Efficiency refers to performing with minimum wasted effort or expense. It is measured by the ratio of useful output to total input. There are several types of efficiency including economic, market, operational, productive, and X efficiency. Equity means fairness and is concerned with equal access and treatment. Horizontal equity means equal treatment of equals while vertical equity means unequal treatment of unequals. Elasticity of demand refers to the responsiveness of quantity demanded to a change in price. Demand can be elastic, inelastic, perfectly inelastic, perfectly elastic, or unitary elastic. The roles of health care financing include mobilizing resources, setting incentives for providers, and ensuring access to care. Financing functions include revenue collection, risk pooling, and purchasing of

1. Presented By:- Sahdev
Concepts of Efficiency,
Effectiveness, Equity,
Elasticity of Demand &
Roles of Health Care
Financing

2. Efficiency
Efficiency signifies a peak level of performance
that uses the least amount of inputs to achieve
the highest amount of output.
Efficiency requires reducing the number of
unnecessary resources used to produce a given
output including personal time and energy.
It is a measurable concept that can be determined
using the ratio of useful output to total input.

3. Definitions

4. Types of Efficiency
Efficiency is concerned with
the relation between
resource inputs (costs, in
the form of labor, capital, or
equipment) and either
intermediate outputs
(numbers treated, waiting
time, etc.) or final health
outcomes (lives saved, life
years gained, quality
adjusted life years (QALYs)).
Economic efficiency
results from the
optimization of
resource-use to best
serve an economy.
Market efficiency is the
ability for prices to
reflect all of the
available information.
Operational efficiency
is a measure of how
well firms convert
operations into profits.

5. Elements of Efficiency

6. Key Terms

7. Productive Efficiency
Productive efficiency occurs when a firm is
combining resources in such a way as to
produce a given output at the lowest
possible average total cost. Costs will be
minimized at the lowest point on a firm’s short
run average total cost curve.

8. X Efficiency
X efficiency is a concept that was originally
applied to management efficiencies by Harvey
Leibenstein in the 1960s. The concept can be
applied specifically to situations where there is
more or less motivation of management to
maximise output, or not.
X efficiency occurs when the output of firms,
from a given amount of input, is the greatest it
can be. It is likely to arise when firms operate
in highly competitive markets where managers
are motivated to produce as much as possible.

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10. Basics of Social Efficiency

11. Basics of Dynamic Efficiency

12. Efficiency v/s Effectiveness
Take care of employees and they will take care
of your customers.

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15. Matrix

16. Equity
• Equity:- equity is about “fairness”. It is often
confused with equality, or “the state of being
equal”. Fairness and seeing equal are not
necessarily the same things. Inequality can be fair
if there are differences in need, or differences in
contribution, effort or deserve.
• Equity is the absence of avoidable or remediable
differences among groups of people, whether
those group are defined socially, economically,
demographically or geographically .

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18. Types
Horizontal equity:- refers to the “equal treatment of
equals”. This is embodied in health care objectives such
as “equal access for equal need”and is reflected in
efforts to use population-based formulas to allocate
health resources to geographical regions.
Vertical equity:- refers to the “unequal treatment of
unequal's". This is a more problematic concept
because it is difficult to decide how unequal people
should be in terms of the amounts of resources
devoted to them or how much more access we should
provide for some over others.

19. Equity in Economics
• Equity represents the value that would be
returned to a company's shareholders if all of
the assets were liquidated and all of the
company's debts were paid off. We can also
think of equity as a degree of residual
ownership in a firm or asset after subtracting
all debts associated with that asset.

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Equity is the amount of capital invested or owned by
the owner of a company. The equity is evaluated by the
difference between liabilities and assets recorded on
the balance sheet of a company. The worthiness of
equity is based on the present share price or a value
regulated by the valuation professionals or investors.
This account is also known as owners or stockholders
or shareholders equity.
Equity Formula:
The accounting equation is Assets – Liabilities = Equity

21. Types of Equity
 Book Value:-
In accounting, equity is listed in its book value and
calculated by the financial statement record and the balance
sheet equation. The equation used to evaluate book value is
Equity = Assets – Liabilities.
 Market Value:-
In finance, equity is indicated as market value, which might
be significantly lower or higher than the book value.
 For a public traded company, the market value of its equity
is calculated as Market Value= Share Price X Shares
Outstanding. Whereas, for a private company to analyse
the market value an investment bankers, boutique
valuation firm or accounting firm are hired.

22. Examples of Equity
If ABC Company had one lakh outstanding
shares, and if the company’s current market
value is ₹50 per share. The company’s market
value of equity will be (₹50 per share X 1 lakh
outstanding share = 50 lakhs)
The above mentioned is the concept, that is
elucidated in detail about ‘What is equity?’ for
the Commerce students.

23. Elasticity of Demand
A. Price elasticity of demand is an economic
measure of the change in the quantity
demanded or purchased of a product in relation
to its price change. Expressed mathematically,
B. Price Elasticity of Demand = % Change in
Quantity Demanded / % Change in Price
C. Price elasticity is used by economists to
understand how supply or demand changes
given changes in price to understand the
workings of the real economy.

24. Concept

25. PED in Action

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27. Inelastic Demand

28. Elastic Demand

29. Perfectly Inelastic Demand

30. Perfectly Elastic Demand

31. Unitary Elastic Demand

32. Table 5.1: Relationship Between Price and
Quantity Demanded for Braeburn’s Poetry Book

33. Limitations of Elasticities

34. Roles of Health care Financing
 Health Financing: – Health financing is the
“function of a health system concerned with the
mobilization, accumulation and allocation of
money to cover the health needs of the people,
individually and collectively, in the health
system.”(WHO)
The purpose of health financing is to make
funding available, as well as to set the right
financial incentives to providers, to ensure that all
individuals have access to effective public health
and personal health care” (WHO).

35. Health Economics

36. Why Focus on Health Financing
 While GDP growth and health outcomes are related, the link comes via a
higher level of health spending.
 Higher GDP growth rate enable countries to allocate more to health,
which in turn impacts on health outcomes.
 But wide variation across countries
Higher GDP does not always lead to higher allocations to health.
 Similarly, higher allocations to health can lead to varied outcomes.
 India has low GDP per capita, low per capita health spending and poor
health outcomes .
 There are countries that are spending more on health even with India’s
level of per capita GDP.
 It is possible to improve health outcomes even with this level of health
spending.

37. HCF in Health System

38. Role of HCF
The primary role of finance in health services
organizations is to plan for, acquire, and use
resources to maximize the efficiency of the
organization. This role is implemented through
specific activities such as planning and
budgeting. financial effectiveness of current
operations and planning for the future.

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 Estimating costs and profitability, planning, and
budgeting.
Managing financial operations.
Financing decisions.
Capital investment decisions :- One of the most
critical decisions managers make is the selection
of new facilities (including land, buildings, and
equipment). Such decisions are the primary
means by which businesses implement strategic
plans; hence, they play a key role in a business’s
financial future.

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Financial reporting:- For a variety of reasons,
businesses must record and report to outsiders
the results of operations and current financial
status.
Financial and operational analysis:-To achieve and
maintain a high level of organizational
performance, businesses must constantly
monitor both financial and operational conditions
and take actions as needed to ensure that goals
are met.

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 Contract management:-In today’s healthcare
environment, health services organizations must
negotiate, sign, and monitor contracts with managed
care organizations and health insurers.
 Financial risk management:- Many financial
transactions that take place to support the operations
of a business can, in themselves, increase a business’s
risk. Thus, an important finance staff activity is to
manage financial risk.
 The finance activities at health services organizations
may be summarized by the four Cs: costs, cash, capital,
and control

42. Three dimensions of universal coverage, WHO: who,
what and how much is covered

43. Health Financing Functions
 Revenue collection is how health systems raise money
from households, businesses, and external sources.
 Pooling deals with the accumulation and management of
revenues so that members of the pool share collective
health risks, thereby protecting individual pool members
from large, unpredictable health expenditures. Pooling
coupled with prepayment enables the establishment of
insurance and the redistribution of health spending
between high- and low-risk individuals and high- and low-
income individuals.
 Purchasing refers to the mechanisms used to purchase
services from public and private providers.

44. Comparison of Healthcare Spend

45. Budget Allocation

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47. A Good Health Financing is…

48. Bibliography
• www.economicsonline.co.uk