ACCA Applied Skills · Performance Management · Specific performance analysis issues in not-for-profit organisations and the public sector
A public sector hospital is assessing its performance using the '3Es' framework. Which of the following measures best represents economy?
Economy means obtaining inputs of the required quality at the lowest possible cost, so buying medical supplies at the lowest price consistent with quality is the economy measure. Output per input is efficiency, and outcomes such as recovery rates measure effectiveness.
- ACost per patient treated compared with the budgeted cost per patient
- BPurchasing medical supplies at the lowest price consistent with the required qualityCorrect
- CNumber of patients treated per nurse per month
- DPercentage of patients reporting a full recovery after treatment
Explanation
Economy concerns acquiring inputs at the lowest cost for the appropriate quality. Patients treated per nurse measures efficiency (output per input), and recovery rates measure effectiveness (achievement of objectives). Cost per patient against budget mixes input cost and output and is a general efficiency measure, so it is not the best example of economy.
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