Economic Evaluation
Dr. Hiba Elzaki
Assistant Professor
Contents
• Why economics for healthcare services?
• What is Economic Evaluation?
• Why study Economic Evaluation?
• Who uses Economic Evaluation?
• What are the types of analysis in Economic
Evaluation?
2
Why economics for healthcare services?
• the scarcity of resources and healthcare
resources .
• Alternative use of healthcare resources exist
• Increasing Demand for Value
• Increasing Demand for Accountability
3
What is Economic Evaluation
• Economic evaluation
– Systematic method to determine whether
healthcare resources are spent efficiently
– Seeks to define a set of explicit criterion, so to
facilitate the allocation decision of limited
resource in different fields
4
What is Economic Evaluation?
• Economic Evaluation is
– the identification, measure, and comparison
of the costs (i.e. resources consumed) and
outcomes (clinical, economic, and
humanistic) of interventions
(pharmaceuticals, non-drug therapies,
public health programs)
What is Economic Evaluation? (cont.)
• Economic Evaluation is NOT JUST economics
• Economic Evaluation is multi-disciplinary, it
combines
– Economics
– Epidemiology
– Biostatistics
– Medicine
– Pharmacy
– ….
Economics
Health Economics
Statistics
Economic Evaluations
Cost-Effectiveness
Analysis
Why study Economic Evaluation?
• The pressure of cost containment.
• The need for methods to evaluate medical
interventions.
• Purpose of economic evaluation
efficient resource allocation
NOTE: equity is often not addressed
Who uses Economic Evaluation?
• Managers in hospital or health care plans
(formulary decision)
• Pharmaceutical companies
• Government / Policy makers
• Researchers
What are the TYPES OF
ANALYSIS in Economic
Evaluation?
What are the types of analysis in Economic
Evaluation?
• Cost Minimization Analysis (CMA)
• Cost Benefit Analysis (CBA)
• Cost Effectiveness Analysis (CEA)
• Cost Utility Analysis (CUA)
• Cost-of-Illness Analysis (COI)
• Budget Impact Analysis (BIA)
Cost-Minimization Analysis (CMA)
• When two or more interventions have been
demonstrated to be equivalent in outcome or
consequence, CMA is used to find the least
expensive alternative.
• CMA is different from Cost Analysis, which
chooses the least expensive alternative
regardless of outcomes.
Cost-Benefit Analysis
• CBA is an evaluation method for comparing the
monetary value of all resources consumed (costs)
in providing a program or intervention with the
monetary value of the outcome (benefit) from
that program or intervention.
• In CBA, both costs and outcomes are measured in
dollars.
• Advantage: CBA allows comparison of programs
or interventions with entirely different outcomes.
CBA (cont.)
• If the interventions result in a stream of benefits
and costs over time --> Choose a discount rate
and construct present value.
• CBA is difficult to perform because it requires that
both costs and benefits be measured in (or
converted into) monetary terms
– Human Capital Approach
– Willingness-to-Pay Approach
Problems with CBA
• Result depends on dollar values assigned
to life
• What about Quality of Life ?
Cost Effectiveness Analysis (CEA)
CEA is a method to determine which program or
treatment accomplishes a given objective at the least cost.
In CEA, the effectiveness is expressed in terms of non-
monetary units that describes the desired objective.
lives saved (life years gained)
- disability days avoided
- cases treated
Limitation: CEA cannot be used to compare interventions
with different health outcomes because of its
nonmonetary measurement of outcomes.
Problems with CEA
• How about Quality of life (CUA)
Cost Utility Analysis (CUA)
• Similar to CEA.
• CUA tried to combine the quality and quantity
of life in its outcome measures.
• The most commonly used outcome measure
in CUA is Quality Adjusted Life Years (QALYs).
CUA (cont.)
• What is the U in CUA?
– Utility. It refers to level of satisfaction or
usefulness that consumers derive from the
consumption of goods and services.
• In economic theory, consumers make their
purchase decision based on the level of
utility per dollar spent.
• Utility is inherently subjective.
CUA (cont.)
• Two limitations of CUA
– Measurement of utility is time and resource
intensive.
– Lack of consensus on which measurement
methods
• In general, researchers agree that “choice-based”
approaches (e.g., standard gamble, time trade-off) are
more appropriate.
• NOTE: QoL is NOT utility
What are the DIFFERENCES
between each type of analysis?
Economic Evaluation Methodologies
Method Cost Outcome Focus
CMA Dollars Equivalent Efficiency
outcomes
CBA Dollars Dollars Most beneficial use
of limited resources
CEA Dollars Natural units (Life- Least costly way to
years gained) achieve an objective
CUA Dollars Natural units Least costly way to
(QALYs) achieve an QALY
gain
CBA vs. CEA
• Uses dollar values for • Uses nonmonetary outcome
outcome measurements measurements
• Maximizes benefit of • Minimizes cost of program
investment/intervention • Assumes adequate resources
• Assumes limited resources • Compares programs with the
• Compares programs with same objectives
different objectives
THANKS
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