Cost Benefit Analysis in the Health care Industry

Cost Benefit Analysis in the Health care Industry

For management to make choices in the health care sector, it is important for them to consider a comprehensive measure of the available choice and value that is gained from the alternative (Institute of Medicine, 2013). However there choices that may fall outside the health care sector but involves a substantial benefit of another kind.

Cost benefit analysis allows analyzing both health and non-health advantages since it values benefits and costs in monetary form (Institute of Medicine, 2013). Today it is assumed that cost benefit analysis is critical in ensuring better regulation to avoid government inefficiency. When the net benefits are positive, it makes sense for the project to move forward. Examples of costs are employees’ salaries, taxes, insurance and administrative costs (Institute of Medicine, 2013). On the other hand, benefits are revenue, savings from patients reallocating patients from emergency to primary care and the increased development.

To quantify costs and benefits, it is important to patient utilization rates. For example the only the way a healthcare service provider can understand labor and operating costs is through forecasting the number of patients visiting the firm every year to determine how many doctors and nurses to employ. If the firm enjoys an increased demand, it’s important to consider hiring more personnel who will assist in service provision.

Long term investment

To understand the cost benefit, it is important to examine opportunity costs and direct cost. Some of the notable opportunity costs are a balanced work life and fun. Pursuing a degree takes off many days from a full-time job. It entails the sacrifice of many hours of sleep which would otherwise be used for part time jobs. Short costs include acquiring a laptop and lots of coffee, on the other hand, long term costs were the loans I took to pay for my degree. The overall benefit is that I became a profession with a career to build on and gained community recognition.

My decision to pursue my master’s degree was derived from the desire to add more knowledge. I can credit myself for being a lifelong learner and keeps on challenging myself academically since it brings me a sense of thankfulness and pride.



Institute of Medicine. U.S. (2013) health in international perspective: shorter lives, poorer health. Washington, DC: National Academies Press.


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