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Economics of Managerial Decision Making


The increasing demand for health care is modulated by series of factors. These factors are highly economic in nature. The aspect of employment, interest rate and price are few such factors. The essay in the current scenario discusses about the possible impact of such factors, over the business and profitability of Joy Hospital Ltd. The essay additionally provides suitable recommendation for the future business operations, with respect to the UK economic environment.

Increase in GDP

The impact of COVID-19 on the healthcare sector is complicated. The rise in the number of cases is likely to enhance the output of the healthcare sector. One significant driver of GDP increase was a 1.4 % drop in real healthcare spending at an annual rate (Chletsos and Saiti, 2019). The possible slowdown of healthcare spending growth can be interpreted as a positive outcome as it leads to slow economic growth in the short term. Four things need to be considered while establishing a connection between health care spending and GDP: Healthcare expenditure has been taking a large proportion of GDP in recent years. In 2012 national healthcare spending was 5% of 0.54 trillion in the case of nominal GDP; however, by 2019, the national healthcare expenditure makes up 17 % of 16.2 trillion GDP (Owler, 2016). If the expenditure is about healthcare a successful, it will take time for the spending to find ways in the other sectors of the economy.


Healthcare spending has always boosted the growth of GDP. During the last fifty years, healthcare spending moderated economic recession. Therefore as health care spending has lowered in the recent past, GDP growth is also decelerating. To accurately assess economic health is essential to consider the GDP growth of healthcare spending. Burke, Brugha and Thomas (2018) stated that flagging healthcare spending can be reduced GDP may lead to higher than expected unemployment if the growth in healthcare spending continues to abet. Suspension of dental and ophthalmic activities accounts for 6% of healthcare output coupled with the cancellation of outpatient activities (Augustine et al. 2019). Elective procedures of 13% and 19% total healthcare output are likely to weigh heavily on the chosen healthcare organization (Augustine et al. 2019).

High levels of employment

At the local level, healthcare spending growth is likely to be perceived as a beneficial intervention asset to create health care jobs and increases wages for the healthcare workers expanding local tax revenues and demand for related services and goods (Viola and Arno, 2019). A higher level of employment promises better adherence to even the costly health care services. Most of the organization provides better healthcare facilities for their employees. A high frequency of employment provides better scope of healthcare insurance, promoted by modern technology (Viola and Arno, 2019). Better paying jobs motivate patients to opt for better health care services without neglecting their health. High-paying jobs mean more stress at the workplace, which can be quickly addressed through the right kind of healthcare interventions (Teymourzadeh et al. 2019). Better paying jobs and a high level of employment can lead to a high level of stress, which needs to be rightly mediated with proper treatment

High level of employment creates a scope of an excellent range of disposable income. As influenced by Owler (2016), a high disposable income is the primary precursor for ensuring better healthcare facilities utilization rates. The high rates of income promise better scope of health care facilities for the working class. As the corporate exhibits, high rates of income and simultaneous expenditure on healthcare facilities, the hospital organizations will tend to run in profit leading to positive profit margins (Gellad and James, 2018).


In the healthcare sector, quality transparency and prices are used as a tool to foster competition among the businesses operating in the healthcare domain. Dranove, Gartwaite and Ody (2017) suggested transparency has become a societal value, and people are expecting more information about the organization and how it may affect them in the future. For example, many benefit designs are given few incentives to favor providers with affordable prices. Prices are the same for all providers, and low insurance covers most of the differences in terms of price (Post, Buchmueller and Ryan, 2018). A high deductible is limited to incentive because information exceeds large deductibles. Networking strategies have the scope to be active with the original concept that the insurance is acting as a purchasing agent for enrollees. First is the higher proportion of services given out by the lowest service providers. Additionally, discounts from provided to become part of the preferred network and, finally, significant and proportion of patients are enrolled in a plan with such incentives providers unlikely to increase the priority given to cost containment (Januleviciute et al. 2016). Patients pay less in cost-sharing when they use preferred providers. Limited networks act as a powerful tool to obtain much-needed lower prices because patient incentives are highly more durable in nature. If a patient opts for the provider, not in the network, then there is a risk of high-cost sharing, and they need to pay more to the provider (Blackstone and Fuhr, 2016). Hence, it can be conclusively stated that the aspect of price plays a vital role in the healthcare sector. Healthcare services are highly expensive in nature, and it becomes difficult for the customers to avail of the much-needed service. However, it becomes equally important to understand the scope of better employment. It can influence the prices of health care services (Augustine et al. 2019).

Low-interest rates:

A low-interest-rate allows better ability to pay off loans, which further allows the hospital to borrow more money and expand existing operation while simultaneously maintaining competitive advantage and businesses (Augustine et al. 2019). With every loan, there remains the possibility that the borrower will not repair the money. Hence to compensate for that risk when it to be a reward, which is interest. Interest is the amount of money lender on when they make a loan, and the borrower repays (Teymourzadeh et al. 2019). The high rate of interest denotes that consumers do not have a large amount of disposable income and hence make card back on spending. Higher interest rates, coupled with an increase in standards for lending make fewer loans affecting not only the consumers but the hospital and healthcare industry. A strict lending standard means that consumers are likely to cut back on spending affecting small healthcare organizations and services. In case of inflation of interest rate, it is essential to keep track on consumer price index and producer price index. Gellad and James (2018), higher interest rate leads to higher borrowing costs, and people start making the limited expenditure. Health care services such as dental treatment may suffer due to changing inflation.


The increasing demand for health care services created a path for lower interest rates after the implementation of affordable healthcare act. Furthermore, there was a decrease in interest rate by 38.8 points relative to the non-healthcare corporate rates resulting in 3 million savings on average healthcare issue couple with 2 billion in aggregate interest in a span of 5 years (Januleviciute et al. 2016). Research-based intervention as shown that the act is good for health care organization's real help, especially in medical expense States. The effect of COVID-19 on the social insurance area is entangled. The ascent in the number of cases is probably going to improve the yield of the medicinal services area. One noteworthy driver of GDP increment was a 1.4 % drop in genuine medicinal services spending at a yearly rate (Januleviciute et al. 2016). The conceivable log of human services spending development can be deciphered as a positive result as it prompts moderate monetary development in the present moment. In the momentary easing back, human services spending implies sharing of GDP. On the off chance that the use relating to human services a fruitful, it will require some investment for the spending to discover courses in different segments of the economy. Social insurance spending has consistently helped in the development of GDP. During the most recent fifty years, medicinal services spending directed a financial downturn. Subsequently, as a medicinal service spending has brought down in the late past, GDP development is likewise decelerating.

to appropriately survey the monetary wellbeing is essential to consider the GDP development of medicinal services spending. Post, Buchmueller and Ryan (2018) expressed that hailing medicinal services spending can be diminished GDP. It might prompt higher than anticipated joblessness if the development in human services spending keeps on abetting. Suspension of dental and ophthalmic exercises represents 6% of social insurance yield combined with retraction of outpatient exercises and elective systems of 13%, and 19% total human services yield is probably going to weigh vigorously on the picked medicinal services assoc, 2018iation (Post, Buchmueller and Ryan). In the social insurance segment, quality straightforwardness and costs are utilized as an apparatus to cultivate rivalry among the organizations working in the medicinal services area. Owler (2016) recommended straightforwardness has become a cultural worth, and individuals are expecting more data about the association and the manners in which it might influence them in the future. For instance, many advantage configurations are given hardly any impetuses to support suppliers with reasonable costs. Costs are the same for all suppliers, and with low protection covers the vast majority of the distinctions as far as cost. A high deductible is constrained to motivating force on the grounds that on data surpass huge deductibles. Organizing methodologies have the extension to be compelling with the original idea of that the protection is going about as a buyer specialist for enrollees. First is the greater extent of administrations given out by the most minimal specialist co-ops. Sudden extra markdown from gave to turn out to be a piece of the favored system lastly for enormous and extent of patients are trying out an arrangement with such motivating forces supplier improbable to build the need given to cost control.

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Recommendations and conclusion

Patients pay less in cost-sharing when they utilize favored suppliers. Constrained systems acts as a fantastic asset to get the essential lower costs since quiet motivating forces are profoundly more grounded in nature. On the other chance that patients settle on suppliers not in the system, at that point, there are dangers of significant expense sharing, and they have to pay more to the supplier. Henceforth it very well may be convincingly expressed that the part of value assumes a significant job in the social insurance segment. Social insurance administrations are exceptionally costly in nature, and it gets hard for the clients to benefit the genuinely necessary help. Nonetheless, it turns out to be similarly imperative to comprehend the extent of better business. It can impact the costs of social insurance administrations. The cost of related healthcare services needs to be monitored and checked continuously for maintaining profitability. The aspect of transparency can be an essential tool.

Reference list

Augustine, T., Perisetti, A., George, N.E., Garg, S., Thandassery, R.B., Inamdar, S., Patel, U., Banerjee, D. and Tharian, B., 2019. Sa1456 IN-HOUSE ERCP AVAILABILITY IN PEDIATRIC HOSPITALS IMPROVES HEALTHCARE ECONOMICS. Gastrointestinal Endoscopy, 89(6), pp.AB239-AB240.

Blackstone, E.A. and Fuhr Jr, J.P., 2016. The economics of Medicare accountable care organizations. American health & drug benefits, 9(1), p.11

Burke, S.A., Brugha, R. and Thomas, S., 2018. It’s the economy, stupid! When economics and politics override health policy goals–the case of tax reliefs to build private hospitals in Ireland in the early 2000s. HRB Open Research, 1(1), p.1.

Chletsos, M. and Saiti, A., 2019. The Economics of Hospitals. In Strategic Management and Economics in Health Care (pp. 151-177). Springer, Cham.

Dranove, D., Gartwaite, C. and Ody, C., 2017. The impact of the ACA's Medicaid expansion on hospitals' uncompensated care burden and the potential effects of repeal. Issue brief (Commonwealth Fund), 12, pp.1-9.

Gellad, W.F. and James, A.E., 2018. Discounted Drugs for Needy Patients and Hospitals-Understanding the 340B Debate. The New England journal of medicine, 378(6), p.501.

Januleviciute, J., Askildsen, J.E., Kaarboe, O., Siciliani, L. and Sutton, M., 2016. How do hospitals respond to price changes? Evidence from Norway. Health economics, 25(5), pp.620-636

Owler, B., 2016. Finance and economics: Patients pay for hobbled hospitals. Australian Medicine, 28(2), p.28.

Owler, B., 2016. Finance and economics: Public hospitals need more than drip feed. Australian Medicine, 28(4), p.29.

Post, B., Buchmueller, T. and Ryan, A.M., 2018. Vertical integration of hospitals and physicians: economic theory and empirical evidence on spending and quality. Medical Care Research and Review, 75(4), pp.399-433.

Teymourzadeh, E., Bahadori, M., Meskarpour-Amiri, M., Khoshmanzar, J. and Hosseini-Shokouh, S.M., 2019. Economic Performance Analysis of Selected Military Hospitals Using Hospital Indicators and Inpatient Bed-Day Cost. Hospital Practices and Research, 4(1), pp.31-38.

Viola, D. and Arno, P.S., 2019. Can Hospitals Advance Health Equity in the United States? The Influence of Technology, Economics, and Policy. In The Modern Hospital (pp. 61-73). Springer, Cham.

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