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Costs in health careBY: David Prakash Kumar | Category: Business and Finance | Post Date: 2009-06-21
Concept of costs:- Costs in economics are considered from the suppliers or producer's point of view. To produce an item, it costs the producer certain amount to hire a factory, hire workers, by equipment, raw material etc. All these are the costs. In terms of health care the costs are related to health services through their use of staff, equipment, material and supplies. Types of costs in health care 1. Opportunity cost It is a term used to describe the loss to the community of failure to use the available resources, technology or institution in the best way possible. It refers to the value of alternatives that could have been chosen instead of one item that has incurred the specific cost. It is the cost of forgone opportunity (e.g) if a nation can spend on defense or national health and chosen to spend on defense, then the loss in the health status is the opportunity cost of spending on defense. 2. Total: fixed and variable cost: Usually the costs are associated with production. In health care there are various kinds of costs. - The cost needed to take care of a patient - for doctors, nurses and other needs. - If it is in a production unit, the cost is the expenditure on paying for premises, equipment, labor, material etc. The sum total of all costs is known as the total cost. It has two components. a. Fixed cost b. b. The variable cost Fixed cost: is called the overhead costs that do not increase with the increases in the number of units produced. (e.g) The rent of building is a fixed cost. The cost of an x- ray machine is fixed, regardless of the number of x-rays taken fixed cost may not remain the same always. It may change. May be there is need for a bigger building or another x- ray machine may be needed. Variable cost: This is otherwise called as prime cost. This varies with the number of units or goods or services produced. (e.g) More patients in clinic require more number of pre scriptions, stationary, more x- ray films etc. Fixed and variable cost together becomes total cost 3. Average: marginal and sunk costs: We have total cost for production of certain amount of goods or services. Consider Q as quantity produced, and C as cost, it is the total cost. Then C / Q is the average or cost for per production. If there is change in the number / quantity of production the total cost increases. So the average cost will change. When the average cost decline as the output keep increasing, this is called economics of scale. It means that when more of a thing is produced, the costs per unit fall. Marginal cost: It is defined as the cost of providing an additional unit of whatever is being costed. Additional unit may increase the total cost or average cost. Sunk costs in health care:- These are costs which are incurred, which cannot be recovered. In economics the marginal cost is related to sunk cost. Article Source: http://www.saching.com About Author / Additional Info: I am a physiotherapist by profession. A writer by interest. I take up freelance assignments for various websites and blogs. Comments are welcome at prakashdavid@rediffmail.com Additional Articles: * Why you Need a Computer Support * Asian Development Bank's success with poverty reduction Does this article violate or infringe on your copyright ? It is a violation of our terms for authors to submit content which they did not write and claim it as their own. If this article infringes on your copyrights, then use our Contact us form with the detailed proof of infringement along with the offending article's title, URL and writer name. If you do not hear back from us then contact us again in another 10 days. Thank you. Comments on this article: (0 comments so far) * Additional comments are now closed for this article *
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