HEALTH ECONOMICS: The occult of efficiency: frank, and Stein’s, advice for physician leaders

Abstract

In this first article in a series on health economics, we focus on efficiency, which is an important concept for leaders deciding how to spend scarce resources, such as time, effort, and money. Efficiency, or cost effectiveness, activities should consider that progress may be a function of multiple outcomes. Simply focusing on one outcome, such as length of stay because it is easy to measure, may produce overall inefficiency according to a more comprehensive set of objectives. Value achieved, a more difficult type of efficiency, involves “smart shopping,” where both costs and outcomes of options vary. Often the new way of doing something is more expensive and more effective. In these situations, a leader must decide the extra cost for extra effect is worth it.