The Hospital - An Economic Model

An Economic Model

Scientific Study from the year 2005 in the subject Economy - Health Economics, grade: 1.0, Western Carolina University, course: Managerial Economics, 3 entries in the bibliography, language: English, abstract: The financing of costs of services in hospitals is a basic and growing problem in Europe. Considering the hospital as a manufacturing company, its product is the health of the patients. But to measure this product is quite hard, and therefore it is difficult to allocate an adequate price for it. Thus, the ascertainment of hospital services occurs by an orientation on inputs. But the menace of such a measuring is that hospitals would increase their inputs and thereby increase costs to maximize their revenues. Another approach defines the medical care partially as a consumer good. By analyzing the cost-utility-consideration and the evaluation of the medical care, also in this case 'The law of diminishing returns' can be noticed. Therefore, more input (expenditures or costs) in the health care system doesn't automatically lead to more output (morbidity or mortality). Facing the problem of increasing costs and the law of diminishing returns, hospitals in Europe start to change their thinking. More and more the organizational structures transform from a general department focused hospital to a patient and economic focused company. Therefore, medical directors are about to be replaced by business managers in the hierarchic structure. These leaders start to use business models and also economic models to increase efficiency, quality and profit in the hospital. The following chapter introduces one approach of an economic model applied to a hospital.