Understaing Cost-Effectiveness Analysis of Health Intervention

1. ECONOMIC EVALUATION
OF HEALTH INTERVENTIONS
Abdur Razzaque Sarker
MHE (Health Economics), MSS (Economics)
Health Economics and Financing Research, icddrb
and
PhD Fellow in Strathclyde University, UK
Email: razzaque.sarker@gmail.com

2. 2
Topic
 Cost Analysis (Cont..)
 Cost Minimization Analysis
 Cost Effectiveness Analysis (CEA)
 Cost utility Analysis ( CUA)
 CEA/CUA Exercise
 Group Work

3. What is economic evaluation?
Economic evaluation is the comparative analysis of at
least two health care interventions or alternatives in
terms of both their costs and consequences.
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4.  Cost‐Minimization Analysis
 Cost‐Effectiveness Analysis
 Cost‐Utility Analysis
 Cost‐Benefit Analysis
Types of Economic Evaluations
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5. Cost‐Minimization Analysis
Compare the costs of two or more
interventions with identical outcome and
choose the least costly one.
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6. Alternative A
Injury prevention by building a speed-breaker
Cost per injury prevented = 500 Taka
Number of injury prevented = 200
Alternative B
Injury prevention by building a foot over-bridge
Cost per injury prevented = 1200 Taka
Number of injury prevented = 200
The outcomes (number of injury prevented) are
identical for alternatives ‘A’ and ‘B’. Alternative ‘A’ has
lower cost of intervention. Using CMA, we can choose
alternative ‘A’, i.e. building a speed-breaker
Cost minimization analysis (CMA)
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7. Cost-effectiveness analysis
(CEA)
Compare ‘cost per consequence’ of two or more
interventions, where the consequences are
measured by “natural” units (life years gained,
saved years of life)
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8. Outcome
Years of life saved
Hospital days prevented
Number of case prevented
Reduction in cholesterol
Blood pressure reduction
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9. Cost-effectiveness analysis (CEA)
 Cost-effectiveness ratio (CER)
 Incremental cost-effectiveness ratio (ICER)
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10. If effectiveness of alternative ‘A’ is higher and its costs is lower than
those of alternative ‘B’.
Alternative ‘A’ is called dominant
Alternative ‘B’ is called dominated
Law of Dominance &
Law of Extended Dominance
Alternative Cost Saved years
of Life
'A' 2,000 600
'B' 3,000 500
Dominance
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11. Extended dominance
If we compare the interventions based on ICERs, we choose that
programs which is ‘more effective, using law of extended dominance’.
One intervention (C) is said to be ‘extended dominant’ if its ICER is
lower than the previous intervention(B). And the rolled out
intervention is called ‘extended dominated’ (B).
Alternative Cost Effect C E C/E
‘No' 0 0 0 0 0
'A' 200 4 200 4 50
'B' 300 5 100 1 100
'C' 380 6 80 1 80
Alternative Cost Effect C E C/E
‘No' 0 0 0 0 0
'A' 200 4 200 4 50
'B' 300 5 100 1 100
'C' 380 6 80 1 80
Extendeddominated
Extendeddominant
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12. 12
Cost Utility Analysis ( CUA)

13. Cost-utility analysis
Compare ‘cost per consequence’ of
two or more interventions, where the
consequences are measured by
“utility” related to health (quality-
adjusted life years, disability adjusted
life years)
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14. 14

15. Cost-utility analysis
Unlike CEA, effects in CUA are measured in terms of
utility
- Quality-adjusted life years (QALYs)
- Disability-adjusted life years (DALYs)
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16. Example
Program Cost per
patients (C)
life year
saved
Quality
increase
QALYs
gain (E)
No program 0 0 0 0
E (Pneumonia) 500 20 0.93 18.6
A (Polio) 100 10 0.92 9.2
D(Diphtheria) 400 19 0.88 16.72
C(Syphilis) 300 15 0.86 12.9
B (TB) 200 14 0.93 13.02
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17. There are five different treatment (interventions) for producing
saved years of life (S YoL). Our aim is to choose those
interventions which survive the cost-effectiveness analysis and to
rank them from highest to lowest cost-effectiveness.
Cost per patients and S YoL are presented below. We assume
that each disease group has 200 patients to be treated.
Intervention Cost per
patients (C)
SYoL
(E)
No 0 0
E
(Pneumonia)
500 20
A (Polio) 100 10
D (Diphtheria ) 400 19
C (Syphilis) 300 15
B (TB) 200 14
Example of allocating resources using
cost-effectiveness and cost-utility analysis
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18. Steps of choosing cost-effective interventions
1. Sort the interventions according to ‘cost per patient’ in
ascending order
2. Find dominated interventions
3. Keep the survived interventions using the same sorting
procedure as in step 1
4. Calculate ICER between interventions
5. Find the interventions which are ‘extended dominated’ and
roll them out
6. Keep the survived interventions
7. Calculate the ICER of the survived interventions and roll out
the ‘extended dominated interventions’ and continue this
process until all extended dominant interventions are rolled
out
8. Now you find the interventions which have survived the
cost-effectiveness analysis
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19. Step 1: Sort in ascending order using cost of
treatment
Intervention Cost per patients (C) SYoL (E)
No 0 0
A (Polio) 100 10
B (TB) 200 14
C(syphilis) 300 15
D(Diptheria) 400 19
E (Pneumonia) 500 20
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Intervention Cost per
patients (C)
SYoL
(E)
No 0 0
E (Pneumonia) 500 20
A (Polio) 100 10
D (Diphtheria ) 400 19
C (Syphilis) 300 15
B (TB) 200 14

20. Step 2: Find Dominated interventions
There is no dominated intervention
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Intervention Cost per patients (C) SYoL (E)
No 0 0
A (Polio) 100 10
B (TB) 200 14
C(Syphilis) 300 15
D(Diptheria) 400 19
E (Pneumonia) 500 20
If effectiveness of alternative ‘A’ is higher and its costs is lower
than those of alternative ‘B’. Alternative ‘B’ is called dominated

21. 21
Intervention Cost per patients (C) S YoL (E)
No 0 0
A (Polio) 100 10
B (TB) 200 14
C(syphilis) 300 15
D(Diptheria) 400 19
E (Pneumonia) 500 20
Step 3: Keep the survived interventions using step 1
All interventions are kept

22. Step 4: Calculate ICER between interventions
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Intervention Cost per patients (C) SYoL (E) ∆C ∆E ∆C/∆E
No 0 0 0 0 0
A (Polio) 100 10 100 10 10
B (TB) 200 14 100 4 25
C(syphilis) 300 15 100 1 100
D(Diptheria) 400 19 100 4 25
E
(Pnumonia) 500 20 100 1 100

23. 23
Step 5: Find ‘extended dominated’ interventions and roll
them out
Intervention Cost per
patients (C)
SYoL (E)
∆C ∆E ∆C/∆E
No 0 0 0 0 0
A (Polio) 100 10 100 10 10
B (TB) 200 14 100 4 25
C(syphilis) 300 15 100 1 100
D(Diphtheria) 400 19 100 4 25
E (Pneumonia) 500 20 100 1 100
One intervention (D) is said to be ‘extended dominant’ if its
ICER is lower than the previous intervention(C). Here,
alternative D is called the extended dominant alternative. And
the rolled out intervention is called ‘extended dominated’. Here ,
C is extended dominated by D.

24. Step 6: Keep the survived interventions
Intervention Cost per
patients (C)
S YoL (E)
No 0 0
A (Polio) 100 10
B (TB) 200 14
D(Diphtheria) 400 19
E (Pneumonia) 500 20
Step 7: Recalculate ICER of survived interventions and roll out
the ‘extended dominated interventions’
Intervention Cost per
patients (C)
S YoL (E)
∆C ∆E ∆C/∆E
No 0 0 0 0 0
A (Polio) 100 10 100 10 10
B (TB) 200 14 100 4 25
D(Diphtheria) 400 19 200 5 40
E (Pneumonia) 500 20 100 1 100
Observation: No ‘extended dominated intervention’ is found.
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25. Step 8: Interventions which have survived the cost-effectiveness analysis
Intervention Cost per patients (C) S YoL (E)
No 0 0
A (Polio) 100 10
B (TB) 200 14
D(Diphtheria) 400 19
E (Pneumonia) 500 20
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Here, A is most cost effective alternative.

26. Allocating budget among the
interventions
Conditions:
Total budget = US$ 80,000
Maximum 200 patients from each disease group can be treated
How to allocate?
We start allocating the budget in the most cost-effective
intervention (A) and gradually allocate in the next ones.
Alternative Cost per
patient
S YoL No of patients
treated
Total cost of
treatment
Budget
left
Total
S YoL
A 100 10 200 20,000 60,000 2,000
B 200 14 200 40,000 20,000 2,800
D 400 19 50 20,000 0 950
E 500 20
Total 450 80,000 5,750
Result:
Using the total budget (US$ 80,000 a sum of 450 patients can be treated w
Gives a total saved years of life (SYoL) of 5,750.
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27. 27
Any other combination gives maximum outcome
based on budget???
Alternative Cost per
patient
S YoL No of patients
treated
Total cost of
treatment
Budget
left
Total
SYol
B 200 14 200 40,000 40,000 2800
D 400 19 100 40,000 0 1900
A 100 10
E 500 20
Total 300 4700
Alternative Cost per patient S YoL No of patients
treated
Total cost of
treatment
Budget left Total SYol
D 400 19 200 80,000 0 3800
A 100 10
B 200 14
E 500 20
Total 200 3800

28. Exercise
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29. THANKS
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Email:
razzaque.sarker@gmail.com