AN ECONOMIC ANALYSIS OF HEART DISEASE TREATMENT IN

PRIVATE HOSPITAL WITH SPECIAL REFERENCE TO

METROPOLITAN CITY OF CHENNAI

Dr. Tmt. V. Renuka Devi*

Tmt. Sindhu T. S**

Abstract
Private Hospital Treatments of Heart Disease is little costlier for the
divergent standard of people in Chennai, their daily attitude will differ from
person to person like too much of tension in both working places and their
homes, food habits, resting times, lack of physical activities, and other
habits, etc: at last it leads to cardiac problems. Middle income people are
facing the Socio-Economic Burden to get their treatments in Private
Hospitals, Medicines per month of this disease are little costly, Expenses of
diagnosing the Heart diseases through ECG, CT scans, Echocardiograph,
Angiogram, etc. are little expensive it comes around Rs. 50,000, the main
burden of the disease are faced by the person is at the time of Surgery and
Sometimes it leads to change the financial capacity of the patient.
Most of the Peoples income are changed After their Surgery
(Especially Bypass Surgery), they choose Alternative Jobs or Voluntary
Retirement to reduce their Workload. 60% of people are comparatively
earning lesser amount than pre-surgery, rest of the peoples are the
employees with low hurdle to do their work.
The treatment of heart Disease is a constant process till the end of their
life, Patients have to consult their physicians every month, monthly
medicine charges, Once in three months check-up, this cost approximately
comes around Rs. 12,000. Automatically it affects the Economic
Background of the patient and their Family.
* Reader and Head , Department of Economics, Ethiraj college for
women, Chennai.
** M.Phil Research Scholar, Department of Economics, Ethiraj College
for Women
AN ECONOMIC ANALYSIS OF HEART DISEASE TREATMENT IN
PRIVATE HOSPITAL WITH SPECIAL REFERENCE TO
METROPOLITAN CITY OF CHENNAI

Dr. Tmt. V. Renuka Devi*

Tmt. Sindhu T. S**

Health Economics

Health Economics has been explained by various authors in

different ways. A general survey of some of the definitions suggest that
health economics is the discipline that determines the price and the quantity
of limited financial and nonfinancial resources devoted to the care of the
sick and promotion of health. It covers the medical industry as a whole and
extends to such fields as the economic analysis of the cost of diseases,
benefits of health programs and returns from investment in medical
education, training and research.
The aim of economics applied to health field or “ health
economics” is to quantify overtime the resources used in health service
delivery and to organize, allocate and manage them in such a way that they
are used for health purposes with maximum efficiency in preventive,
curative and rehabilitative health services, so as to achieve maximal
individual and national productivity.

* Reader and Head , Department of Economics, Ethiraj college for

women, Chennai
.** M.Phil Research Scholar, Department of Economics, Ethiraj College
for Women
Health Economic View of Demand and Supply

In the Health care delivery system has taken as a market

were the supply and Demand has made as in the ordinary market. Here
Medical institutions and providers are taken as the supply side, where as the
patients or consumers are on the demand side
According to Indian health care delivery system, it is providing free of
cost in the Government hospitals, most of the people are avoiding to take the
health delivery for their major diseases like heart disease and cancer because
of poor quality of treatment, Slow Process of treatment, irresponsive
Attenders, patients satisfaction derived from the treatment of government
hospital deteriorates and diverts them towards private hospital
Most of the middle income groups are approaching the
private hospitals for better treatment , better environment, infrastructural
facilities and hospitality. In The treatment given by the private hospitals are
fully satisfied by the demanders, where as the cost for the treatment is very
costly to them, it makes them really burdened. So many peoples sell their
land and jewels, opting loans from banks and relatives. Some of the people
standard of living has changed ,their children’s educations are affected.
After their treatment they have to spend the money for monthly medicines/
drugs, rent for their houses, Electricity charges, household expenses, school
or college fees ,children’s dresses, stationery expenses, health check-up
costs , doctors consultation fee, repayment of loans,and other expenses etc;
it is an additional expenses for them to face their day to day life.
 Whether the price of the treatment increase or decrease, the
peoples demand will not come down, price inelasticity of demand is
happening in this health care delivery ,especially in the heart treatments.

In Economic View
Health care delivery system is a market
Patients are the consumer or the demander (Demand)
Hospital and their institutions are the supplier (Supply

DEMAND OF HEART DISEASE TREATMENT

Demand for health care service is very different from the demand for other
economic goods.
 In Economic goods consumer will be aware of the product,

where as consumer in the health care service is dependent

upon the producer for getting information about the quality
of the product or the treatment.
 In Economic goods consumer are the king to decide ‘what

to buy’ and ‘where to buy’ in other part consumer choice is

decided by the producer or the physicians.
 Consumer is treated as a king in the economic goods

whereas in the health care delivery, sometimes consumers

are ignored (Because of limited No. of Beds).
 Variations of Price will fluctuate based on consumers
demand whereas Health care demand will not fluctuate
according to any change in Price.(Health Care is Necessity)
Factors of Health Demand

 Income of the purchaser

 Price of health services
 Price of complementary services (Ayurveda, homeopathy…etc.,)
 Goodwill or assurance of the health care services.

Functions of Health Care Demand

 Health care demand function D= fm (Hs, A, P)

D- health care demand.
m- quality of medical care demand.
Hs – health status (wish).
A- Individual perception of the need.
P- price of the medical care to the consumer (they Charge
different price).

 Price of a health status:

General demand is different from medical demand

because general demand is consumable there is no time gap,
medical demand is the demand when they have sick only they will
demand. When the price of health services increase or decrease
the demand will not vary, if they have heart disease only they will
demand health services, product is available only if they get
appointment from the physician or surgeon.

 Entry of the market:

Only the medical professionals ,licensing

requirements, paramedical, laboratory clinics ,etc can only enter
this market , they are known as the producers of health care
services, health professionals are the monopoly sellers they fix the
price of their own whether the price increases or decreases the
patient has to demand for their betterment of health. The
Demanders enter only when their necessity of health care is
required.
 FIGURE: 1 PRICE INELASTICITY DEMAND OF HEART
DISEASE TREATMENT IN PRIVATE HOSPITAL

Y
D1 (Demand)

Price P2

P1

O D X
Demand of Heart Disease treatment in Private hospital

Diagrammatic Explanation:

 In the diagram OX axis represent heart disease treatment in the

private
Hospitals.
 OY axis represent the price or cost of the treatment.
 DD1 refers the Demand curve for the heart disease treatment.
  This diagram shows that when the price of heart disease Treatment is
Rs.3,00,000 (P) the demand will be the same, whether If the price has
declined to Rs.2,80,000 (P1), or when the price of the treatment has
augmented upto Rs.5,00,000 (P2) . Consumers psychological
assurance or goodwill of the private hospital treatment are the major
factor for this rigid demand.
 It refers to a situation when the quantity demanded remains
unchanged irrespective of any rise or fall in the price of a commodity.
The demand is perfectly inelastic, the elasticity of demand is zero.
(E=0).
 Perfectly inelastic demand curve DD1 it is a vertical line parallel to the
Y- axis, in this figure Treatment demanded is OD both at the price of
Rs. 3,00,000/- and Rs.5,00,000/-.

It shows that when the Price increase or Decrease Demand of the

Health Care Services of private hospitals remain the same, Here Demand
Determines Necessity Part Of their life.
SUPPLY SIDE OF THE HEART DISEASE TREATMENT

Hospitals and their dependants are the supply side of the health care
service market, whereas in the private hospitals their capital investments
are very high as most of the machineries are imported for diagnosis and
heart treatments, which nearly costs crores of rupees and they have to spend
for their maintenance charges, specialized facilities such as intensive care
units, angiography suites and operating rooms, electricity , building
expenses, costly drugs, doctors, nurses, attenders and other staffs salaries
are be paid by the private hospitals.
 private hospitals act as the business, it motivates both the profit and
welfare of the people, they make the patient comfortable with quality of
treatments, environment, infrastructural facilities, good hospitality,
immediate treatments, good response to the patients,etc Hence people started
comparing the government hospitals with private hospitals and
automatically goodwill goes to the private hospitals. so people are willing to
get their treatment from these institutions, medical Institutions charged their
expenses from the patients. Surgery cost is about Rs.3,00,000 to Rs.8,00,000
(it varies depending on the class), and is one of the costliest surgery in the
world.
High income groups manage to pay the fees with savings and other
arrangements, whereas the middle income groups are facing the great burden
to pay the amount what they are charged.

COST OF HEART DISEASE DIAGNOSING MACHINES

S.No Machines for diagnosis Cost of the machine

(Rs)
1 Echocardiograph 3D 1. 25 crores
colour
2 Nucleous scan 1. 75 crores
3 ECG 2. 5 lakhs
4 Angiogram 3. 5 crores
5 Holter monitor 4 .5 lakhs
6 Thread mill 12 .5 lakhs
Tota 6. 69 crores
l
Source: Primary data of one of the leading private hospitals in Chennai.
The above table shows the price of various Diagnosing
Machineries. Most of the machineries are imported from foreign countries,
which totals to around Rs. 6,69,50,000 crores (with out taxes, duties and
maintenance charges) . These machines are bought through loans, so the
authority has to pay the interest to the banks.
Supply side also faces the burden for their investments of
machineries, equipments, building expenses, import drugs, monthly
maintenance charges, surgeon’s fees,etc so these expenses are charged from
the patients.
In this supply of health services act as a price elasticity ; Depending
upon the price increase the supply of health services also increase, they
provide better health care, hospitality, etc.,
FIGURE: 2 PRICE ELASTICITY SUPPLY OF HEART DISEASE
TREATMENT IN THE PRIVATE HOSPITAL

S1

P2
P
Price
P1

O
S1 S S2
Supply of Heart diseases Treatment in Private Hospital
Diagrammatic Explanation

 In the Diagram ‘OX’ axis represent heart disease treatment in the

private hospitals
 ‘OY’ axis represent the cost or price of the treatment
 ‘SS’ refers supply curve of the Heart Disease Treatment.
 The diagram shows that when the price of heart disease treatment
or surgery comes down from Rs. 3,00,000 (P) to Rs. 2,80,000 (P1)
the supply of health care is comparatively lesser than before, when
the price of treatment increases up to Rs.8,00,000 (P2) the supply
will be higher. This changes will happen within the premises of
hospitals at the same time, depending upon the class.
 Price elasticity of supply it refers to the situation when any change
in price, supply will differ according to change in the price.

Price elasticity of supply is when a small change in price leads

to a big change in supply. It is called the elastic supply. It can be explained
with the help of a diagram, The price of the treatment increase from general
ward patients to deluxe ward patients, the cost will vary between person to
person depending on the price the supply of health care service is also
increased.
 DEMAND AND SUPPLY OF HEART DISEASE TREATMENT

In the health service market, supplier of health

services are medical institutions and demanders are the patient , the demand
of this product will differ from Economic market, it is demanded when the
patient has a disease. Three fourths of the Middle income Groups approach
Private Hospitals because of the Quality of Treatment, at the same time they
are charged at a sky- scraping prices for their treatment. Here price is fixed
by the supplier, the supplier follows monopoly Price, they fix the price
according to the capacity of the patients. ( Operation charges will be the
same for all the patients, other health care facilities will vary depending on
the price)
FIGURE: 3 DEMAND AND SUPPLY OF HEART DISEASE
TREATMENT IN PRIVATE HOSPITAL

Y
D1
S1

Price

O D X
Quantity Demand and supply of Health Services
Diagrammatic Explanation:
 ‘OX’ axis represents Quantity of Heart Disease services
 ‘OY’ axis represents price of the Heart Disease Treatment
 ‘DD1’ refers the Inelastic demand of Heart Disease Treatment
 ‘SS1’ represents the Elastic supply of Heart care services.
 ‘P’ represents price of the Treatment.
 The Diagram shows that when the price is increasing or decreasing
the supply will change accordingly, Demand and Supply will be in
equilibrium when the price is equal at the point ‘P’ where the demand
and supply intersect.
 It clearly shows that the Demand will increase when the patients are in
need of health care, no matter whether the price increase or decrease.
So there is no relationship between price and Demand of Heart
Disease but the financial consequences relating to health care
expenses will carry on throughout their entire life.
 Supply and price is closely related in the Health service Market.
Demand And Supply of treatment makes one Better-off and other
Worse-off, it determines the Price of the health Services. Demander’s face
the Economic Burden of Getting the Service but a Supplier earns Profit to
Provide the Service.

COST-EFFECTIVE ANALYSES OF THE TREATMENT

Cost – benefit analysis, in which both costs and benefits are
expressed in the same units (such as Rupees ), and cost- effectiveness
analysis, in which the costs are commonly expressed in monetary terms
while the effectiveness is expressed in terms of the health benefit.
 Effective of this heart disease treatments in private hospitals are
better one for the high income groups as well as the middle income groups.
According to developing country like India, peoples per capita income is
comparatively lesser with other countries, even the developed countries are
facing the burden for this heart disease treatment, then what will be the
condition of the developing ones with huge heart diseases.

Calculations Of Cost-Effective Treatment of Heart

Diseases

Cost new – Cost old

Effect New- Effect Old

12,000-2,50,000 -2,38,000
15,000-12,000 = 3000

= -76.6

Source: Braunwald, “Heart disease A Text Book of Cardiovascular

Medicine” Indian Edition, 7th edition, Saunders An imprint of Elsevier, pg:
20

Post surgery Medical Expenses (cost new) = Rs. 12,000/-

Surgery Period Expenses (cost old) = Rs. 2,50,000/-
Pre surgery period Income of the patient (Effect old) = Rs. 15,00/-
Post- Surgery Period Income of the Patient (Effect new) = Rs. 12,000/-

Cost- Effective Treatment of Heart Disease is – 76.6

 Practically Speaking Cost is effective for this heart disease treatment
in private hospitals, the outcome of the cost is satisfactory by the patients
and it gives them a new life, but the efficiency on physical activities come
down so the Calculated Cost Effective Treatment of Heart Disease Shows
Negative Points (-76.6). That is after the surgery, patients are unable to do
hard work physically and mentally. Most of the patients are shifted
alternative jobs which has less strain and 40% of the people are take
voluntarily retirement.
Comparing the cost –effectiveness with the treatments, it
makes them feel very expensive for both the categories of income groups.
Here High income groups can be referred as ‘ A’ and Middle income groups
can be referred as ‘ B’ . Price of the treatments are fixed by the private
hospitals it varies depending upon the class of the private hospitals and their
patients willingness to pay (separate room and special care)
Small change in the cost of the treatment will adversely affect the
huge part of the financial condition of the middle income person that is
category ‘B’ whereas in the high income groups their financial capacity is
affected at a low level. Comparatively, Category ‘B’ is facing the Economic
burden for treating heart disease in the private hospitals than category ‘A’.
So Middle Income Groups are Facing the Economic Burden Of Treating
Heart Disease In the Private Hospitals.
To conclude cost effective of heart disease treatment in private
hospitals are accepted by the patients. It clearly shows that too much of
demand in private hospitals when the prices are increased or not, the
demand is same and on the other hand it is a burden to all section of the
people, it makes improvement in the physical part of the body but it brings
down the financial future development of the patients.
 ECONOMIC FLUCTUATIONS OF POST SURGERY PERIOD OF
THE PATIENT

40 37
35
30 28
26
25
20
15 11
10
5
0
Same Decline d Vo lunta ry Nil
Salary Income Re tiremen t

Source: Primary Data

Inference:

The above Chart Clearly shows that 37% heart patients are
earning the Same salary after their surgery and treatment. (it include a both
surgery as well as medicines taker) For 28% People salaries have declined
after their Surgery. 11% Heart Patients have taken Voluntarily Retirement
From their Jobs, and 26% of heart Patients quit their jobs after their
Surgery .
It Concludes that After their Surgery Most of the people do not work
efficiently than Before. So Cost- Effective is comparatively lesser than
other Disease.
Conclusion
 Economic Burden of Heart Patients and Decline of
Patients income make fluctuations in the Percapita income of a group of
people, Contribution of GNP has declined by these heart Patients, so it
drastically changes the state as well as the country’s Economy.
To avoid this Economic Burden of Treating Heart Disease in the Private
Hospitals, Government has to provide Better Quality of Treatment in their
Hospitals, Every individual has to take the health Insurance scheme to avoid
the Monetary burden at the time of Hospital Expenses. These burdens can
be reduced by the medical insurance, but most of the people are not aware
of the med claim or medical insurance, it covered more than half of the
money spend for their treatment, it also reduced the economic burden of the
patients and their family.

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REPORTS

1. Global Report, “Innovative Care For Chronic Conditions, Building

Blocks For Action”

2. WHO, Preventing Chronic Diseases a Vital Investment

3. World Health Statistics(2006), World Health Organisation Report

WEBSITES

1. www.thecardioblog.com
2. www.lifeheart.com
3. www.pubmed.com
4. www.medicinenet.com
5. www.healthline.com
6. www.medkez.com
7. www.heart.bmj.com
8. www.thelancet.com
9. www.google.com
10.www.hsph.harvard.edu.com

NEWS PAPER

1. Times Of India 4-7-2008 (Fri) pg: 4