KEYSTONE HPSR Initiative // Module 5: Economic analysis // Slideshow 1: Economic Evaluation This is the third slideshow of Module 5: Economic Analysis, of the KEYSTONE Teaching and Learning Resources for Health Policy and Systems Research To access video sessions and slides for all modules copy and past the following link in your browser: http://bit.ly/25vVVp1 Module 5: Economic analysis An economist’s approach to understanding and studying health systems problems is underpinned by principles of economic reasoning. These principles of reasoning can be applied to a range of questions around the production of health and health services, demand and supply of health services, principal-agent relationships, and incentive mechanisms in health systems. This module outlines the basic concepts of economics and stimulates the participants to think about the debates about failure of market in health care and the role of the Government and give an overview about costing of health care programs and role of economic evaluation in health care. There are 4 slideshows in this module. Module 5: Economic analysis -Module 5 Slideshow 1: Basic Principles of Health Economics -Module 5 Slideshow 2: Micro Economics for Health -Module 5 Slideshow 3: Economic Evaluation -Module 5 Slideshow 4: HPSR Research Ideas Economic Perspective The other modules in this series are: Module 1: Introducing Health Systems & Health Policy Module 2: Social justice, equity & gender Module 3: System complexity Module 4: Health Policy and Systems Research frameworks Module 6: Policy analysis Module 7: Realist evaluation Module 8: Systems thinking Module 9: Ethnography Module 10: Implementation research Module 11: Participatory action research Module 12: Knowledge translation Module 13: Research Plan Writing KEYSTONE is a collective initiative of several Indian health policy and systems research (HPSR) organizations to strengthen national capacity in HPSR towards addressing critical needs of health systems and policy development. KEYSTONE is convened by the Public Health Foundation of India in its role as Nodal Institute of the Alliance for Health Policy and Systems Research (AHPSR). The inaugural KEYSTONE short course was conducted in New Delhi from 23 February – 5 March 2015. In the process of delivering the inaugural course, a suite of teaching and learning materials were developed under Creative Commons license, and are being made available as open access resources. The KEYSTONE teaching and learning resources include 38 videos and 32 slide presentations organized into 13 modules. These materials cover foundational concepts, common approaches used in HPSR, and guidance for preparing a research plan. These resources were created and are made available through support and funding from the Alliance for Health Policy & Systems Research (AHPSR), WHO for the KEYSTONE initiative

1. https://twitter.com/KeystoneHPSR
Building the HPSR CommunityBuilding HPSR Capacity
KEYSTONE
Inaugural KEYSTONE Course on Health Policy and Systems Research
2015
Economic Evaluation

2. Economic EvaluationEconomic Evaluation
Keystone HPSR CourseKeystone HPSR Course
2525thth
Feb 2015Feb 2015
New DelhiNew Delhi

3. OverviewOverview
• Efficiency concept
• What is an economic evaluation?
• Types of economic evaluation
• Interpreting the results of an economic evaluation
• How can economic evaluation guide policy?
• Illustrations

4. BackgroundBackground
• Resource scarcity
– Routine health system: Resource envelope under NHM
– Hospital budgets: resource based rather than need based
• Opportunity Cost
• So, how do you make choices?
– Precedence
– Disease burden and effectiveness of interventions
– Cost effectiveness of interventions

5. EfficiencyEfficiency
Investing resources to get best value for money

6. How to Assess Efficiency?
Economic Evaluation
The comparative analysis of alternative courses of
action in terms of both their costs and
consequences
Source: Methods for the economic evaluation of health care programmes Michael F. Drummond,
2nd
edition, 1997

7. What is economic evaluation?
Does a medical intervention (drug, device, program,
surgery) when used to prevent or treat a condition or
improve health outcomes in patients, justify
the additional dollars spent compared to the existing
medical strategy?
Costs A
Costs B
Programme A
Programme B
Consequences A
Consequences B
ChoiceChoice

8. No
No Yes
Examines only
consequences
Examines only
costs
Outcome
Description
Cost Description
Cost Outcome
description
Yes
Efficacy or
Effectiveness
Evaluation
Cost Analysis
Full Economic
Evaluation
Cost Effectiveness
Analysis
Cost Utility Analysis
Cost Benefit Analysis
Istherea
alternatives Are both the costs (inputs) and consequences (outputs) of the
alternatives examined?
Health Care Evaluation

9. Perspectives in economic evaluation
• Patient or client perspective
• Health System/ Donor perspective
• Societal perspective

10. Outcome Assessment
Type of economic evaluationType of economic evaluation Outcome can be measured byOutcome can be measured by
Cost effectiveness analysis • Clinical end points
• Mortality
• Years of life
• Condition specific outcome measures
Cost utility analysis • Utility based quality of life scales
(DALY, QALY)
Cost benefit analysis • Monetary value of health benefits
Cost Minimization analysis: Least cost with same effects

11. Health care
sector – C1
Resource
consumed
Other sector
– C3
Patient and
family – C2
Health care
programme
Other values
created (v)
Health state
changed
Effects
(E)
Resources
saved
Health care
sector – S1
Patient and
family – S2
Other sector
– S3
COSTS CONSEQUENCES
Total cost = C1+C2 + C3 –(S1+S2+S3)
Cost-effectiveness
analysis
C1+C2 + C3 –(S1+S2+S3) /E
•Life years saved
•Mm Hg BP
reduced
•Number of
patients treated
successfully

12. Health care
sector – C1
Resource
consumed
Other sector
– C3
Patient and
family – C2
Health care
programme
Other values
created (V)
Health state
changed
Effects
(E)
Resources
saved
Health care
sector – S1
Patient and
family – S2
Other sector
– S3
Health state
preference
(U)
COSTS CONSEQUENCES
Cost-utility analysis
C1+C2 + C3 –
(S1+S2+S3) /U
•Quality adjusted
life years
(QALYs)

13. Health care
sector – C1
Resource
consumed
Other sector
– C3
Patient and
family – C2
Health care
programme
Other values
created (V)
Health state
changed
Effects
(E)
Resources
saved
Health care
sector – S1
Patient and
family – S2
Other sector
– S3
Monetary value
(Rs) of health
benefits
COSTS CONSEQUENCES
Cost-benefit analysis
[W+V+S1+S2+S3] –
[C1+C2+C3)

14. Programme A
Programme B
Choice
Costs A
Costs B
Effects A
Effects B
CB – CA / EB - EA =
Incremental cost
effectiveness
Average cost
effectiveness A = CA / EA
Average cost
effectiveness B = CB / EB
Average & Incremental Cost Effectiveness Ratio

15. +-
+
-
O
IV
IIIII
ICost difference
Effect
difference
Less effective
More costly
Less effective
Less costly
More effective
Less costly
More effective
More costly
200 300
1,00,000
2,00,000
100
Cost –effectiveness plane
x
y
●
●
●
Excluded
Questionable
Dominant
Cost-effective ?
Less effective
More costly

16. Interpretation of ICERInterpretation of ICER
• < GDP per capita : Very cost effective
• 1-3 times GDP per capita : Cost effective
• >3 times GDP per capita : Not cost effective

17. Examples for
Illustration

18. India’s female sex worker HIV preventionIndia’s female sex worker HIV prevention
programprogram
Prinja S, et al. Sex Transm Inf. 2011; 87: 354-61.

19. Incremental Cost Effectiveness
Ratio (ICER)
Value
Government perspective
USD per DALY averted 819
USD per life year gained 885
USD per Hib case averted 115
USD per Hib death averted 26,004
Societal perspective
USD per DALY averted 277
USD per life year gained 300
USD per Hib case averted 39
USD per Hib death averted 8,809
Hib vaccine in UIP: Haryana state, IndiaHib vaccine in UIP: Haryana state, India
19
Gupta M, Prinja S et al. Health Policy and Planning (2012).

20. Cost Effectiveness of IMNCI program in IndiaCost Effectiveness of IMNCI program in India
Prinja S, et al (2015). Unpublished
Incremental Cost
ICER, using different Perspective for ICER
Health system Societal
Per illness averted 1699 1183
Per infant death averted 49963 34799
Per DALY averted 1554 1082

21. How Can CEA Guide Policy?How Can CEA Guide Policy?

22. How Can CEA Guide Policy?How Can CEA Guide Policy?

23. How Can CEA Guide Policy?How Can CEA Guide Policy?

24. Does Using EE violates Equity?
• Maybe yes!
• Maybe no!
• But then what do we do?

25. Conclusion
• Introduction to efficiency and economic evaluation
• Efficiency should be an important consideration for
planning and implementation of health programs
• Cost effectiveness analysis helps in making efficiency
decisions
• Incremental cost effectiveness ratio is the key output
measure

26. Open Access Policy
KEYSTONE commits itself to the principle of open access to knowledge. In keeping with this, we strongly support open access and use of materials that we
created for the course. While some of the material is in fact original, we have drawn from the large body of knowledge already available under open licenses
that promote sharing and dissemination. In keeping with this spirit, we hereby provide all our materials (wherever they are already not copyrighted elsewhere
as indicated) under Creative Commons Attribution-NonCommercial 4.0 International License. To view a copy of this license visit
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