Economics and Healthcare: Concepts, Funding Framework and Casemix-Based Management Information Systems

Running head: ECONOMICS AND HEALTHCARE
Subject Name
ECONOMICS AND HEALTHCARE
Name of the Student
Australian College of Nursing
Author’s Note
Assessment Number
Word Count- 2000

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The main objective of this assessment is to explore various economic concepts, funding
framework and casemix-based management information systems and its application within the
environment of health care sector. This assessment highlights that nurse manager’s plays vital
role in the health care environment. They are in pivotal position as they ensure the provision of
clinical as well as effective healthcare. The economic concepts applied in the context of health
care delivery are also explained in this study (Andel et al. 2012). This assessment also provides
an overview about the activity based funding and its application as incentive to drive efficiency,
enhance accountability and improve access to health care. The last section of assessment reflects
on the kinds of casemix based management information system that are offered for nurse
managers. In fact, the information used for financial planning as well as management and quality
enhancement is also critically analyzed in this assessment.
As individuals have become highly concerned about increasing cost, the economic
concepts have attained higher currency in community’s healthcare consideration. Efficiency
includes the primary economic theory of opportunity cost, which refers to the total value of best
alternatives foregone for producing or attaining better health care service. Hollingsworth (2012)
opines that if value of present health care service is greater than the value of alternative use then
the present one is said to efficient. On the contrary, Folland, Goodman and Stano (2016) states
that if value of other alternatives is larger than the present health care service, then the current
one is said to be inefficient.
Furthermore, one of the economic assessment techniques that are also used in the context of
health care service is cost – effectiveness analysis (CEA). This type of analysis mainly evaluates
on whether the total amount spent on specific program or any healthcare treatment can provide
healthier lives of the patient. In addition, the outcome of this program is also measured in health

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status that includes- decrease in disease, gain in life years etc. But the difficult part of this
analysis arises when it compares various health care services for detecting difference in total
expense adds to same benefit in health (Muennig and Bounthavong 2016). There are three basic
limitations of CEA are given as follows-
The first limitation is that the requirement for estimating outcomes in health units
generally limits efficiency and hence cannot be utilized for comparing dissimilar programs. For
example, the program that is aimed at reinstating sights of the patients is usually not compared
with the program that treats foot ulcers under cost- effective analysis (Drummond et al. 2015).
The second limitation is that natural units of health captures single dimension of outcome of
programs. For example, the measurement of patient life years attained ignores their quality of life
that is considered as another dimension of program outcomes (Hollingsworth 2012).
Apart from this, economic efficiency can also be examined with the help of technical and
allocative efficiency. Technical efficiency is basically attained through implementation of cost –
effective process with least inputs. This efficiency is mainly concerned with conversion of inputs
that includes labor services into outputs ((Eckermann and Coelli 2013). This kind of efficiency
is estimated as distance to frontier. Likewise, allocative efficiency is attained through selection
of health programs that are health efficient in order to yield biggest possible improvements in
patient’s health (Folland, Goodman and Stano 2016). Moreover, allocative efficiency is usually
estimated through comparison of various frontier points in order to improve the population’s
heath status. Overall the efficiency estimates the impact of both the technical as well as
allocative efficiency. For example, our health center consumes considerable amount of local
allocation of human as well as financial resources. Additionally, efforts have also been given to

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provide effectual health care delivery owing to primary health centre endorsement provided by
government. In order to increase the technical efficiency in this specific health centre, they
utilized full time skilled staff for measuring the services or input provided by them. In fact, the
nurse managers of this health centre also help to increase efficiency through their appropriate
implementation of practical tools (Lowe et al. 2012). As a result, this increase in overall
efficiency has improved the health care delivery service in this centre over the last few years.
Activity based funding and its utilization in health care service.
Activity based funding (ABF) refers to the process of funding healthcare in which the
providers are basically allocated funds depending on the volume as well as type of services
provided by them to the patients (Rosenberg and Hickie 2013). This has become one of the
international standards for funding healthcare and thereby referred to as service-based funding,
patient- centered funding and casemix funding. ABF is generally implemented by the health care
centers with the objective of creating incentives for enhancing productivity as well as efficiency
and improve transparency in healthcare funding. The funders of health care system who adopts
this type of funding leverage information from financial as well as clinical data captured in
routine basis (Heslop 2012). There are generally three components of ABF, which are needed for
this funding procedure to operate. These components include- pricing, costing and
commissioning, which are described below:
Pricing- Prices are generally set for each diagnosis related group (DRG) depending on hospitals
average cost of activities in DRG. The prices are set in such a way so that it can maximize huge
benefits to patients and incentivize objectives of health care. This ABF system allows the health
care funders to overview the service delivered for the paid price.