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Using a value chain approach for effective decision making.

N A Wilner1

  • 1University of North Texas, USA.

Journal of Healthcare Resource Management
|August 5, 1997
PubMed
Summary
This summary is machine-generated.

Healthcare cost management needs a new approach. Evaluating products by price alone is inefficient; a value chain analysis reveals true costs, including process and downstream expenses.

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Area of Science:

  • Healthcare Management
  • Health Economics
  • Operations Research

Background:

  • Traditional healthcare cost evaluation often relies on product price.
  • This method may not accurately reflect the total economic impact on an organization.
  • A comprehensive cost assessment is crucial for effective financial stewardship in healthcare.

Purpose of the Study:

  • To differentiate between product price and true cost in healthcare.
  • To introduce a value chain approach for evaluating healthcare expenditures.
  • To analyze the functional, process, and downstream costs associated with healthcare purchases.

Main Methods:

  • Examination of a typical healthcare purchase scenario.
  • Application of value chain analysis principles.
  • Comparison of price-based evaluation versus a functional cost assessment.

Main Results:

  • Product price is a limited metric for determining actual healthcare costs.
  • Value chain analysis provides a more comprehensive understanding of "process" and "downstream" costs.
  • Healthcare organizations may incur significant hidden costs beyond the initial purchase price.

Conclusions:

  • Rethinking cost evaluation is essential for effective healthcare financial management.
  • Adopting a value chain approach can lead to more efficient resource allocation.
  • Understanding the full spectrum of costs optimizes organizational financial health.