The Cost-Effective Analysis in Healthcare

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Table of Contents

Introduction
Step 1: Research and Discussion of Key Terms
Step 2: Cost-Effective Analysis of the Wait Times in ED
Step 3: Measurement of Program Quality Outcomes
Conclusion
References

Introduction

It is important to note healthcare issues in health administration require an analytical and calculated approach to identifying the most effective solutions since there is a wide range of solutions. Cost-Effective Analysis or CEA is a form of an established procedure used by financial management professionals to ensure that a program or measure is properly evaluated. The given CEA will primarily focus on determining whether or not a solution to decreasing wait times in a hospital emergency department (ED) is cost-effective.

Step 1: Research and Discussion of Key Terms

There are a number of cost types in financial management in regard to healthcare administration. It is stated that “cost-effectiveness analysis is a way to examine both the costs and health outcomes of one or more interventions. It compares an intervention to another intervention (or the status quo)” (CDC, 2022, para. 1). In other words, costs and comparative assessments of the potential losses are critical elements in any form of accurate and reliable cost-effective analysis.

In order to effectively determine the financial feasibility and plausibility of a proposed measure, one needs to be able to differentiate between diverse categories of costs by defining and outlining them clearly. Opportunity costs refer to potential losses when comparing two alternatives, and the contrast is made with respect to the option not selected (Zelman et al., 2020). The initial cost is an expense incurred on average due to launching or purchasing an investment, equipment, or personnel (Zelman et al., 2020). Continuing costs are related to regular spending amounts with the purpose of maintaining and sustaining use (Zelman et al., 2020). Thus, there is a distinction between expenses incurred at the start of an investment and its continual utilization

However, it is vital to know that some costs can fluctuate and alternate depending on specific factors. Induced costs are incurred in relation to changes, such as additional expenditures coming from generating more revenue (Zelman et al., 2020). Averted costs are expenses avoided due to the integration of some form of measure or intervention (Zelman et al., 2020). Fixed costs refer to static spending, which does not depend on the output, whereas variable costs are dependent and influenced by a change in the volume of production or provision of service (Zelman et al., 2020). Therefore, knowing the differences and unique aspects of various types of costs is critical in order to competently conduct a cost-benefit analysis.

Step 2: Cost-Effective Analysis of the Wait Times in ED

One way to reduce wait times in EDs is to hire more medical professionals to receive patients considering space is not a constraint. It is stated that “the optimization of patient flow and allocation of the human and material resources have become important issues” (Daldoul et al., 2018, p. 16). In other words, the emphasis is put on human resources as a key limiting factor. Another way to address wait times is to use rapid Plan, Do, Study, Act (PDSA) to adjust the scheduling and medical professional shifts in accordance with demand fluctuations (Shen & Lee, 2018). It is reported that “the mean wait time to see a physician … was 35.7 minutes” (U.S. Department of Health and Human Services, 2018, p. 6). In addition, around 58% of all patients arriving at EDs after business hours of Monday through Friday, 8 a.m. to 5 p.m., whereas 42% come during these periods (U.S. Department of Health and Human Services, 2018). Thus, ED wait times are a major challenge in the US.

It should be noted that the improvements made by the proposed solutions differ. An average number of physician shifts in ED is three, and a single physician sees around 16 patients per shift, which means three physicians see 48 patients in one complete day (Joseph et al., 2018). The first approach of hiring more physicians is about reducing the number of health professionals to reduce wait times. An average annual salary of a physician in the emergency departments in the United States is equal to $354000 (Wilcox, 2021). It is reported that the second method of PDSA with schedule adjustment improves the value by around 15%, and the intervention system costs around $150000 per year for the analyst (Shen & Lee, 2018). On the basis of the presented facts, the assumption for this CEA is that an ED receives 100 patients per day with an average wait time of 36 minutes, and it has six physicians. The first solution is to hire three more physicians to make sure that the ED has three health professionals available at any given moment, which means a 33% reduction in wait times. The detailed CEA can be accessed in Table 1 below.

Table 1. CEA

Control	1) Hiring 3 more Physicians	2) Schedule Adjusting
100 patients	100 patients	100 patients
36 minutes wait time	23.76 minutes wait time	30.6 minutes wait time
0% improvement	33% improvement	15% improvement
0 minutes reduction	12.24 minutes reduction	5.4 minutes reduction
$0 cost	$1062000 cost per year	$150000 per year
–	$86765 per minute reduced	$27778per minute reduced
–	–	The most cost-effective solution

Step 3: Measurement of Program Quality Outcomes

The program’s quality can be measured by ensuring that wait times are reduced without incurring additional costs above what was initially expected within the process of analysis. In other words, the sudden increase in patient flow or increase in wait times due to shifts in proportions in complicated cases can greatly alter the outcome. The schedule adjusting system shows that it is the most cost-effective because it can anticipate the number of patients arriving during particular hours and requires only one specialist to maintain the instrument. However, it has limitations because it might fall behind the physicians hiring option if the demand for ED is elevated. In other words, the second option is potent and cost-effective only to a certain extent. Thus, the quality of the program intervention needs to be assessed by keeping the additional factors into consideration. Since the cost per minute reduced is drastically different between the two solutions, major changes in ED dynamics need to occur for the first option to become more cost-effective. For most EDs, it is suggested to work on schedule adjustment first before hiring more physicians.

Conclusion

In conclusion, the cost-benefit analysis is a powerful financial management tool that can help in making sound and valid decisions when faced with several options. It can be simplified or expanded depending on the scenario, where wide categories of costs might need accounting. The given case revealed that CEA heavily favors the second option of schedule adjustment over hiring physicians, but limitations should also be factored in during the process.

References

CDC. (2022). What is cost-effectiveness analysis? Web.

Daldoul, D., Nouaouri, I., Bouchriha, H., & Allaoui, H. (2018). A stochastic model to minimize patient waiting time in an emergency department.Operations Research for Health Care, 18, 16–25. Web.

Joseph, J. W., Davis, S., Wilker, E. H., Wong, M. L., Litvak, O., Traub, S. J., Nathanson, L. A., & Sanchez, L. D. (2018). Modelling attending physician productivity in the emergency department: A multicenter study.Emergency Medicine Journal, 35(5), 1-7. Web.

Shen, Y., & Lee, L. H. (2018). Improving the wait time to consultation at the emergency department. BMJ Open Quality, 7(1), 1-6. Web.

U.S. Department of Health and Human Services. (2018). National hospital ambulatory medical care survey: 2018 emergency department summary tables.Web.

Wilcox, L. (2021). Emergency medicine physician salaries 2021: COVID’s impact on compensation. Weather by Healthcare. Web.

Zelman, W. N., McCue, M. J., Glick, N. D., & Thomas, M. S. (2020). Financial management of health care organizations: An introduction to fundamental tools, concepts and applications. Wiley.

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