areas which include cost increases as
a result of inflation or higher purchases costs and predictions associated with
increases in costs and income as a result of business volume predictions.
A key limitation of the incremental budgeting system is the manner in which
percentages are added in a blanket fashion resulting in the likelihood of

higher overall costs in the long-term. This may then also result in a business
having to increase its sale prices to a level that is no longer competitive.
2. Zero-Based Budgeting
The clue is in the title here as the zero-based budgeting system requires
budgeting to commence with the assumption that every cost has a zero
base. Next, each item relating to expenditure is worked through and
decisions are made as to whether the purchase is completely essential. Then
different purchasing options associated with the specific item are explored as
a means of ensuring the item is obtained as cost-effectively as possible.
One of the main limitations of the zero-budgeting system is that it can take
an awful lot of time to work through each individual cost in this manner.
However, it is fair to add that utilising this approach will then provide an
extremely useful database containing valuable, time-saving information for
the years to come.
3. Flexed Budgeting
As with zero-based budgeting, the flexed budgeting system gives its name
away in the title as it involves „flexing‟ the normal budget. The benefits of
flexed budgeting are that it is likely to be considerably more accurate as the
budget is adapted to suit various external changes. Within this approach
managers are able to provide key information resulting in an achievable
budget, pessimistic budget and optimistic budget.

Through undertaking the process of flexed budgeting, managers are better
able to make important decision relating to risk and expenditure, having
gained a wider perspective on best and worst outcomes.
As highlighted above, there are three main categories associated with
budgeting which include incremental, zero-based and flexed budgeting. Each
of these approaches has various strengths and limitations with the latter
approach being able to provide more accurate information.

SAMPLE BUDGET FORMAT: HYGIENE PROMOTION
No Description Unit cost No of unit Total cost Remarks
Project staff
Hygiene promotion coordinator
Hygiene promotion supervisors
Hygiene promoters
Community mobilizers
Total cost
Workshops for community
sensitizations
Participant incentives
Facilitators
Venue rent
Refreshments
Stationaries
 Flip chart
 Spiral notebooks
 adhesive tape
 marker pens
 blue pens
 photocopy charge

 Total cost
Domestic kids and household
items for vulnerables
Jerry cans
Soaps
Cooking dishes
Plastic plates
Plastic cups
Plastic jugs
Sleeping mats
Blankets
Mosquito nets
Total cost
Excreta disposal
Construction of pit latrines
 Tools and materials


 Staff costs
 Engineer
 Masons

 Carpenters

Total cost
Solid waste management
Collection of wastes from public
places
Refuse containers
Total cost
Medical waste management
Segregation containers
Disinfecting materials


Gloves
Masks
Office costs
Rent of office space
Stationaries and office supplies
Office running cost
Communication costs
Security guards
Cleaners
Total cost
Grand total

EXERCISE
1. Define budgeting?
2. What is the importance of budgeting?
3. Explain techniques of budgeting?
4. Discuss different parts of budget?

CHAPTER SEVEN
HEALTHCARE FINANCIAL MANAGEMENT AND ACOUNTING
Increasing global awareness of the serious health problems faced by
developing countries has resulted in a widespread desire to address these
issues. This requires strengthening the ability of governments and civil
society organizations (CSOs)—faith-based, community based, and
nongovernmental organizations (NGOs)—to manage health projects and
service delivery programs effectively and efficiently. To fulfill their growing
responsibilities, both public- and private-sector entities must manage funds
with the utmost care and integrity. They share similar needs for efficiency,
effectiveness, and transparent use of financial and other resources.
Operations management focuses on systems that support the organization in
reaching its objectives. These systems include procurement (also known as
purchasing), travel management, inventory management, and personnel
management systems such as payroll and benefits. These systems are
closely linked to financial management because they have a direct bearing
on how funds are spent and reported, how the organization’s assets are
monitored and safeguarded, and how employees are compensated.

Definitions and Meanings
Finance can be defined as the art and science of managing money.
Health Finance is a broad term that describes two related activities: the
study of how money is managed and the actual process of acquiring needed
funds.
Healthcare Financial Management is the planning, organizing, directing
and controlling the financial activities of the health system.
Policy is a managerial directive pertaining to accepted business strategies,
objectives, and standards. It answers the question: what will be done?
Procedure is a methodology or series of actions that is followed to carry out
a policy. It answers the question: how will it be done?
Objectives of Healthcare Financial Management
The healthcare financial management is generally concerned with
procurement, allocation and control of financial resources of a concern. The
objectives can be:
1. To ensure regular and adequate supply of funds to the concern.
2. To ensure adequate returns to the shareholders this will depend upon
the earning capacity, market price of the share, expectations of the
shareholders.
3. To ensure optimum funds utilization. Once the funds are procured,
they should be utilized in maximum possible way at least cost.

4. To ensure safety on investment, i.e, funds should be invested in safe
ventures so that adequate rate of return can be achieved.
5. To plan a sound capital structure-There should be sound and fair
composition of capital so that a balance is maintained between debt
and equity capital.
Functions of healthcare Financial Management
Financial management focuses on controlling, accounting for, conserving,
and investing an organization ’s resources (cash, employees, inventory,
equipment, and time) to meet planned objectives. The following are the
functions of health financing:
1. Estimation of capital requirements: A finance manager has to make
estimation with regards to capital requirements of the company. This will
depend upon expected costs and profits and future programmes and policies
of a concern. Estimations have to be made in an adequate manner which
increases earning capacity of enterprise.
2. Determination of capital composition: Once the estimation have been
made, the capital structure have to be decided. This involves short- term
and long- term debt equity analysis. This will depend upon the proportion of
equity capital a company is possessing and additional funds which have to
be raised from outside parties.

Choice of sources of funds: For additional funds to be procured, a company
has many choices like-
 Issue of shares and debentures
 Loans to be taken from banks and financial institutions
 Public deposits to be drawn like in form of bonds.
Choice of factor will depend on relative merits and demerits of each source
and period of financing.
3. Investment of funds: The finance manager has to decide to allocate
funds into profitable ventures so that there is safety on investment and
regular returns is possible.
4. Disposal of surplus: The net profits decision have to be made by the
finance manager. This can be done in two ways:
 Dividend declaration - It includes identifying the rate of dividends and
other benefits like bonus.
 Retained profits - The volume has to be decided which will depend
upon expansional, innovational, diversification plans of the company.
5. Management of cash: Finance manager has to make decisions with
regards to cash management. Cash is required for many purposes like
payment of wages and salaries, payment of electricity and water bills,
payment to creditors, meeting current liabilities, maintainance of enough
stock, purchase of raw materials, etc.

6. Financial controls: The finance manager has not only to plan, procure
and utilize the funds but he also has to exercise control over finances. This
can be done through many techniques like ratio analysis, financial
forecasting, cost and profit control, etc.
Importance of healthcare financial management
The benefits of integrating financial management and operations
management include:
 Ensuring that assets already obtained will be kept safe, in good
working order, and available for the use of programs that require
them;
 Deciding what will be bought and how, so that the best value is
obtained;
 Allowing for enhanced revenue generation through proper pricing of
goods and services that is acceptable to clients;
 Safeguarding the organization and the individuals involved in its
ownership, management, or program implementation by ensuring that
financial transactions are conducted lawfully and ethically;
 Creating an organization that fairly compensates staff for their work
while at the same time allowing for the provision of quality services
that serve the broadest possible client base.

Health economics and financing

Health economics and financing

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