Value is defined (economically) as outcome divided by cost. Value is created when the price that a patient is ready to pay for a service (or a product) is higher than the cost of providing this service. The potential value that a company willing to provide medical services can get can be represented by the area between the demand curve (maximum price a client is willing to pay for the service) and the cost of providing the service (see my diagram).When we add an e- to the word health, when we for example provide medical services through the internet, two things happen to this potential value:
- The demand curve shifts to the right, because the same offer arrives now to more potential buyers, i.e. patients that can get the service through the web without going to a “real” building
- The cost curve shifts down, because there is a lower cost for any transaction, we don’t need intermediaries and there are more efficiencies.
Therefore the potential value (the triangle area between both curves) increases.
2 comments:
Don't forget that many of the potential healthcare consumers (elderly) could not have an easy access to internet.
Sometimes e-health is not equivalent to expanding your demand.
Good post.
Economics allow us to do almost anything potentially. I wonder if you use empirical data from the determinants of the supply and the demand (which is very difficult in the healthcare sector) you will have any growth.
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