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Decision Making in Health and Social Care - Case Study Example

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The paper "Decision Making in Health and Social Care" discusses that the most debated efficiency criterion with regard to prioritizing CEA in a health care environment is based on the vertical equity principle, i.e. whether do those who need medical care the most…
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Decision Making in Health and Social Care
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Download file to see previous pages Consumer sovereignty principle illustrates the fact that in a free market economy the consumer is free to consume what he wants. However, the consumer’s sovereignty does not have meaning if he/she is unable to buy what he/she wants. This paradox is solved through government intervention in the provision of those merit goods such as health care and education. On the other hand, agency theory indicates that conflicts between principals (e.g. shareholders or owners) and agents (e.g. managers) occur as a result of the latter misrepresenting facts and misinterpreting information so that resources can be diverted to uses which they regard as more lucrative. Since principals cannot themselves carry out the task of managing the business paid mangers are hired to carry it out. Thus there is an information failure and asymmetry in its distribution. This means agents have more information than principals about the nature and the extent of risk of an investment. Therefore it’s imperative for principals to put in place a monitoring mechanism so that agents’ responsibility to principals’ would be ensured. However again there is the problem associated costs in monitoring. In order to reduce such monitoring costs, the relationship or bonding between principals and agents can be more effectively carried out by implementing organizational structures that support positive outcomes (Jensen and Meckling, 1976).
In the health and social care industry, this becomes more complex because insurance companies come into the picture as a third party. If, as the above explanation to the principals versus agents theory shows, agents behave in a manner that reduces transparency and increases the risk to the principals or shareholders what would be the alternative in caring for those who are uninsured or lack adequate funds for health care? In a health care organization, this is apparently the relationship between the hospital staff including paid managers and the shareholders. ...Download file to see next pagesRead More
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