Cost-Benefit Analysis in the Healthcare Sector Lecture No 55 Chapter 16 Contemporary Engineering Economics Copyright © 2016 th Contemporary Engineering Economics, edition Park Copyright © 2016 by Pearson Education, Inc All Rights Reserved Cost-Effectiveness Analysis in Healthcare • What constitutes a cost? o o o • Direct cost Indirect cost Intangibles What constitutes a health effect? o o Years of life saved (gained) Quality of life improved • Cost-effectiveness ratio • Discounting – All cost items in the future are discounted th Contemporary Engineering Economics, edition Park Copyright © 2016 by Pearson Education, Inc All Rights Reserved How to Use a CEA? • Independent interventions – Cost-effectiveness ratios be calculated for each program and placed in rank order Select all the programs as long as the budget permits • Mutually exclusive interventions – Incremental cost-effectiveness ratios (ΔCERs) should be used to make the selection th Contemporary Engineering Economics, edition Park Copyright © 2016 by Pearson Education, Inc All Rights Reserved Example 16.1: Cost-Effectiveness for Independent Interventions Given: Cost and health effect for three drug-intervention programs Find: Which project to fund as a function of available budget? th Contemporary Engineering Economics, edition Park Copyright © 2016 by Pearson Education, Inc All Rights Reserved Solution Click Click to to edit edit Master Master text text styles styles th Contemporary Engineering Economics, edition Park Copyright © 2016 by Pearson Education, Inc All Rights Reserved Example 16.2: Mutually Exclusive Intervention Programs Given: Five drug intervention programs Find: Incremental CER and which program to fund out of five programs th Contemporary Engineering Economics, edition Park Copyright © 2016 by Pearson Education, Inc All Rights Reserved Incremental Analysis • P1 versus “do-nothing” • P1 versus P2 – • Select P2 P2 versus P3 – No dominance th Contemporary Engineering Economics, edition Park Copyright © 2016 by Pearson Education, Inc All Rights Reserved (continued) • P4 versus P3 – • P2 versus P4 – • Select P4 Select P4 P4 versus P5 – No dominance th Contemporary Engineering Economics, edition Park Copyright © 2016 by Pearson Education, Inc All Rights Reserved Remaining Mutually Exclusive Alternatives After Eliminating All Dominated Programs If the available budget is $140,000, all patients should receive intervention P4 If the available budget is $170,000, all patients should receive the more effective P5 If the budget is $150,000, 2/3 patients receive P4 and 1/3 receive P5 th Contemporary Engineering Economics, edition Park Copyright © 2016 by Pearson Education, Inc All Rights Reserved Cost-Effectiveness Diagram: Life Years Gained th Contemporary Engineering Economics, edition Park Copyright © 2016 by Pearson Education, Inc All Rights Reserved .. .Cost- Effectiveness Analysis in Healthcare • What constitutes a cost? o o o • Direct cost Indirect cost Intangibles What constitutes a health effect? o o Years of life saved (gained) Quality... dominance th Contemporary Engineering Economics, edition Park Copyright © 2016 by Pearson Education, Inc All Rights Reserved Remaining Mutually Exclusive Alternatives After Eliminating All Dominated... improved • Cost- effectiveness ratio • Discounting – All cost items in the future are discounted th Contemporary Engineering Economics, edition Park Copyright © 2016 by Pearson Education, Inc All