COST EFFECTIVE ANALYSIS

Presented By
Mr. Naveena. J H
Asst. Professor
Subharti Nursing College
SVSU , Meerut, UP
Direct Nursing Cost Indirect Nursing Cost
 Scope
 Cost effectiveness analysis (CEA) used heavily in
social programs and projects where identification
and quantification of benefits in money terms is not
straightforward but, at the same time, the desirability
of the activity is not in question.

 For example, in the case of health care:

- What is the best way to prevent heart
attacks?
- What drugs are most cost effective in the
treatment of illness?
- What is the least cost way of providing
nutrition to poor children?
- Which of the programs is most cost
effective for AIDS prevention?
Formula for Analysis
 Cost - effectiveness analysis seeks to identify and
place currency on the costs of a program. It then
relates these costs to specific measures of program
effectiveness. Analysts can obtain a program ’ s cost
- effectiveness (CE) ratio by dividing costs by what
we term units of effectiveness :

Cost-Effectiveness Ratio = Total Cost

Units of Effectiveness
 Scale Problem in CEA
Effectiveness Cost
Method CE Ratio Ranking
(Patients a Month) (Rand)

Alternative A 200 50,000 250 1

Alternative B 1,150 300,000 261 2

 Let’s say there are two mutually exclusive options in the choice of medical diagnostic
equipment for a clinic.
 The first type of machine (A) costs R 50,000 and it can diagnose 200 patients a month.
 The second option involves more expensive equipment (B), which will cost R 300,000 but
could serve up to 1,150 people a month.
 The CEA results in the selection of the least costly alternative, option A, which costs R 250
per diagnosis.
 Option B allows to process almost a six-fold higher number of medical tests a month, at cost
of R 261 per patient.
 Unless there is a severe budget constraint for implementation of alternative B, this
alternative could be justified even if its average costs are higher than costs of alternative A.
This is because the total benefits that alternative B generates are very much larger than the
benefits of alternative A.

30
 ACTIVITY: 1:
 Cost effective Analysis On wound Care

FIGURE -1
FIGURE -2
Cost Comparison: Previous Management vs. Best Practice
Previous Care Cost Present Care Cost
Nursing labour $9,600.00 Duplex scan $161.30
($40.00 x 240 visits ) Nursing labour $240.00
Fucidic acid cream $ 240.00 ($40.00 x 6 visits)
Gauze bandages $ 360.00 Multi-layer bandage x 4
$100.00
Gloves $ 48.00 Nanocrystalline silver
4x4dressings (x2) $26.00
Dressing trays $6.00
Gloves $1.20

Total $10,248.00 Total (best practice) $534.50

Outcome No healing Outcome Closed wounds

Difference in cost: $9,713.50

 ACTIVITY:2
 Cost effective Analysis on Antenatal Visits
CONCLUSION
 A cost−effectiveness analysis (CEA) seeks
to find the best alternative activity, process,
or intervention that minimises resource use
to achieve a desired result. Like
Cost−Benefit Analysis, Cost−Effectiveness
Analysis can be used either to assess the
expected impacts of alternative policy
measures before they are implemented , or
to assess the effectiveness of a policy
measure that is already in place .