AHMADU BELLO UNIVERSITY ZARIA

COLLEGE OF HEALTH SCIENCE

FACULTY OF ALLIED HEALTH SCIENCE

DEPARTMENT OF NURSING SCIENCE

HEALTH ECONOMICS (NURS 516)

TOPIC: HEALTH CARE COST

BY

GROUP 3

LECTURER: DR. AHMAD AMINA.

JULY, 2024.
S/ NAMES REG NUMBER
N

1 ABDULHAKEEM SHIFAU U18NS2048

ZAKARIYYA

2 ABDULKADIR AMINU U17NS1077

3 ABUBAKAR AISHA BAYERO U18NS2060

4 ABUBAKAR HAFSAT ABBA U18NS2069

5 AFOLABI, JOHN AYOOLUWA U17NS1107

6 AHMED HALIDU U17NS2047

7 AHMED MARYAM U18NS2057

8 ALEGE RUKAYAT U18NS2053

9 AL-KASIM MAS'UDAT U18NS2050

10 AMINU ADAMA MU’AZU U18NS2066

11 AMINU U. AISHAT U18NS2051

12 AUWALU MARYAM YAKUBU U18NS2065

13 BASHIR USMAN U17NS1097

14 BELLO FATIMA U17NS1100

MUHAMMAD

15 DIKKO BARAATU U18NS2067

16 GAMBO JACOB SADUWA U17NS1080

17 HADIZA ALIYU U17NS1082

18 HAMISU MUSA U18NS2059

19 HARUNA MUHAMMAD SAIDU U17NS1090

20 HAUWA AHMAD ATATUS U17NS1108

21 IBRAHIM RAHMAT U17NS1089

22 ITSE JUDITH ATONG U17NS1085

23 JUWAIRIYYA ADEE U17NS1075
ABUBAKAR

24 KABIRU AISHAT U17NS1087

25 KHADIJAT MUSTAPHA U17NS1074

26 KWAIFA SALIHU FATIMA U17NS1104

27 MAHMUD HAJARA U18NS2049

28 MANDE HAFSAT ALIYU U16NS1050

29 MANU ADAMU YAHAYA U18NS2062.

30 MODE MUHAMMAD BELLO U17NS1076

31 MUHAMMAD ASMAU U17NS1099

32 MUHAMMAD KARIMAT U17NS1095

33 MUHAMMED ABBAS U18NS2068

34 MUSA AISHATU.A. U18NS2052

35 MUSA AZEEMAT U17NS1079

ONYENEOYIZA

36 MUSA YUSUF YUSUF U17NS1096

37 MUSASADIQ KUDARU U18NS2064

38 NASIRU YUSIF SANI U18NS2047

39 OKOLI CALISTER EBERECHI U17NS1098

40 OTUECHERE GLORY NGOZI U17NS1092

41 RUFAI KHADIJA U17NS1083

42 SALAMATU SULEIMAN U17NS1086

43 SALIHU MAHDIYA OYIZA U17NS1101

44 SULAIMAN U17NS1106
 AMATURRAHMAN MB

45 SULEIMAN AISHATU U17NS1081

ABDULLAHI

46 SULEIMAN AMINA ADAM U17NS1088

47 TIJJANI ADAMU U17NS1091

48 UMAR-MANN ZAINAB U17NS1102

49 UMAR NAZIFAT ONIZE U17NS1094

50 UMAR SUMAYYA U18NS2061

50 USMAN ABDULLAHI U17NS1103

51 WADA ZAINAB ABU U17NS1073

52 WETLE HAPPINESS U16NS1087

53 YAHAYA JECINTA U18NS2055

54 YAKUBU AYUBA U17NS1078

55 YUNUSA AISHA JUMMAI U17NS1105

56 ZAID MUSTAPHA U18NS2063

 HEALTH CARE COST

INTRODUCTION

Healthcare cost is a fundamental concept in health economics, representing the monetary

value of resources used in the prevention, diagnosis, and treatment of diseases, as well as the

maintenance of health (Shi et al 2022).

Definition

Healthcare cost refers to the total value of resources used in healthcare, including direct

medical costs (e.g., hospital stays, physician services), indirect costs (e.g., lost productivity), and

intangible costs (e.g., pain and suffering) (Woods 2022).

TYPES OF HEALTHCARE COST

LABOUR COST

The cost of labor is the sum of all wages paid to employees, as well as the cost of employee

benefits and payroll taxes paid by an employer. The cost of labor is broken into direct and

indirect (overhead) costs. The direct labor cost includes the cost of wages and benefits for
employees who are directly involved in producing the product or service commodity. The

indirect cost of labor refers to amounts paid for employees that support the commodity but aren't

directly involved in making it. To calculate the cost of labor, the total sales is multiplied by the

percentage of labor and divided by the hourly average of worker salaries.

Cost of Labor = (Total sales x Percentage of labor) / Hourly average of worker salaries

Factors that determine labor costs include salaries, benefits, and overtime (Akande 2020).

SUPPLY COST

Supply cost means the actual cost of materials, ingredients, packaging, direct labor, and direct

overhead excluding any allocation or absorption of costs for excess or idle capacity, and

excluding any intracompany transfer profits plus the actual cost of shipping and transportation in

cases in which those costs are incurred by a respondent.

Supply chain costs account for a large portion of hospital expenses. Expenses that qualify as

medical supply costs include medications, equipment like medical devices, surgical instruments

etc., consumables like medical supplies and laboratory supplies, cleansing and disinfectants etc.,

food preparation, laundry and linens (Abimbola 2019).

OVERHEAD COST

Overhead costs are expenses that are not directly attributed to a patient’s medical care. The bulk

of these expenses include staff salary and benefits, medical/surgical supplies, facility expenses

(building rent or mortgage + occupancy), building depreciation, information technology (EHR,

billing system, telephone system, Internet servers, etc.), clinical Laboratory, facility needs etc

(Oyedeji 2020).

EDUCATIONAL AND TRAINING COST

Educational cost is a measure of what a student, an institution of learning, or the public has to

give up in order to educate an individual or a group of people. Cost of education may he incurred

by producers (educational institutions) or consumers (students and their parents). This includes

course fees, training programs, workshop registration, conference attendance, online learning

platforms etc (Onoka 2019).

TECHNOLOGY COST

These are expenses associated with the development, acquisition, implementation, deployment,

maintenance of assets of technology that includes depreciation and amortization. This includes

electronic health records, medical devices, healthcare IT infrastructure, telemedicine and remote

monitoring etc. (Nigerian Private Sector Health Alliance 2019).

PATIENT CARE COST

These are costs related to the treatment of a disease, such as cancer, surgery etc. These costs

include treatments, procedures, therapies, other patient care cost etc (Oyedeji 2020).

REGULATORY COMPLIANCE COST

Regulatory compliance cost refers to all the expenses that a firm incurs to adhere to industry

regulations. Compliance costs include labor costs, technology costs, consulting and advisory

costs, documentation and reporting costs etc (Akande 2020).

QUALITY IMPROVEMENT COST

Quality improvement focuses on care that is safe, timely, effective, efficient, equitable and

patient-centered. These include training and development, process improvement, quality control

and testing, supply chain quality, quality management systems, customer satisfaction and

feedbacks etc (Oleribe 2019).

FACTORS INFLUENCING HEALTH CARE COSTS IN NURSING.

1. Staffing ratios and skill mix

 Staffing Ratio: Studies reveal a connection between higher ratios of registered nurses

(RNs) to patients and reduced costs. This association stems from fewer complications,

hospital readmissions, and shorter lengths of stay (Dall, et al., 2023).

 Skill Mix: A balanced skill mix, featuring more RNs, can improve patient outcomes and

potentially generate cost reductions (McIntyre et al., 2023).

2. Patient acuity and complexity

Acuity refers to the severity of a patient's condition. More acutely ill patients require more

intensive care and resources, leading to higher costs. Complexity represents the number and type

of a patient's medical conditions. Patients with multiple complex conditions often require more

specialized care and longer hospital stays, thus increasing costs. Studies have shown that patients
with higher acuity and complexity consume more healthcare resources, driving up costs (Fink et

al., 2020).

3. Length of stay and readmission rates

Longer hospital stays are associated with higher costs due to increased resource utilization

(staffing, medications, facilities). Patients who return to the hospital soon after discharge also

incur additional costs. This can be due to inadequate discharge planning or complications arising

from the initial hospitalization. Studies have shown a positive correlation between LOS and

hospital costs (Rich et al., 2020). Additionally, reducing readmissions can lead to significant cost

savings (Geng et al., 2019).

4. Supply chain management and inventory control

Inefficient supply chain management and poor inventory control can significantly contribute to

rising healthcare costs. Holding excessive inventory ties up capital that could be used for other

purposes. It also leads to waste due to expired or obsolete items. Stockouts occur when essential

medical supplies are unavailable, potentially delaying procedures or compromising patient care

(Nardeau, 2024). Also, fragmented supply chains and poor coordination between healthcare

providers and suppliers can lead to higher procurement costs and logistical inefficiencies.

Effective supply chain management and inventory control strategies can help healthcare

organizations reduce costs, improve efficiency, and ensure that essential supplies are always

available (Nardeau, 2024).

5. Technology integration and adoption

Integrating and adopting new technologies can present significant cost challenges for healthcare

organizations. While technology offers the potential to improve efficiency and reduce costs in

the long run, there are upfront investments required including acquisition costs, training costs,

maintenance costs and integration challenges (American Hospitals Association, 2020).

Despite these challenges, the potential benefits of technology adoption in healthcare includes,

improved efficiency, enhanced care quality and reduced cost (Health Financial management

Association, 2023).

6. Evidenced based practice and guideline implementation

While EBP and guideline implementation aim to improve patient care and healthcare quality,

they can also introduce cost considerations such as implementation cost, inflexibility and limited

evidence (Institute for Health Care Implementation, 2023).

However, EBP and guidelines can also yield significant cost savings in healthcare including,

Reduced Waste: By discouraging unnecessary tests, procedures, or medications, EBP can help

eliminate wasteful spending, improved outcome and standardized care (WHO, 2016).

[Link] safety and quality initiatives

Patient safety and quality initiatives are crucial for optimal patient outcomes, but they can also

strain healthcare budgets due to resource investment, increased regulations, and potential over

testing. However, these initiatives yield significant long-term benefits like reduced errors,

improved outcomes, and enhanced efficiency, ultimately reducing overall healthcare costs

(Agency for Healthcare Research and Quality, 2023; World Health Organization, 2023).
Striking a balance between cost-effectiveness and high-impact interventions is key for healthcare

organizations.

8. Regulatory requirements and accreditation standards

Regulatory requirements and accreditation standards, while essential for quality care and patient

safety, can also increase healthcare costs due to compliance burdens and potential redundancy

[The Joint Commission, 2024; National Institutes of Health, 2020].

IMPACT OF HEALTH CARE COST IN NIGERIA

Healthcare cost has a significant impact on healthcare services in Nigeria, leading to:

1. Inaccessibility: High costs limit access to healthcare, especially for low-income

individuals and rural communities.

2. Poor health outcomes: Delayed or foregone care due to cost leads to poor health

outcomes, increased morbidity, and mortality.

3. Overreliance on out-of-pocket expenses: High costs force patients to pay out-of-pocket,

leading to financial hardship and poverty.

4. Brain drain: High costs and inadequate funding drive healthcare professionals to seek

better opportunities abroad.

5. Inefficient resource allocation: High costs lead to inefficient allocation of resources,

prioritizing curative care over preventive care.

6. Limited healthcare infrastructure development: High costs hinder investment in

healthcare infrastructure, exacerbating existing shortages.

 7. Increased mortality rates: High costs contribute to increased mortality rates, particularly

among vulnerable populations like children and pregnant women.

8. Poor quality of care: High costs lead to overburdened facilities, compromising the quality

of care.

9. Limited access to specialized care: High costs restrict access to specialized care, forcing

patients to seek care abroad.

10. Disparities and inequalities: High costs exacerbate existing health disparities and

inequalities, particularly for rural and low-income populations.

(Oyedeji 2020)

IMPACT OF PATIENT CARE COST IN NIGERIA

Patient care costs in Nigeria are significantly impacted by the high cost of living, leading to:

1. Catastrophic healthcare expenditure: High costs of care lead to financial hardship, forcing

patients to spend a large portion of their income on healthcare, compromising their ability

to afford basic necessities .

2. Out-of-pocket expenses: Patients bear a significant burden of healthcare costs, leading to

increased poverty and financial insecurity.

3. Delayed or foregone care: High costs lead to delayed or foregone care, exacerbating

health conditions and reducing quality of life.

4. Increased mortality rates: High costs contribute to increased mortality rates, particularly

among vulnerable populations like children, pregnant women, and the elderly.
 5. Reduced access to care: High costs limit access to healthcare services, especially for low-

income individuals and rural communities.

6. Overreliance on informal care: Patients rely on informal care from family and friends,

leading to caregiver burden and reduced productivity.

7. Poor health outcomes: High costs lead to poor health outcomes, reduced quality of life,

and decreased life expectancy.

8. Increased burden on households: High costs lead to increased burden on households,

compromising their ability to afford basic necessities like food, education, and housing.

9. Reduced economic productivity: High costs lead to reduced economic productivity, as

patients and caregivers are unable to work due to illness or caregiving responsibilities.

10. Increased health inequities: High costs exacerbate existing health inequities,

disproportionately affecting vulnerable populations.

(Onoka 2019)

SOLUTIONS OF HEALTH CARE COST IN NIGERIA

To address the challenges posed by high healthcare costs in Nigeria, the following solutions can

be considered:

1. Universal Health Coverage (UHC): Implement a comprehensive health insurance scheme

to ensure access to healthcare for all Nigerians.

2. Increased government fundings: Boost healthcare funding to improve infrastructure,

equipment, and personnel.

3. Public-Private Partnerships (PPPs): Collaborate with private sector to finance and deliver

healthcare services.
4. Cost-containment measures: Implement efficient resource allocation, reduce wastage, and

promote generic drug use.

5. Primary Healthcare (PHC) strengthening: Focus on preventive care, community

engagement, and PHC revitalization.

6. Healthcare infrastructure development: Invest in modern equipment, facilities, and

technology.

7. Workforce development: Train and retain healthcare professionals, address brain drain.

8. Health education and awareness: Promote healthy lifestyles, disease prevention, and

health literacy.

9. Private sector engagement: Encourage private sector investment in healthcare, medical

tourism.

10. Policy reforms: Enact policies supporting healthcare financing, access, and quality.

(WHO 2019)

NURSES ROLE IN MANAGING HEALTHCARE COST

 Nurses play a vital role in managing healthcare costs through various roles and

responsibilities, including:

 Care coordination (Smith et al., 2019): Nurses ensure timely and effective transitions

between healthcare settings, reducing unnecessary hospital readmissions and costs.

 Patient education (Kumar et al., 2020): Nurses empower patients to take charge of their

health, improving self-management and reducing unnecessary healthcare utilization.

 Medication management (Nelson et al., 2019): Nurses optimize medication use, reducing

errors and adverse reactions that lead to increased healthcare costs.

  Preventive care (CDC, 2020): Nurses provide preventive services like screenings and

vaccinations, reducing the likelihood of costly chronic conditions.

 Quality improvement (IHI, 2020): Nurses participate in quality improvement initiatives,

identifying areas for cost reduction and quality enhancement.

 Resource allocation (ANA, 2020): Nurses optimize resource allocation, ensuring

appropriate utilization of equipment, supplies, and personnel.

 Telehealth (ANA, 2020): Nurses leverage telehealth technologies to remotely monitor

patients, reducing unnecessary hospitalizations and costs.

 Value-based care (CMS, 2020): Nurses contribute to value-based care models, focusing

on quality and cost-effective care.

By assuming these roles and responsibilities, nurses play a crucial part in managing healthcare

costs and improving patient outcomes.

CHALLENGES IN MANAGING HEALTHCARE COSTS.

The ever-rising cost of healthcare poses a significant challenge globally. Health economics plays

a crucial role in analyzing these costs, identifying drivers, and exploring strategies for

sustainable healthcare systems.

The following are the key challenges in managing healthcare costs

1. Aging Population:

An aging population leads to increased demand for healthcare services as older adults tend to

require more frequent and complex medical care (McCubbin et al., 2018). This puts a strain on

healthcare budgets and resources.

2. Increasing Prevalence of Chronic Diseases:

Chronic diseases like diabetes, heart disease, and cancer are becoming more prevalent, leading to

long-term treatment costs. Managing these conditions requires ongoing medication, monitoring,

and sometimes specialized care, significantly impacting healthcare spending (World Health

Organization [WHO], 2023).

3. Technological Advancements:

While new medical technologies can improve patient outcomes, they often come with a high

initial cost. The acquisition, maintenance, and training associated with these technologies need

careful consideration in relation to their cost-effectiveness (Cutler, 2020).

4. Pharmaceutical Pricing:

The high cost of prescription drugs significantly impacts healthcare budgets. Factors such as

research and development costs and patent monopolies contribute to high drug prices, posing

challenges in ensuring affordable access to essential medications (OECD, 2019).

5. Administrative Costs:

The complex healthcare system often involves a considerable amount of administrative overhead

associated with billing, coding, insurance processing, and regulatory compliance. Streamlining

these processes can lead to cost reductions (American Hospital Association [AHA], 2023).

6. Nurse Shortages:

Inadequate nurse staffing levels can lead to increased reliance on agency nurses with higher

rates, overtime pay, and potential for patient complications requiring additional resources.
Investing in workforce strategies to manage nurse shortages is crucial for cost containment

(Institute of Medicine [IOM], 2010).

Conclusion:

Managing healthcare costs is a complex challenge with various contributing factors. Health

economics provides valuable tools for analyzing costs, identifying areas for improvement, and

developing strategies for a sustainable healthcare system. By employing a combination of cost-

containment measures and investing in preventive care, healthcare systems can balance cost

control with delivering high-quality care to the population.

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