By Ricardo A. Bitran
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In the first case, illustrated in figure 2-2b, the demand curve for visits crosses the facility's average cost curve at two points, (Q1, P1) and (Q2, P2). Figure 2-2b. Case 1: Single-Product FacilityTwo Break-Even Solutions Exist Figure 2-2c. Case 2: Single-Product FacilityBreak-Even Not Possible, External Subsidy is Needed 7. From Atkinson and Stiglitz 1980, p. 463. 8. With an external subsidy, breaking even is defined here as the ability to generate sufficient revenue to cover total costs net of subsidy.
Pricing How much should the focus health facility charge for its services? A well-known tenet of welfare economics is that to maximize welfare in a perfectly competitive market selling private goods and with well-informed consumers, price should be equal to marginal cost. In the health care market price may depart optimally from marginal cost for several reasons. First, the presence of externalities in the consumption of some health care services (for example, immunizations) may warrant an optimal price that is below marginal cost.
S. dollars, FX denotes the current exchange rate (units of local currency per US$), L is the useful life of the asset (in years), and 12 is the number of months in a year. Fuel is used to power refrigerators and to sterilize vaccination equipment. For simplicity, these fuel costs are treated as fixed in the model. S. dollars. Variable Costs: Drugs and Medical Supplies In order to compute variable costs for drugs and medical supplies, the user of the model must specify the average cost to the health center of a typical prescription, laboratory exam, and other pharmaceutical products associated with each type of health service.
A supply-demand model of health care financing with an application to Zaire: a training tool by Ricardo A. Bitran