Health Economics Workshop:

Costing exercise
Monisha Sharma, PhD
International Clinical Research Center (ICRC)
University of Washington
 Goals of costing exercise:
• To familiarize yourself with using excel costing tools
• To practice placing intervention costs into
appropriate categories, annualizing, and
discounting costs.
• To think about how to adapt costs collected from
an RCT to estimate intervention costs.
Inflating costs to current value
• You are looking for the yearly cost of administering
ART in Kenya.
• You find an estimate in the literature of $350 per
year, but this is in 2014 dollars.
• Your cost analysis is in 2015 dollars
• Need to account for inflation.
• How do you adjust the ART cost for use in your
analysis?
• Adjust for inflation using the consumer price index (CPI)

Current cost ($) = (base year cost) * (Current CPI) / (Base year CPI)
Consumer price index (CPI) table (ie GDP deflator): Kenya

Year CPI
• Obtain CPIs online
2015 153.7 from World Bank
2014 140.8 (online)
… … • Obtain 2014 and 2016
2011 113.1 Kenya to US exchange
rates (also from World
2010 102.1 Bank)
2009 100

Year Exchange rate

2015 92.0
2014 87.7
Converting 2014 costs to 2015

Current cost ($) = (base year cost) * (Current CPI) / (Base year CPI)

• Convert $350 US dollars to Kenyan Schillings using 2014 Kenyan to

US exchange rate: 87.7

2014 CPI = 140.8 2015 CPI = 153.7

2014 ART cost= 350*87.7 Inflation-adjustment factor
=30,765 KSH
2015 ART Cost = 30,765 x (153.7/ 140.8)
= 33,507 KSH
• Convert to 2015 US dollars using 2015 exchange rate (94.0)
=33,507/94
=$356 (2015 dollars)
$350 in 2014 in Kenya=$356 in 2015
Costing exercise: Instructions
• You are conducting a microcosting of an HIV testing
intervention run as an RCT in Kenya.
• Results will be used for a cost-effectiveness analysis
• Fill in the Excel spreadsheet provided to generate
estimates of the total cost of the intervention if it
were implemented by the Kenya Ministry of Health
• The sheets are linked and will populate the
summary sheet automatically.
• Some boxes have formulas already written in (eg
anniuty factor) and will fill in automatically.
Costing exercise: Instructions cont’d
Boxes in blue can be filled in with words
(description of items included in costing)

Boxes in yellow can be filled in with numbers

Boxes in green populate automatically and

should not be altered

• Assumptions:
• Vehicles have 5 years of useful life
• Furniture has 10 years of useful life
• Discount rate: 3%
• Costs are in 2015 US dollars
COSTING EXERCISE
 Start up costs: Staff hiring
• Interview HR and managers (and others involved in hiring)
• Ask about time and money spent advertising positions,
interviewing, shortlisting, and offering positions.
• Assess time spent by each staff member
• How would this process be different in government
intervention? Would staff structure be different?
Interviewing   Panel interviews   Time costs (Kenyan Shillings)
Time for field
Position # coordinator Upper cost/position
interviews
(hours) Staff responsible positions HR management total cost hired
Health HR, field coordinator,
advisors 28 senior nurse 12 290,326 $34,838 $20,709 $84,580 $7,048
field HR, upper
coordinator 7 management 1 7,258 $8,709 $5,177 $21,145 $21,145
data manager HR, field coordinator,
7 upper management 1 7,258 $8,709 $5,177 $21,145 $21,145
office HR, field coordinator,
assistant upper management,
7 accountant 1 7,258   $7,258 $7,258
Start up costs: Staff training
• How many staff were trained? Assess time costs of staff
responsible for training
• Supplies
• Per diem
• External speakers
• Remove research costs
• Training on human subjects, research practices

TRAINING (assuming 5 years of useful life) Time costs: Kenyan shillings

# new field
Training Staff staff Employee Project coordinat Employee
Position type responsible # days # hours trained salaries manager or cost total cost
field
Health Advisor In office coordinator 10 80 12 744,000 $44,239 $69,124 $411,428 $524,792
Health Advisor senior health 744,000
In field advisor 1 8 12     $41,142 $41,142
Health Advisor Observation 4 32 12 744,000     $164,571 $164,571
Field coordinator In office senior admin 10 80 1 1,464,000 $99,539  $67,465 $167,004
field
Office assistant In office coordinator 5 40 1 1,044,000   $49,769 $24,055 $73,824
My actual costing sheets
My actual costing sheets
Thank You!
Email: msharma1@uw.edu