The dominant hospital system in a market is considering various options to reduc

Question

The dominant hospital system in a market is considering various options to reduce the number of emergency room visits. A local health care consultant proposed that the hospital distribute a "Healthy Living and Preparedness" manual providing basic information on improving health and how to avoid unnecessary emergency room visits. The consultant explains that the manual has met with substantial success in a neighboring municipality. The program would rely on the hospital's volunteers both to distribute the manuals to community groups and train those groups on the manual. The volunteers would be trained by hospital employees. Suppose you are assigned the task of conducting an economic evaluation. The evaluation would compare the efficiency of the wellness manual with the alternative of doing nothing.

A.) What type of information do you need before deciding whether an economic evaluation of the wellness manual makes sense?

B.) Should your evaluation be a cost-benefit or a cost-effectiveness analysis? Why?

C.) Propose an indicator that can be used to capture the outcome of the program.

D.) Whose costs and what costs of the net program should be included in the analysis?

Explanation / Answer

(A) The basic economic evaluation would be on the basis of whether the cost of resources being used caused by too many patients requiring emergency services is higher or lower than the revenue being generated from such patient visits.

The cost of resources will also include the costs incurred in proactive awareness effort undertaken by the hospital.

(B) I will evaluate on basis of Cost-Benefit ratio, and not only cost-effectiveness. After the campaign is launched, I would compare the increase in revenue plus decrease in costs incurred by hospital associated with emergency visits (Benefit from the project) with the costs incurred in running the project (Project Costs). If the former exceeds the later, that will indicate that the project is economically viable.

(C) I can propose the following indicator:

Net Benefit = Benefits - Costs, where

Benefits = (Decrease in hospital's costs per emergency room patient + Revenue per emergency room patient)

Costs = Costs incured in conducting the awareness program

(D) Costs of both the hospital's emergency services as well as the costs incurred for the awareness program should be captured by the evaluation. Such costs will include the hospital's emergency services, doctor's fees, utilities, medicine fees required, plus the cost of training the campaign volunteers (salary of the trainer assigned by hospital), cost of preparation of manuals and the relevant contingency costs.

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