Cost effectiveness and cost efficiency.

Outlines:
The cost definition. The types of nursing costs.

The theory of cost.

The definition of cost effectiveness.

The definition of cost efficiency.

The principles of efficiency. The measuring of cost effectiveness and efficiency.

Outlines:
The activity based costing steps. The levels of cost hierarchy. The stages of cost effectiveness and containment. The approaches to control health care cost. The definition of managed care.

The strategies used by managed care organization to control

costs.
The definition of costing out nursing services. The benefits of costing out nursing services.

Outlines:
The methods for costing out nursing services.

The strategies used to mange nursing services mores

productively.
The implication of cost effectiveness and efficiency in

nursing service administration.

The summary.

Introduction:
The cost of health care delivery is growing at an outstanding rate as a result of availability of more health care facilities, increase in number of health care providers, as well as application of expensive new technology in the care domain.

These changes in the health care delivery impose a financial

pressure on hospital services specially nursing services. Consequently health care facilities are now compelled

(obligated) to reexamine their methods of care delivery and

develop creative approaches to contain (control or restrain) cost while providing the expected high level of quality.

The cost definition:

The cost is the money expanded for all resources used, including personnel, supplies and equipment.

The types of nursing costs:

Direct nursing cost: Is the cost used by the hospital to provide
service to patient. The cost of nurse labor and the supplies that they and physicians use are examples of direct costs. In direct nursing cost: Is the cost used by the hospital to provide service to patient. These costs include: building and

capital equipment use, occupancy services, departmental,

faculty and central administration, library operations and technical services.

The theory of cost:

Demand pull theory of inflation: this theory suggests that increases in

the cost of health care occur from excess demand and spending on health care with an insufficient supply of goods and services to accommodate the demand.\
Cost push theory of inflation: this theory suggests that higher prices

result from the rising costs within the health care business. .

The definition of cost effectiveness:

In the business: the effectiveness is the success or financial
validity of an organization. In nursing: the effectiveness is primarily relates to quality outcomes being achieved. Is concerned with doing the right things in provide the patients care with low cost and high quality.

The definition of cost efficiency:

The cost efficiency: Is a state in which the inputs and
methods used to produce a product or service result in the maximum feasible outcome. It is the accomplishment of objectives with the lowest expenditure of resources.

The definition of cost containment

Process of maintaining organizational

costs within a specified budget; restraining expenditures to meet organizational or project financial targets.

The principles of efficiency

The principles related to interpersonal relation

The principles related to system in management

The principles of efficiency:

The principles related to interpersonal relation:
Goals and ideas should be clear and well defined. Change should be evaluated and management should not

ignore.
Competent counsel is essential.
Management can strengthen discipline or adherence the

rules.
Justice or equal enforcement on all.

The principles of efficiency:

The principles related to system in management:
Records, including adequate, reliable and immediate

information about the expenses of equipment and personal should be available as a basis for decision.
Dispatching or production scheduling is recommended. Standardized schedules.

Standardized conditions.

The principles of efficiency:

The principles related to system in management:
Standardized operations can be facilitated through the use

of.
Written instructions.

Efficiency rewards should be given for successful completion

of tasks.

The measuring of cost effectiveness and efficiency:

The activity-based costing : can be used in utilization management and case management to truly combine the

financial aspects of patient care namely both the efficiency

and effectiveness of service delivery. Is an exciting management tool that links financial information with operation, by determining the cost of specific activities and processes. Examples are the number of machine setups or

product design changes required of a particular product line.

e.g.(hemodialysis machine and its equipment )

The activity based costing steps:

Cost assignment process: begins with the identification of

activities that consume resources.

Cost assignment activity: includes actions, jobs and tasks

that are performed during the course of the day such as the
provision of patient care, production of financial statements or scheduling patient care visits.

The levels of cost hierarchy

Unit-level costs
Businesslevel cost

Batch-level costs
Enterpriserelated cost

The levels of cost hierarchy:

Unit-level costs: are directly assignable to predetermined

cost objectives based on characteristics associated with the patient. Examples include per unit visit for labor, patient identifiable supplies and equipment.
Batch-level costs: include all the supporting services that are

performed from admission through discharge. Example are

billing, records management, scheduling and nurse

management.

The levels of cost hierarchy:

Business-level cost: it is the category that has no direct

relationship to the patient care. Example include accounting activities, recruitment, interest expense and marketing.
Enterprise-related cost: it is usually has no relation to cost

objectives such as utilities and taxes.

The stages of cost effectiveness and containment

Cost awareness

Cost monitoring

Cost management

The stages of cost effectiveness and containment

Cost incentives:

Cost avoidance

Cost reduction

The stages of cost effectiveness and containment

Cost control

The stages of cost effectiveness and containment:

Cost awareness: It focuses the employee attention on costs.

It increase the organizational awareness of what cost are, the

process available for containing them, how they can be managed and by whom.
Cost monitoring: It focuses on how much will be spent where,

when and why. It identifies reports and monitor costs.

The stages of cost effectiveness and containment:

Cost management: It includes conceptual and physical acts

to curb (limit) unnecessary spending through planned and

practical
use of personal, material and physical resources for maximum productivity. It focuses on what can be done by whom to contain costs.
Cost incentives: It motivate cost containment and reward

desired behavior.

The stages of cost effectiveness and containment:

Cost avoidance :It means not buying supplies,

technology or services, the costs of them should be

analyzed carefully and the least expensive and less

effective items avoided.
Cost reduction: It means spending less for goods and

services, the amount of reduction depend on the size of the agency, previous, efficiency, skills of mangers and cooperation

of employees.

The stages of cost effectiveness and containment:

Cost control: It is effective use of available resources

through careful forecasting, planning, budget preparation, reporting and monitoring.

The approaches to control health care cost:

Regulation(government intervention)regulatory initiatives as:
Certificates of needs. Economic stabilization programs. Professional standards review organization. Prospective rate setting.

Prospective payment system.

The approaches to control health care cost:

Competition:
Competitive contracting.
Managed care organization. Health maintenance organization. Preferred provider organization. Cost sharing.

Medical saving accounts.

Managed competition.

The definition of managed care :

Managed care: Is a system of care in which a designated
(selected) person determined the services that the patient uses, its goal is to decrease unnecessary services, thereby decreasing costs, ensure timely and appropriate health care.

The strategies used by managed care organization to control

costs:
There are five strategies to control costs: Provider networks and selective provider: It contracting at a

favorable reimbursement rate, this strategy restricts

consumers choice of provider.

Payment methods with risk sharing: Reimbursement

includes an incentive for providers to limit the cost care.

Gate keeping: The goal of this practice is to prevent

unnecessary resource utilization.

The strategies used by managed care organization to control costs:

Utilization review: This refers to a variety of practices that

require appropriate use of resources by clinicians: preauthorization is the requirement that specified services, such as hospitalization or emergency room care be approved

before they providepreauthorization

Favorable selection of clients: one criticism of managed care

organization is that many seek to enroll younger and healthier

individuals who will require fewer resources.

The definition of costing out nursing services:

Costing nursing care: Is the process of estimating the monetary(fiscal or financial) value of providing nursing care to patients. It is thus of major importance that nursing acquires a cost allocation ( allowness) system that can define and measure the consumed time of providing nursing care by different personal categories per patient and its cost. It can be estimated per hour, per patient, or per day.

The benefits of costing out nursing services:

Charging out nursing services makes it possible for the

customer to pay for the care.

Customers start to realize that direct care has a price value. Hospitals can receive compensation for what they provide,

maximizing profits.
Nursing can be viewed as a revenue-generating center

rather than cost.

Cont. The benefits of costing out nursing services:

Charging a fee for services helps enhance the

professionalism of nursing through the traditional pattern of reimbursement for services.

Costing out nursing services to enhance the use of human

resources, contains costs and mention quality.

Using a cost accounting system to assess and change the

nursing department helps establish a reputation for innovation

and leadership.

The methods for costing out nursing services:

Per diem or cost per day: It used for both rate setting and

reimbursement is calculated by dividing the total nursing care

cost by the number of patient days for a specific period.

Cost per diagnosis:(diagnostic related group) It used to reduce

reimbursement costs

for patient payment, categories patients based on diagnosis

and number of days of hospitalization by using four methods which are reduce the prices paid for resources, reduce the length of stay, reduce the intensity of services provided and finally improve efficiency.

Cont. The methods for costing out nursing services (remove this method) :
Cost per Relative Intensity Measures: (RIM) It is calculated by

dividing the total nursing costs for hospital by the total minutes of care estimated or nursing resource used to provide care to all

patients then by dividing the number of minutes used by the total

hospital population including adjustments for downtime, such a sick leave and vacation time, is calculated and finally the cost of care for each patient is determined by multiplying the RIM by the minute of care required by the patient as estimated by an

equation.

The methods for costing out nursing services:

Patient classification system: It is the method that grouping

patients according to some observable or interfered

characteristics. It focuses on a mean to categorize patients

according to assessments of their nursing needs that can be quantified to determine a measure of nursing effort interfaced with nursing care system.

The methods for costing out nursing services:

The basic criteria of patient classification system:
The must identify patients in conjunction with each other so

that they can be classified into relatively clear categories of care.

There, must be a systematic and organized approach to the

classification and integration of various patient types

components.

The methods for costing out nursing services:

The basic criteria of patient classification system:
The timing of each classification must be identified so that the

number of classification and time taken to deliver care can be consistent with the service offered.
The calculation must make provision for the utilization of

human resources and their application to the requirements for

each patient care.

The methods for costing out nursing services:

Work-sampling technique: It is an industrial engineering

technique in which data an individual from outside the primary

work group observes the activities of a selected sample of

employees on regular intervals, records their activities and

generalize from the observed sample to estimate the percentage of the employer total time that workers spend in each task.

The methods for costing out nursing services:

Time and motion studies: all nursing procedures are timed and

norms established for each task. The average level of the worker

doing the task also determined. when the average time of each
of them known direct costs of labor are determined and added to cost materials. Calculation by knowing the specific tasks performed on a unit on a given day.

The strategies used to mange nursing care productively:

Do more with no more. Use generic(common, standardized ) care plan. Develop new flow sheet to streamline( update) documentation.

Use group counseling and teaching methods.

Package nursing programs and information.

Increase use of ambulatory surgery facilities and day surgery

admission programs.

The strategies used to mange nursing care productively:

Effectively mange materials and shared services. Think competitive marketing and consumer choice. Develop new product.

Create a learning culture with staff.

Maximize the contribution of professional nursing. Consider matrix staff when the nurse has competencies at

least two services and can float between services.

Develop and use nursing productively standard and implement

control system.

The implication of cost effectiveness and efficiency in nursing service administration:

Promoting the role of nursing as a core resource in cost

effective care and as a critical contributor to decision making on health care spending.
Offering nurses educational opportunities to gain knowledge of

political skills, economic principles budgeting and resource use

and cost effectiveness in health.
Supporting leadership and management development that

include the role of nurses in resource management, decision making and policy development.

The implication of cost effectiveness and efficiency in nursing service administration:

Promoting and supporting research and evaluation that links

and validates costing methodology to nursing and health out come.

Encouraging the development of data base system that permit

comparison of out comes across setting to the best approcah to

care and to most effective design of nursing system.

Facilitate information dissemination and interactive networking

on cost effectiveness research.

The implication of cost effectiveness and efficiency in nursing service administration:

Establishing professional networks with relevant stakeholder

for promoting quality and cost effectiveness.

Promoting quality to recognize and support nursing roles in

promoting cost effectiveness.

Budgetary planning of nursing services from the nursing

services department.
Establishing valid and reliable patient classification system. Planning the beat use time by cutting down all time wasting

and devoting more time for really important issues.

The implication of cost effectiveness and efficiency in nursing service administration:

Increase the number of trained auxiliary personal to reduce

indirect care time consumed by professional nurses.

Alternative new system of nursing care delivery system for

cost effectiveness.
Employee orientation increase employee socialization to the

job and decrease turn over and absenteeism which lead to

decrease cost.

The summary :
The cost effectiveness is ready to receive manuscripts on all aspects of economic evaluation in health care and also encourages submissions on health policy Issues relating to resource allocation and the trade-offs between economic, ethical and social criteria for decision-making. The cost efficiency for a media schedule, refers to the relative balance of effectively meeting reach and frequency goals at the lowest price.