BOOKS OF RtfiDIfGS - PAHO/WHO

- 566 -
Application of Cost-Benefit Analysis to Health Senvice.
Sbmilay, a higher income permits people to spend more on automobiles with safety
dppsU, reducing the noed to exert influence on the behavior of drives. It may be mort
effct~vh to operate on impersonal environmental forces than to try to chingo the
bair of individuals (86).
At this tim no general answer is discernible to the question of how change in halth
uystan technology affect costa and benefita. It happens only once in a generation.
perdapa even less frequently, that an idea such as early ambulation after surgery is born of
ecessity in wartime, effects huge savings in tha use of health resoutrcs, and also exerta a
positive effect on health. In most cases, the effects of technology will be mixed. Often
the product is new, in the sense that a treatment is created that was not available
previously and therefore could not have been demanded. The decision of whether or not
to adopt a piece of technology, and the extent of its spread once adopted, depend on a
number of factors, including the values of consumers, the motivations of providers, tha
availability of funds, methods of provider remuneration, as weUl as the cost and efficacy
of the service in question.
Such a general formulation of the problem of assessing health systems technology, as
provided above, affords practically no guidance to decision making. Only the concrete
circumstances surrounding a project or program can indicate the special problems of
measurement and valuation and the unique opportunities for solving them, what is to be
emphasized in the analysis, and what may be neglected with only a moderate degree of
trepidation. Accordingly, I will examine two examples in detail: hospitals and automated
multiphasic screening (58).
The Hospital
Economists have offered essentially three views concerning capital investment in the
hospital. First, hospitals invest too little capital, hence their productivity gains lag behind
those of the economy at large (87). Second, hospitals invest too much, because grants and
bequests accrue to them at zero price (88). Third, there is no optimum amount of
investment in hospital beds, since there is no standard of appropriate hospital use (89).
Conceivably, each position may have some merit to the extent that it reflects the
situation in different sectors of the hospital.
For simplicity I shall employ a threefold classification of hospital capital
investment-patient beds, supporting housekeeping serviCes, and ancillary medical
services (82). The unique problems of measurement and valuation facing the application
of cost-benefit or cost-effectiveness analysis will be explored for each sector.
Patient Beds The heart of the exercise in evaluating a project to expand hospital bed
capacity, in my judgment, lies in one's explanation of the phenomenon of hospital use.
At one pole, if the primary deterrninants of use are biologic in nature, an increase in bed
supply beyond a certain point must result in additional empty beds. If hospitals are paid
at stated charges, empty beds inflict a heavy financial burden on each institution (79).
The reason is that fixed costs constitute two-thirds to three-quarters of total operating
costsa (90). Each institution would therefore be subject to financial self-discipline in
building beds, and there would be little occasion for outside intervention beyond the
provision of information on the plans of other hospitals. The effect of introducing more
technology might well be to increase the proportion of fixed costa to total operating
costs, thereby reinforcing the efficacy of financial self-discipline.