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Accounting for Health 1. Money Theory or Health Economics in Health care Systems. Money…..is one of the wheels of trade: it is the oil which renders the motions of the wheels more smooth and easy David Hume. We are just statistics, born to consume resources Horace 65-8 B.C. Epistles.

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Accounting for Health 1

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Accounting for health 1

Accounting for Health 1

Money Theory or Health Economics in Health care Systems

petersims@upng.ac.pg


Accounting for health 1

Money…..is one of the wheels of trade: it is the oil which renders the motions of the wheels more smooth and easy David Hume

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We are just statistics born to consume resources horace 65 8 b c epistles

We are just statistics, born to consume resourcesHorace 65-8 B.C. Epistles

  • Peter Sims

  • Professor of Public Health Medicine

  • University of Papua New Guinea

  • PO Box 5623

  • BOROKO

  • NCD 111

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Aim to appreciate the agenda of money in health care

Aim-To appreciate the agenda of money in health care

  • Objectives

  • To distinguish Economics from Accountancy

  • To see the value of the Health Economist in Health Planning

  • To outline some tools of the Health economist

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Accountancy versus economics

Accountancy versus Economics

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Private sector versus public sector in health care

Private Sector versus Public Sector in Health care

Maximising Return on Capital Employed

To deliver value for Money from the Resource Provided

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Value for money

Value for Money

  • Economical…doing it as cheaply as possible

  • Efficiency…doing it right

  • Effectiveness….doing the right thing

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Time perspective

Time Perspective

Financial Accounting is -The Year End -financial accounts are Historic Documents

Management Accounting is forward looking -Projections, Plans

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Capital versus revenue

Capital versus Revenue

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Accounting for health 1

COST

PRICE

VALUE

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Accounting for health 1

COST

PRICE

VALUE

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Average costs versus marginal costs

Average Cost == total number of procedures (N) divided by

The total cost ($)

= N/$

The cost remains the same regardless of volume

Marginal Cost = the cost of doing one more or one less procedure

There is a minimal cost per procedure and this is determined by volume and expenditure

Average Costs versus Marginal Costs

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Accounting for health 1

AVERAGECOST

A

C

Minimal Cost

B

Quantity

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Accounting for health 1

AVERAGECOST

Minimal Cost

Quantity

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The marketplace and the laws of supply and demand

As the price increases so the demand for an article of goods is diminished

Some goods are very elastic and the amount drops or rises exactly in line with price

As the price increases so the supply of goods is increased for more producers come into the marketplace

It is possible to influence the marketplace by rationing or taxation

The Marketplace and the Laws of Supply and Demand

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Accounting for health 1

Supply and demand

Price

Demand

Curve

Supply

curve

B

A

Quantity

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Some economic terms

Some economic terms

  • Cost Efficiency

  • Cost Effectiveness

  • Cost Benefit

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Some useful concepts

Some Useful Concepts

  • Opportunity Costs

  • Discounting

  • Assets

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Some useful concepts1

Some Useful Concepts

  • Investment Appraisal

  • Option Appraisal

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Economics the dismal science

Economics-the dismal science,

but it requires both Love and Money to make the world go round

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