7.3 Economics and value-based healthcare

The examination of low-value care through the lens of health economics is a fundamental and important way of looking at these issues. Health economics examines the way that scarce resources are allocated and used within the healthcare system and services. Economics is one of several social sciences that are used to understand and predict human behaviour; this is relevant within health and for those who need any use healthcare (Morris et al., 2012). Through the lens of health economics, we look broadly at key issues of resource allocation where low-value care is about misallocation of resources that do not provide optimal benefit to patients or consumers. Economics also provides a range of key evaluation methods such as cost–benefit analysis, which examines the relationship between costs and benefits associated with a particular healthcare intervention.

Understanding value

Value refers to the optimisation or maximisation of health outcomes relative to the costs and resources that need to be used in delivering interventions. It considers clinical effectiveness, cost-effectiveness, patient preferences and resource allocation efficiency. Value articulates or explains the health improvements that can be achieved with the allocation of resources to patient care (Lakdawalla et al., 2018).

Quantification methods

In relation to low-value care there are several techniques that measure the impact and extent of outcomes related to clinical care and health services where there is little or no benefit. Techniques include cost-effectiveness evaluation; patient and client outcomes evaluation, examination of practice and service delivery variations and considering the use and impact of incentives in health delivery. Quantification of situations related to low-value care enables targeted and planned responses, to reduce incidents and practices of low-value care, optimise resource allocation and improve service delivery outcomes (Sacristán, 2020).

Value for money studies

A value for money study is a method that considers quantitative information (cost-effective ratios, return on investment, consumer satisfaction) and examines what resourcing allocated to a particular treatment or care actually provides in terms of the outcome and impact delivered.

Cost drivers and studies

Cost drivers are factors or influences that affect and change costs and expenses associated with delivering patient and consumer care. Examples include technology, labour costs, pharmaceutical costs, cost of quality assurance and regulatory compliance, patients and consumers, as well as incident rates for disease and injury in a community. Understanding and controlling cost drivers enables effective management of funding and other resources and is therefore a significant factor in identifying and managing low-value care.

Uncertainty

Uncertainty refers to lack of optimal knowledge and therefore predictability of outcomes and events (Briggs & Gray, 1999). Uncertainty arises when health managers have incomplete information, operate in ambiguous situations and cannot foresee events that could impact economic outcomes. Examples include changes to and availability of technology, shifts in government policy and reactions within human behaviour. A key and important response to dealing with low-value care in uncertain situations and conditions is to gather information (actual and predictive) to support economic modelling that can assess the impact of uncertain factors and economic behaviour in care and service delivery.

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