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The medical specialty concerned with the physiology of blood. Also 'hematology'.

Halo Effect

The effect on recorded observations of the observer's perceptions of aspects that are not part of the study. Not the same as placebo effect.


Disadvantages experienced by the individual arising from impairment or disability. The extent of handicap may be conditional on environment (for example, the nature of work) and may include general deleterious effects on the quality of life.

The Harvard Center for Risk Analysis CUA Database/CEA Registry

The Center maintains a catalogue of cost-per-QALY results scores obtained from published cost-utility and cost-effectiveness analyses. Its website is at www.hsph.harvard.edu/cearegistry/.

Hawthorne Effect

An improvement in productivity due to its observation. The effect was first noticed in the Hawthorne plant of Western Electric in Cicero, Illinois, where production increased, not as a consequence of actual changes in working conditions, but because there was a Harvard research team taking an active interest in working conditions in the plant and management was taking an interest. A type of confounding factor in experiments and trials that may lead to bias. The term is now used for any situation where the behaviour of the

148 Hazard subjects being studied may be affected by the fact of their being studied. Also known as 'attention bias'.


The probability of occurrence of an outcome: an estimate of the number of people experiencing the outcome divided by an estimate of the number at risk.

Hazard Function

Closely related to the survival curve, it shows the risk of dying in a very short time interval after a given time (assuming survival to that point).

Hazard Ratio

Same as relative risk.

Acronym for Health Benefit Group.


Acronym for Health Care Financing Administration. Health

According to the World Health Organization's charter, this is a state of complete physical, mental and social well-being and not merely the absence of disease or infirmity. Less star-gazing notions are usually embodied in practical work (including that of the WHO). See Assessment Quality of Life, Disability-adjusted Life-year, EQ-5D, Health Gain, Health Status, Health Utilities Index, Healthy Years Equivalent, Quality-adjusted Life-year, SF-6D, SF-8, SF-12, SF-36.

Health Care Financing 149

Health Benefit Groups

Health Benefit Groups are standard groupings of people who are expected to need similar health care interventions and to derive similar benefits from their treatment. HBGs focus on those at risk from a particular health condition or disease and on people with acute or continuing long-term needs. They are being developed to complement Healthcare Resource Groups (HRGs) in the National Health Service in England. The objective is to provide the NHS with a standardized presentation of relative needs for health care resources.

Health Benefit Plan

Any programme of directly provided health services or indemnification of medical expenses offered by service providers or third-party payers, such as a health insurance policy, a health maintenance organization, preferred provider organization, health service contract sponsor, or an approved employee welfare benefit plan. The term does not usually include medical coverage under workers' compensation or motor insurance.

Health Care

Goods and services provided to promote health, or prevent, alleviate or eliminate ill-health. Sometimes 'healthcare'.

Health Care Expenditures

Same as expenditures on health care.

Health Care Financing

Health care is typically financed from a number of sources in any jurisdiction, though the proportions vary greatly from one to another. The usual sources are direct and indirect taxes (including taxes on employers and employees and special taxes designated or earmarked for health care), social insurance contributions, private insurance premiums and direct payments for care (paid by patients or third party payers).

150 Health Care Financing Administration Health Care Financing Administration

The US federal body formerly responsible for the Medicare and Medicaid programmes. Now termed The Centers for Medicare & Medicaid Services. Its web address is www.cms.hhs.gov/default.asp?

Health Care Savings Account

Same as medical savings account.

Health Care Systems

Systems for financing and providing health care vary substantially across jurisdictions. They are commonly classified (by first-world writers) into four (not very well differentiated) types: sickness insurance (private insurance and care provision with often large public subsidies and governmental regulation, as in Austria, Belgium, France, Germany, Luxembourg and The Netherlands); national health insurance (public insurance with premiums either separate or embodied in the tax structure and mixtures of public and private provision, as in Canada, Finland, Norway, Spain or Sweden); national health services (public insurance mostly via the tax structure and mostly public provision, as in Denmark, Greece, Italy, New Zealand, Portugal, Turkey and the UK); mixed systems (having the foregoing in varying mixes, as in Australia, Iceland, Ireland, Japan, Switzerland and the USA). Some would dispute that the latter group (especially the USA) classifies as a 'system'. The greater part of humankind in the world does not live under any kind of health care 'system'.

Health Economic Database

HEED is a database of some 28 000 articles that are or purport to be economic appraisals of health care technologies. It covers 4500 journals and is produced by the Office of Health Economics. Its website is at www.ohe-heed.com.

Health Economics

The application of economic theory to phenomena and problems associated with health. Topics include, among others, the meaning and measurement of

Health Frontier 151

health status, the production of health and health services, the demand for health and demand for health services, cost-effectiveness and cost-benefit analysis in the health territory, health insurance, the analysis of markets for health services, health service financing, disease costing, option appraisal in health services, manpower planning, the economics of medical supply industries, equity and the determinants of inequalities in health and health care utilization, hospital economics, health care budgeting, territorial resource allocation, methods of remuneration of medical personnel, and economics of comparative health systems. See Williams' Schematic of Health Economics.

Health Economists' Study Group

The oldest of the professional associations for health economists, it celebrated its 25th anniversary in 1997. Its website is at: www.city.ac.uk/ economics/research/HESG.htm.

Health Expenditures

See Expenditures on Health Care.

Health Frontier

A locus of the maximum health (or gain in health) possible for two or more individuals when resources and technology are given but the resources going to each individual may be varied. Cf. Production Possibilities Curve.

Health of person A

Health frontier

Health frontier

Unattainable combinations beyond the frontier

Health of person B

152 Health Gain

Health Gain

An increase in the health of an individual or a population.

Health Human Resource Planning

See Manpower Planning.

Health Impact Assessment

An approach to health service planning through which any policy, programme or project is judged in terms of its potential effects on the health of a population, the distribution of the health effects across the population and the steps that could be taken to enhance desired and reduce undesired consequences.

Health Indemnity Plan

Health insurance that reimburses the insured person retrospectively after paying their own medical expenses, minus any deductible or copayment.

Health Insurance

An arrangement by which the insurer pays contingent sums of money to the insured person or their service provider according to the terms of the insurance policy. A more accurate term would be 'health care insurance'.

See Insurance.

Health Maintenance Organization

An HMO is a group of US health care providers which offers an agreed comprehensive package of care to a subscriber for a prepaid premium. They are a species of managed care plan. There is a great variety of forms of HMO organization and great variety in the form of remuneration for physicians, but two broad types of HMO are approved by the US Health Maintenance Organization Act. One is the closed panel HMO. Under this type, the HMO employs a group of medical professionals at a central location or contracts

Health Technology 153

with a medical group to provide services exclusively for the HMO's members. Tight control of medical services is maintained because of the close affiliation between the employer HMO and its medical personnel. The other type is the Independent Practice Association. See also Preferred Provider Organization.

Health-related Quality of Life

See Assessment Quality of Life, Disability-adjusted Life-year, EQ-5D, Health, Health Gain, Health Status, Health Utilities Index, Healthy Year Equivalents, Quality-adjusted Life-year, SF-6D, SF-8, SF-12, SF-36.

Health Services/Technology Assessment Text

An internet search facility operated by the National Center for Biotechnology Information (NCBI) of the US National Library of Medicine (which is located at the National Institutes of Health in Bethesda, Maryland). The texts are books or reports.

Health Status

The measurement, via some form of utility measure, made up from attributes of a person's or group's state of health. Normally measured with respect to activities of daily living such as freedom from pain, anxiety, ability to feed, dress oneself. See Assessment Quality of Life, Disability-adjusted Life-year, EQ-5D, EuroQol, Health, Health Gain, Health Status, Health Utilities Index, Healthy Year Equivalents, Quality-adjusted Life-year, SF-6D, SF-8, SF-12, SF-36.

Health Technology

A widely used term conventionally relating to the ways in which health services can promote health or prevent/postpone ill-health. The 'ways' in question are in principle very broad and may, for example, extend well beyond the practice of medicine, for instance to embrace managerial arrangements, though it is more common for a narrower range of technologies to be embraced, even as narrow as drugs. Because we lack a suitable term for technologies that this narrow interpretation would exclude, it seems desirable

154 Health Technology Assessment to see its scope as even wider, to treat anything as a 'health technology' which promoted health or prevented ill-health, regardless of whether it was conventionally located in 'health services' conventionally understood.

Health Technology Assessment

Health technology assessment (HTA) usually addresses the following questions. Does the technology in question work? For whom does it work? How well does it work? At what cost does it work? How does it compare with other technologies deemed to be suitable comparators?

Health Technology Board for Scotland

The function of the HTBS is to perform original health technology appraisals for the Scottish National Health Service. These appraisals embody evidence on cost-effectiveness as well as clinical effectiveness. The Board works in conjunction with the National Institute for Health and Clinical Excellence and, for example, generally adopts NICE recommendations unless particular conditions in Scotland indicate otherwise.

Health Utilities Group

HUG is a group of Canadian economists and decision theorists who have developed the Health Utilities Index. Their website is at: www.fhs.mcmaster.ca/ hug/.

Health Utilities Index

The Health Utilities Index (HUI®) is a generic, preference-scored, comprehensive system for measuring health status and health-related quality of life, and producing utility scores. It is sponsored by (and was essentially created by members of) the Health Utilities Group (HUG), which focuses on preference-based measures of health-related quality of life for describing treatment process and outcomes in clinical studies, for population health studies and economic evaluations of health care services. There are three versions of the Index: HUI Markl (HUI1), HUI Mark2 (HUI2), and HUI Mark3 (HUI3). HUI2 has seven 'attributes': Sensation on a scale of 1-4, Mobility (1-5) Emotion (1-5), Cognition (1-4), Self-care (1-4), Pain (1-5) and Fertility

Healthy Years Equivalent 155

(1-3). HUG's website is at: www.fhs.mcmaster.ca/hug/. Cf. Assessment Quality of Life, Disability-adjusted Life-year, EQ-5D, EuroQol, Health Gain, Health Status, Healthy Year Equivalents, Quality-adjusted Life-year, SF-6D, SF-8, SF-12, SF-36.

Healthcare Resource Groups

Healthcare Resource Groups (HRGs) are standard groupings of clinically similar treatments, which use common levels of health care resource in the National Health Service of England. They are intended to enable case-mix adjusted comparisons between institutions and underpin the national schedule of reference costs. They have also been used in setting targets for providers to reach. Cf. the US predecessor, Diagnostic Related Group.

Healthy Entrant Effect

A source of possible bias in clinical trials whereby the health outcome of the treatment under investigation is better than would be expected in the general population (or the population at risk) on account of the trial's subjects being healthier than average at the beginning of the trial.

Healthy Worker Effect

Workers generally experience lower mortality rates and better health than the general population on account of the fact that those who are severely ill or disabled are not usually in employment. This is the original 'healthy worker effect', but it applies to any subgroup from which those at relatively high risk of death or ill-health are excluded. Any sample based on the subgroup would give a biased picture of the general population from which it was drawn, unless this effect were compensated for.

Healthy Years Equivalent

The number of years of perfect health followed by instantaneous death that has the same utility as a profile of actual health states over an expected lifetime. The experimental method used to derive preference-based values of health states for use in cost-effectiveness and cost-utility analyses employs both the standard gamble and the time trade-off methods. The HYE was

156 HeaLY

invented in order to overcome disquiet over some of the assumptions needed to base quality-adjusted life-years on individual preferences. In particular, HYEs do not depend on 'adding up' QALYs ascribed to periods within an overall period of time (such as a lifetime); they depend instead on an individual's ability to ascribe a health value to the profile of health states across the whole time period. Cf. Assessment Quality of Life, Disability-adjusted Life-year, EuroQol, EQ-5D, Health Gain, Health Status, Health Utilities Index, HeaLY, Quality-adjusted Life-year, SF-6D, SF-8, SF-12, SF-36.


The healthy life year (HeaLY) is a composite measure of health loss that combines the amount of healthy life lost owing to morbidity, plus that attributed to premature mortality. Cf. Assessment Quality of Life, Disability-adjusted Life-year, EuroQol, EQ-5D, Health Gain, Health Status, Health Utilities Index, Healthy Years Equivalent, Quality-adjusted Life-year, SF-6D, SF-8, SF-12, SF-36.

Heckit Model

A two-step estimator designed to deal with sample selection bias. Cf. the Tobit model, which is designed to deal with estimation bias associated with censoring. See James Heckman (1979), 'Sample selection bias as a specification error', Econometrica, 47, 153-61.

Hedonic Prices

These are prices calculated on the basis that the value attached to any good is a function of its characteristics, both inherent (such as colour, quality) and external (such as location and environment). The hedonic prices are computed by regression techniques and indicate the price of a marginal change in one of the characteristics or the addition of another characteristic, ceteris paribus. They are commonly used in economic studies of the quality of goods and services or to adjust for changes in quality over time when calculating price indices.

Herfindahl Index 157


See Health Economic Database.

Herd Immunity

The protection offered by vaccines is rarely 100 per cent. Any vaccine will be more effective at the population level if more people have been vaccinated because some diseases may be able to jump from a vaccinated person to a person who has not been vaccinated but is unlikely to jump from one vaccinated person to another who has been vaccinated. Empirically, when a particular percentage of a population is vaccinated, the spread of the disease is effectively stopped. This critical percentage varies according to the disease, the interactions between members of the population, and the vaccine, but 90 per cent is not uncommon. This is herd immunity: the fact that others in the herd or population have been vaccinated provides protection to all others, whether or not vaccinated themselves. An obvious implication is that 100 per cent vaccination is not normally a technically necessary target to obtain effective 100 per cent population protection. Of course, a cost-effective rate of vaccination will normally be even less than this, depending on the social value of the marginal reduction in risk and the cost of increasing vaccination from a lower to a higher percentage (but still lower than the herd immunity level) of the population at risk. The marginal costs of increasing vaccination rates may rise quite sharply as one seeks to immunize groups who are reluctant (for a variety of reasons, including religious objections, fear of the needle, imaginary risks, lack of contact with health care services, ignorance).

Herfindahl Index

The Herfindahl index is a measure of the degree to which an industry is concentrated. The formula for the index (H) is:

where fn is the market share of the nth firm. It has a maximum value of 1002 = 10 000 (which indicates a monopoly) and a minimum value of zero. It is sometimes also termed the Herfindahl-Hirschmann Index. See Concentration Ratio.

158 Herfindahl-Hirschmann Index

Herfindahl-Hirschmann Index

Abbreviated to HHI. See Concentration Ratio, Herfindahl Index.

Acronym for hospital episode statistics.


An entity is heterogeneous when there is variance in a relevant characteristic of an entity (note the four 'e's in this word). Cf. Homogeneous.


It is usually assumed in regression analysis (for example, ordinary least squares) that the error term has a constant variance. This will be true if the observations of the error term are assumed to be drawn from identical distributions. But if the error terms were not all to have the same variance, this assumption would be invalidated and there would be heteroskedasticity. Also appears as 'heteroscedasticity'. Its converse is 'homoskedasticity'.


Assisting in the process of learning or understanding. It is both noun and adjective.

Acronym for Herfindahl-Hirschmann index.

Acronym for health impact assessment.

Hierarchical Choice

Histology 159

A statistical procedure for deriving utilities in conjoint analysis. Hierarchical Data

Data that are organized in classes, with subclasses beneath them and possibly further subdivisions of the subclasses.

Hierarchy of Evidence

A procedure for labelling the strength of the evidence in support of the use of drugs and other medical products and procedures. It is widely used in systematic reviews. A ranking might be as follows:

1. Evidence from at least one properly designed randomized controlled trial.

2. Evidence from several well-designed controlled trials but without randomization.

3. Evidence from several well-designed case-control studies by different authors.

4. Evidence from observational studies, time-series or uncontrolled experiments.

5. Expert opinion.


A diagram consisting of (usually) vertical bars whose area is proportional to the relative frequency of the observations within the bounds of each bar. When each bar has the same width, the height is proportional to the frequency. Cf. Bar Chart.


The study of the structure of cells and tissues. It usually involves the microscopic examination of tissue sections. For example, the histology of a tumour is determined by a biopsy of it which is examined under a microscope.

160 Historical Controls

Historical Controls

Patients who are not assigned to an arm of a clinical trial at its start but who received treatment at some time previously and are used as a comparison group.

Acronym for Health Maintenance Organization. Holding Gain

The increase over time in the value of an asset merely by continuing to own it.


A rate of reimbursement by a purchaser at which the provider receives the lowest rate they are willing to accept to provide a service but which provides no incentive to invest. See Purchaser-provider Split.


An entity is homogeneous when there is a lack of variance in a relevant characteristic of an entity. (Note the second 'e' in this word.) The opposite of heterogeneous.


This exists when the variance of the error term is constant across observations. The homogeneity of variance. Cf. Heteroskedasticity.


This is a property mainly used (in economics) when utility or production functions have a constant slope of the isoquants along any expansion path.

Hospital Behaviour 161

Horizontal Equity

Treating equally those who are equal in some morally relevant sense. Commonly met horizontal equity principles include 'equal treatment for equal need' and 'equal treatment for equal deservingness'. Cf. Vertical Equity. See Equity.

Hospital Behaviour

Theories of the behaviour of hospitals as institutions generally take their nonprofit status as given (see Hospital Economics) and then explore models and their comparative statics for purposes of explanation and prediction. Despite the potentially complex interactions between the Chief Executive Officer, the Board (of 'trustees') and senior clinical staff, it is generally assumed that 'the hospital' can be characterized as an individual and that it maximizes a utility function defined over entities such as quantity of service, quality and net income. This function is maximized subject to a budget constraint and to a condition that the net residual ('profit') be zero, so that average cost = average revenue and there may be elements of X-inefficiency as decision makers work to ensure that average cost is sufficiently high for the purpose: the hospital is, to some extent, a 'conspicuous producer', using prestigious technologies that are not efficient from a societal perspective (for some people this may, of course, be an indicator of 'quality'). The limiting case when doctors' incomes are the only argument in the utility function produces a theory in which the hospital is assumed to maximize net revenue per (already on the staff roll) doctor.

Where there is competition in the market for hospital services, one predicts that all these utility-maximizing models tend to converge on the general profit-maximizing model of the firm, even though the ownership (shares) of the hospital is not tradable in capital markets. This is expected partly because price competition will drive out hospitals (or hospital managements) that inflate costs in order to generate sources of utility for management and partly because new entrants (if there are no significant barriers to entry) will tend to cause prices in established institutions to fall and income residuals, whether for spending on on-the-job or take-home sources of utility, will fall. In fact, there is a secular trend in the USA for non-profit hospitals to convert to forprofit status and, in other jurisdictions, private sector providers (whether for profit or non-profit) are increasingly being allowed to compete with public sector hospitals for contracts to provide services for publicly insured patients.

Empirically, it is hard to detect differences that would enable one to discriminate between these rival theories. This is particularly so in markets

162 Hospital Costs where competition is limited, where third party payers have considerable influence on case loads, case-mix and reimbursement rates, and where exit barriers may be strong. See Hospital Costs, Hospital Economics.

Hospital Costs

Hospital cost analysis has been mainly concerned with the use of routine data either to explain apparent differences in unit costs or to inform decisions about what the appropriate 'allowances' might be to compensate hospitals for 'teaching' or 'research'. All studies are beset with the problem of coping with varying degrees of technical inefficiency and X-inefficiency (as when hospitals are not located on isoquants), varying degrees of 'difficulty' of patient cases and dating of the end-point at which the health output is assessed (which is often after discharge from hospital), differences in case-mix, and imperfect specification of outputs which leads to problems of omitted variable bias. The literature is highly technical and considerable imagination is given to the solution of these and other difficulties. While carefully conducted econometric analysis of hospital costs can be of great value in practical decision making, to use it well requires sophistication and the ability to integrate it into a wider understanding of the hospital world.

The classic tour de force in this territory is undoubtedly Martin Feldstein (1967), Economic Analysis for Health Service Efficiency: Econometric Studies of the British National Health Service, Amsterdam: North-Holland.

Hospital Economics

Hospitals are characteristically (though not invariably) non-profit institutions which are often also registered charities (or have a similar status). The essential characteristic of a non-profit institution is that its owners (usually either 'trustees' when the hospital is privately owned, or publicly appointed nonexecutive directors when publicly owned) do not have the right to any residual profit, which may not be taken out of the business. Charitable status also grants them exemption from many of the obligations of for-profit organizations, including exemption from corporation tax. These (together with some other) characteristics give rise to the special treatment of hospitals in economics. A puzzle that arises is why this form of organization is so common, whether the hospital be privately owned non-profit (where the owners are effectively the trustees) or publicly owned non-profit (where the owner is a government). Embarrassingly there is no good answer to this question (in economics). Most attempts run along the lines that hospitals are there to

Hospital Economics 163

internalize marginal (Pareto-relevant) externalities and produce services that have in many respects the character of public goods. However, while this suggests that hospitals (of any kind) are likely to underproduce without special incentives, it scarcely explains why (or justifies why) they should be publicly owned or be charitable, as distinct from being in receipt of a public subsidy in return for providing services of a kind and on a scale they would not otherwise choose.

Another explanation rests on the assertion that non-profit organizations are more trustworthy than for-profits. Yet other explanations arise from the historic context in which most hospitals began (as charitable foundations for the poor sick) but which then gradually became centres of expertise as medical science progressed, eventually becoming centres for the treatment of all without, however, having shed their legal status.

Besides the for-profit/non-profit issue there is the public/private issue. Why are hospitals such popular targets for being publicly owned? There exist popular beliefs that public ownership is somehow more efficient than private, or that public ownership in the specific case of medical care is more efficient than private (which is hard to pin down theoretically, desperately difficult to nail empirically and whose advocates - this is largely a world of advocacy rather than analysis - seem less concerned with primary care (general practitioners are almost universally private in all systems) than with secondary. Other explanations are managerial in nature, to the effect that it is easier (cheaper) to manage hospitals in accordance with a set of public objectives if they are directly line-managed from the 'ministry' than if they were private institutions under contract to the same ministry. Again the theory is unclear and the evidence is absent (which is not, of course, the same as saying the evidence exists and it supports the private production plus public subsidy argument).

One set of reasons for the evidence being so difficult to obtain in this area, in addition to the absence of any coherent theory, is that (a) there is a huge variance in the performance of hospitals (however judged) within the nonprofit groups (and within the public or charitable sectors) as well as across them; (b) hospitals produce multiple outputs that are easy to oversimplify (for example, 'deaths and discharges' - as though the difference did not matter) but difficult to summarize in ways that are conducive to quantitative analysis; (c) hospitals also produce widely differing mixes of these outputs (notably varying in their case-mix); (d) hospitals are presented with human cases of widely varying 'difficulty' (in both diagnosis and treatment); and (e) hospitals also have a widely varying perceived 'quality' independently of the goodness of their clinical outcomes. In quantitative analysis it is consequently very easy to fall foul of the problem of omitted variable bias.

Amongst the more plausible partial theories of hospitals in economics is a theory that builds on the descriptive historical account alluded to above and

164 Hospital Episode Statistics sees them essentially as doctors' workshops. This approach utilizes a version of interest group theory in which being able to admit patients to hospital became a powerful right through which doctors increasingly acquired control over hospitals and, in particular, over other doctors and any threat their behaviour might constitute by way of impediment to the private practice of medicine. The non-profit mode suits this interest group by ensuring the dominance of their interests over those of shareholders. The public acquiesce in this arrangement partly because of asymmetry of information and partly because, unlike the doctors, they are diffuse and disorganized. See Hospital Behaviour, Hospital Costs.

Hospital Episode Statistics

Hospital episode statistics (HES) provide information on admitted patient care delivered by National Health Service (NHS) hospitals in England from 1989. This is used to provide wide-ranging analysis for the National Health Service, government and other organizations and individuals. The HES database is a record-level database of hospital admissions and is currently populated by taking an annual snapshot of a subset of the data submitted by NHS trusts. Quarterly information is also collected. A separate database table is held for each financial year containing approximately 11 million admitted patient records from all NHS trusts in England.

Hospital Separation

A discharge from hospital (alive or dead).


Usually defined (pragmatically) as a single person living alone or a family group voluntarily living together, having meals together and having housekeeping shared in common.

Acronym for Healthcare Resource Group.

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