How Economic and Health Models Can Be Useful in the Healthcare Service

The present economic turmoil in the U.S. has introduced new challenges for the business community, and the healthcare industry.

What’s more, the increased demand for health services due to an aging population and extreme lifestyle changes has created greater administrative challenges for providers. The existing practice areas are also experiencing a financial and operational crunch.

In such a scenario, implementing business models with appropriate modifications is critical. Healthcare service providers need to identify new revenue streams while cutting down on their operational costs at the same time.

Economic model

The economic model is a tool that helps in making financial decisions. It helps analyze cost-effectiveness, cost-benefits, and resource allocation. It is also used to determine the relative value of different treatment options. The economic model for healthcare is based on economic theory, which states that resources are limited and thus must be allocated efficiently so that maximum benefit can be derived from them.

Types of economic models

Healthcare providers can use different economic models such as throughput accounting, activity-based costing, marginal costing, and break-even analysis to run their businesses efficiently.

Throughput accounting is an accounting method used by hospitals to determine the amount of money spent on each patient during their stay in the hospital.

Activity-based costing is an accounting method used by hospitals to charge each department according to their overhead costs instead of charging them on a per-unit basis, as is the case in throughput accounting.

Marginal costing is another type of economic model used by hospitals. They calculate the total cost incurred by each patient based on their length of stay and other factors such as age, gender, and financial ability.

Hospital administrators do a break-even analysis when they want to know how many patients need to be treated before they start seeing profits from their business.

Health models

The healthcare industry is extremely complex and constantly developing. Many factors play into the cost of healthcare, including the number of patients, their age and medical history, any preexisting conditions, and the type of treatment required. Health models help predict the cost of healthcare services by considering these factors.

DRG model

DRG is the most common model used in health care to predict costs. DRG stands for Diagnosis Related Grouping, a method for classifying patients based on specific diagnoses or procedure codes. The DRG model also includes a relative weighting factor that considers how much time it takes to provide a particular service compared to others. For example, an appendectomy may take less time than treating someone for pneumonia because it does not require as much monitoring or intensive care.

Benefits of economic & health models

The following are some of the benefits associated with economic and health models:

• They help create an environment for innovation and growth

These models play a key role in creating an environment where innovation and growth are encouraged. Here, you can use the information from these models to develop new ideas for improving your business or healthcare service. This helps increase work productivity while also helping you achieve your goals within a short time frame.

• They provide an objective perspective on performance and quality

Healthcare models provide a detailed analysis of the financial status of a healthcare organization, including data such as patient demographics, operating costs, revenue streams, and treatment outcomes. They also provide information on how well an organization performs compared to its competitors in terms of service and efficiency.

• They help identify areas that need improvement

Using these models, one can easily identify areas where improvements are needed to make them more efficient. For instance, if you notice a low patient satisfaction level at one hospital location, there might be something wrong with the delivery of the services or other factors like staffing problems or poor equipment that need to be addressed.

• They can be used to measure progress toward goals

Health models use a common set of assumptions and methods to estimate costs, which allows hospitals to see how different strategies affect total costs over time. 

An advanced degree can make all the difference

There is a growing demand for specialized nurses who can deal with the complexities of the healthcare industry. The economic and health models are incredibly useful tools for those seeking to understand the intricacies of healthcare management. An online master’s degree in healthcare, such as the UIndy online MSN-AGNP program, can equip nurses with the necessary skills to handle various aspects of their work and advance their profession through specialization.

Final thought

The health and economic models are some of the ways through which one can measure the efficiency and effectiveness of a healthcare organization. Many organizations use these models to evaluate their services and identify areas that need improvement. It is important to note that these models can be customized depending on the needs of an organization.