Welcome to SCIRE Professional

Economic Evaluations

Economic evaluations (also known as cost-effectiveness studies) of health care interventions are important in decision making because of limited available health care resources. Economic analysis has been defined as “the comparative analysis of alternative courses of action in terms of both their costs and consequences.” (Drummond 2001, as described in Shemilt 2009, pg 15.2). In health care a certain condition may have direct costs, such as hospital stay, cost of a medication, or physician visits. There are also indirect costs associated with care that may need to be considered, such as lost productivity and wages due to time off from work or transportation costs associated with medical appointments. Indirect costs can be for the patient or for an informal caregiver. The purpose of the economic evaluation is to inform decision makers about the monetary value of different treatment options or to provide an estimate of the impact of a disease or treatment option to the health care system.

For economic evaluations the primary aim is to explore and combine both the incremental cost as well as the incremental effect of a treatment against a reasonable comparator. Although often used as a “catch-all” term, economic evaluations can be grouped into three categories: cost-benefit studies, cost-effectiveness studies and cost-utility studies. In cost-benefit studies, all benefits and costs are converted to a common unit (in this case monetary costs) and summed for each intervention. Many of these benefits and costs are easily valued in terms of money (such as laboratory services consumed, or hospital bed days avoided). However, there are also many intangible items (such as patient pain or satisfaction) where assigning a monetary value may be more challenging (Morris et al. 2011). In such cases, the monetary value may be determined by patient preference, measured through their willingness to pay for the health benefits or to avoid a health cost associated with the intervention versus the comparator (Drummond 2001; Morris et al. 2011). The output of a cost-benefit study is the difference in total monetary cost between an intervention and a comparator. In cost-effectiveness studies the benefits are not converted to a monetary value. In these types of studies, the incremental effect of the intervention is usually a clinical outcome of importance to the condition of interest. One limitation to cost-effectiveness studies is the limited comparability of these studies across different disease groups, due to variation in clinical outcomes. Cost-utility studies overcome this limitation by using a common denominator of change in health (utilities) as the clinical outcome. Utilities are measured from a generic (non-condition specific) patient preference quality of life scale. This scale measures a patient’s quality of life and assigns a value to it between 0 and 1 (Drummond 2001). These values measured over time are multiplied by the patient’s expected life years to produce a quality-adjusted life year (QALY) value. The primary outcome of cost-utility studies reflects the incremental cost of the intervention divided by the incremental QALY gained (or lost) by the intervention. Cost-utility studies, as well as cost-effectiveness and cost-benefit analyses, provide the full spectrum of economic evaluations observed in health research publications.