Week 4:
Economic Evaluation Methods in
Healthcare
Definition of Economic Evaluation
Economic Evaluation: A systematic approach to comparing the
costs and outcomes of two or more healthcare interventions.
o Key Elements: Costs (inputs) and consequences (outputs).
o Purpose: Inform resource allocation decisions to maximize
health benefits within budget constraints.
Example: Comparing two smoking cessation programs based
on the cost per smoker who successfully quits.
Types of Economic Evaluation
Cost-Minimization Analysis (CMA):
oFocus: Identify the least costly option when outcomes
are the same.
oExample: Comparing the cost of two generic drugs with
identical efficacy.
Cost-Effectiveness Analysis (CEA):
Focus: Cost per unit of a specific health outcome (e.g.,
cost per life saved). Example: Evaluating a new vaccine by
Types of Economic Evaluation
Cost-Utility Analysis (CUA):
o Focus: Measures outcomes in terms of quality-
adjusted life years (QALYs). Example: Comparing cancer
treatment A with B, using QALYs gained to account for
life expectancy and quality of life.
Cost-Benefit Analysis (CBA):
o Focus: Both costs and outcomes are expressed in
monetary terms. Example: Estimating the net
Steps in Economic Evaluation
Define the Problem:
oIdentify the health issue and interventions to address
it.
oExample: Reducing hospital readmissions for diabetic
patients.
Identify Alternatives:
oInclude all feasible options for comparison.
oExample: Telehealth follow-ups vs. in-person visits.
Steps in Economic Evaluation
Measure Costs:
oInclude direct, indirect, fixed, and variable costs.
oExample: Costs of equipment, staff, patient
transportation.
Measure Outcomes:
oChoose relevant health outcomes (e.g., reduced
mortality, improved quality of life).
oExample: Number of infections prevented by a vaccine.
Steps in Economic Evaluation
Analyze and Interpret Results:
oUse cost-effectiveness ratios or other metrics to
compare alternatives.
oExample: Determine which program provides the most
health benefit per dollar spent.
Challenges in Economic Evaluation
Data Quality and Availability:
oLimited or inaccurate data on healthcare costs and
outcomes.
oExample: Difficulty obtaining real-world data for a new
drug.
Valuing Non-Monetary Outcomes:
oChallenges in assigning monetary value to improved
quality of life.
oExample: Benefits of reducing caregiver stress.
Challenges in Economic Evaluation
Ethical Considerations:
oBalancing equity and efficiency when allocating resources.
oExample: Deciding between funding a rare disease
treatment vs. a widespread vaccination program.
Equity vs. Efficiency:
oStruggle to prioritize cost-effectiveness while addressing
disparities.
oExample: High-cost interventions for underserved
populations.
Case Study: Cost-Effectiveness of Vaccines
Scenario: HPV Vaccination vs. Influenza Vaccination
oInputs: Costs of vaccines, administration, and logistics.
oOutputs: Infections prevented, QALYs gained.
oResults:
HPV: $200 per QALY gained.
Influenza: $300 per QALY gained.
oInterpretation: HPV vaccination is more cost-effective.
Practical Applications
Healthcare Policy:
oInform government funding for public health programs.
oExample: Prioritizing vaccination campaigns during an
outbreak.
Hospital Resource Allocation:
oOptimize budgets for medical equipment or staff hiring.
oExample: Deciding between adding ICU beds or
purchasing new diagnostic tools.
Practical Applications
Insurance Reimbursement:
oGuide coverage decisions for new treatments.
oExample: Reimbursing cost-effective drugs based on cost-
utility analysis.
Discussion Questions
[Link] might cost-effectiveness vary between developed and
developing countries?
oConsider differences in healthcare infrastructure and
disease burden.
[Link] can policymakers address equity concerns in resource
allocation?
oExample: Implementing tiered pricing for medications to
improve access for low-income populations.
