PERTEMUAN

COST EFFECTIVE ANALYSIS

BY DESTANUL AULIA, SKM, MBA, MEc, Phd
 COST EFFECTIVENESS ANALYSIS (CEA)
DEFENITION :
CEA is one form of full economic evolution, whereby the cost are compared with outcomes
measured in common natural units eg. Per life saved, per life year gained, and per pain or
symptom free day.
COST EFFECTIVENESS ANALYSIS :
It is one of the tools available to help managers to identify areas in health programs that are
inefficient and help to design a better program.
CEA involves assessing the gain (effectiveness) and resource input requirement (costs) of
alternative ways of achieving a specifies objective.
Result are usually expressed in terms of cost per unit of effectiveness for each alternative. The
alternative with the lowest cost per unit of effectiveness is the most cost effective and is
generally to be preferred on grounds of economic efficency.

MEASURE OF EFFECTIVENESS :
Depent on the objectives of the particular interventions under review.
Measures of effectiveness should be defined in appropriate natural units and, ideally,
expressed in a single dimension.
Example of effectiveness measuremen are ;
o Lives saved
o Life years gained
o Cases treated appropriately
o Pain or symptoms free days
o Cases succesfully diagnosed
o Complication avoided
OBTAINING EFFECTIVENESS DATA
Ideally, data on effectiveness may obtained alongside clininc trials so that relevant data on
costs and effectiveness can be collected at the same time.
Howeevr, setting up and conducting appropriated trials is often time consuming and
expensive. Becouse of this, many CEA rely on the exiting medical literature for their data.
Even when data are available it is important to ensure that they are relevant to the
context in which an evaluation is being carried out.
Example, do medical and other staff have the same skills and experience as those
reported in the studies?. Is the same range of medical and surgical equipment available?.
Economic evalution may have to rely on assumptions about clinical evidence thus the
result are subjected to a range of different assumptions about effectiveness. This can be
done by sensitivity analysis.

UNCERTAINTY AND SENSITIVITY ANALYSIS

Approach to uncertainty about the costs and effectiveness of different procedures is to use
sensitivity analysis.
This permits the robustness / strength of the results to be tested in light of variations in
the values of key variables.
Different forms of sensitivity analysis are.
a) Simple Sensitivity Analysis :
Varying one or more of the components of an evaluation to see how it affects the results.
Eg. Varying both the length of inpatient stay and the hotel costs per inpatient day.

b) Extreme Scenarios :
Identify extreme estimates of cost and effectiveness and effectiveness so that two
procedures can be compared under pessimistic (high cost and low effectiveness) and
optimistic (low cost and high effectiveness) assumptions.

c) Probabilisti Sensitivity Analysis

It assigns ranges and distributions to variables, and computer programs are used to select
values, at random, from each range and to record the results.
The advantage of this approach is that it can simultaneously deal with a large number of
variables and indicated the degree of confidence that can be attached to any option.
5 STEPS IN PERFORMING CEA
1.Defining the programs objectives.
2.Identifying the possible ways of achieving those objectives.
3.Identifying and measuring the costs of each option.
4.Identifying and measuring the effectiveness of each option.
5.Calculating the cost effectiveness of each option and interpreting the result.

1. DEFINING THE PROGRAMS OBJECTIVES

The incentive for doing a CEA oftencomes from identifying a particular program. Eg.
Drugs are not readily available in rural areas, or contraceptive use in the communities
is low or malnutrition is common in children.
Examples : Malnutrition seems to be a consequence of feeding children the wrong
foods at the weaning stage, so the objective would be to encourage the use of better
weaning foods.
The more precise the statement of objectives, the easier it is to use CEA, becouse
both the costs and effects are likely to be more clearly defined and easier to measure
and interpret.
Specify the objectives quantitatively if possible. Eg. To reduce mortality from tetanus
by 25%.
CEA may also be stimulated by a particular objective being set up earlier by the
ministry or policy makers.
2. IDENTIFYING THE POSSIBLE WAYS OF ACHIEVING THOSE OBJECTIVES
Identify at least possible ways of achieving the objectives that have been identified.
For each option identified, be sure to describe it in sufficient detail.
It is useful to consider a wide range of options at first, so as not to miss the best
solution.
From the initial list of options, need to be selective because a full CEA of all
conceivable option is usually costly and unnecessary.
Can narrow down the options to a manageable selection by eliminating those that :
o Cannot be accommodated within the existing budget constraints.
o Are clearly less efficient than other options on the basis of a rough calculation of
costs and effects.
o Are not feasible in technical and political terms (consider all options that have
powerfull political support even if they are unworkable, if they really are poor
options in economic terms, this needs to be carefully documented).
o Cannot be analysed easily and cheaply in time to influence decision making.

Another way to identify objectives is to perform exploratory study which compare the
performance of two ot more approaches currently being used to meet some objective,
or examining the expected performance of completely new approaches to an
objective.
3. IDENTIFYING AND MEASURING THE COSTS OF EACH OPTION
The resources that are costed should be those that are responsible for producing the
effects that will be measured.
Another thing to stress about costs is the need to be comprehensive, that is to include
all the input that are put to work in that option.
Donation. Volunteers as well as paid for resources should be included.
Take care not to count any resources more than once (double counting).
Where a new service or set of servicer is being added to an existing program, it will
be sufficient to look only at the costs and effects of the new components (additional /
incremental / marginal costs).
However, by doing this, there is risk of overlooking other differences, and obscuring
the exact meaning of the cost effectiveness indicator.
4. IDENTIFYING AND MEASURING THE EFEECTIVENESS OF EACH OPTION
It is important to be sure that the effects that measured are result from the resource
inputs whose costs are calculated.
Important methodological issue to be addressed in the choise of effectiveness
measure is whether to choose final health outcome such as life years gained, or an
intermediate outcome such as cases found or patients appropriate treated.
In general though, one should choose an effectineness measure relating to a final
outcome.
Intermediate outcome are admissible, although care must be taken to establish a link
between these and a final health outcome, or show that the intermediate outcomes
themselves have some value.
Especially on prevention outcome becouse studies to estimate an improvement in final
endpoints are costly and time consuming to conduct.
Major sources of effectiveness dat is the existing medical literature.
In situations where no good clinical evidence exists, and the CEA may procees by
making assumptions about the clinical evidence and then undertaking a sensitivity
analysis of the economic result to different assumptions.
4. CALCULATING THE COST EFFECTIVENESS OF EACH OPTION AND INTERPRETING
THE RESULT
Cost effectiveness ration for each option can be calculated by dividing its cost by the
numerical value of the chosen effect.
The ratios are then compared to determine the most cost effective option, that is
the one costing the least per unit of effect achieved.
To deal with this kind of uncertainty for a perticular assumption, define a plausible
range of values for the variable, or take (1) the best estimate, (2) twice that estimate
and (3) half of it.
Taking each of these figures in turn (or using the values at either end of the plausible
range), calculate how the results of CEA change with the different values.
If the conclusion as to the most cost effective option changes, then the conclusion
are said to be sensitive to the assumption about the value of that variable (sensitivity
analysis).
Having established which of the options is the most cost effective, an important
follow up step is to decide what is responsible for the diffrerences among them.