Cost effectiveness analysis in health care planning

Nayyar Raza KazmiMBBS, DHPM, MPH, M.Sc

Cost Effectiveness Analysis in Health Care Planning

Cost Effectiveness MethodologyDefine ObjectivesStructure AlternativesCalculate EffectivenessEstimate CostsChoose a Criterion

The Crucial IssueConstruct Alternatives that hold something

constantHold Cost Constant and Maximize

Effectivenesso Or

Hold Effectiveness Constant and minimize costs

ApplicationsTo buy a 1.5 tesla MRI Scanner or buy 3 Ct

ScannersTo increase no of TB Diagnostic Centres or

Fund Free TB DrugsConstruct a new tertiary care hospital or

upgrade one DHQH and 3 THQH

CostingCosting estimates are done by historical

estimates or by current market surveyStepwise the costing process involves

Charting the activities of a planCalculating Unit costs based on current

market ratesCalculating carrying costs, costs of

operations, fixtures, personnel, again in unit terms

Costing- ContdIn other wordsAcquisition (non-recurring)

– Development– Procurement

• Land• Facilities• Equipment (depends on number of

systems)– Salvage

• Operations and Support (recurring)– Operations and Maintenance– Personnel

Adding to original costs, we can calculate costs in terms of Fixed, Variable and Marginal Costs, as in practice costs are fluctuating at different levels of outputs

CCalculate Effectiveness

Usually measured in QALY’s, DALY’s, No of deaths averted, No of Lives saved, No of children immunized.

Calculate Cost to effectiveness ratio

Consider two strategies intended to lengthen life in patients with heart disease. One is simple and cheap (e.g., aspirin and -blockers); the other is more complex, more expensive, and more effective (e.g., medication plus cardiac catheterization, angioplasty, stents, and bypass). For simplicity, we will assume that doing nothing has no cost and no effectiveness.

Because CEA involves marginal cost and benefits, the choice of which strategies to compare can drive the calculation and the conclusion of a CEA. Consider the effect of repeating the above analysis without the simple strategy