Cost Effectiveness Analysis Page 2    HHS    CDC
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 IntroductionJump to page 1.
Framing CEA
General concepts on framing have been presented in the FramingOpen this in a new window tutorial. This tutorial will focus on how framing pertains to CEA.
Defining the Problem
In a CEA, health-related outcomes are relevant in the problem specification section. Since CEA is a comparative analysis, knowing costs and outcomes for both the existing and the proposed or alternative available programs is relevant.
Specific questions that could guide the problem identification section include:
  • Which intervention, a telephone help line or group treatment, is more cost effective for increasing the rate of smoking cessation among middle-aged adults?
  • Which intervention is more cost effective in treating persons who are intermediate or heavy smokers:
    • a transdermal nicotine patch in addition to physician counseling, or
    • counseling alone?
When defining the study problem for a CEA, asking these four questions is often helpful:
  • What is the problem to be analyzed?
  • Why is this problem important?
  • What aspects of the problem need to be explained?
  • What questions need to be answered?
Once the study problem has been identified, a research strategy must be adopted to further direct the framing process. This requires deciding how to structure the CEA.
An Example: Defining the Problem
This example is abstracted from a CEA conducted in 2000 to assess the cost effectiveness of two interventions (i.e., lifestyle and structured) designed to increase physical activity among sedentary adults in Dallas, Texas.
Texas' Project ACTIVE:
Lifestyle versus Structured Interventions
What is the problem to be analyzed? Sedentary lifestyles are prevalent among adults in the United States.
Why is this problem important? An association exists between inactivity and morbidity and mortality, especially with regard to chronic diseases, such as diabetes and cardiovascular disease.
What aspects of the problem need to be explained? In an effort to reduce overall health-care costs and utilization by promoting prevention activities, information on costs and effectiveness was needed to evaluate the program.
What questions need to be answered?
  • What was the cost of the first two years of running the program?
  • Did the program effectively increase physical activity among its participants?
Adopting a Research Strategy
Once the study problem has been identified and defined, a research strategy must be adopted that can direct an evaluator through the remainder of the framing process.
This requires deciding how to structure the CEA.
Following is a list of questions to ensure that all aspects of the research strategy are considered.
What Intervention(s) Will Be Analyzed?
The first task is to define with precision the programs or interventions to be evaluated. For each intervention or program included in the study, identify the following elements:
  • Nature of the intervention — e.g., a screening and vaccination program for varicella zoster virus (VZV) or "chickenpox" infection.
  • Target population — e.g., employees of a health-care institution.
  • Delivery site — e.g., hospital.
  • Personnel delivering the service — e.g., hospital nurses.
  • Technology to be used — e.g., an enzyme-linked fluorescent immunoassay test to determine serologic status.
  • Timing of the intervention — e.g., screening performed at program onset with subsequent vaccination for those patients with no immunity immediately following.
Identifying the elements stated above precisely is important because programs that appear similar might have very different costs and outcomes.
For example, in the example above, program costs would be different if only high-risk workers were screened rather than all hospital personnel.
Who Is the Audience?
The CEA study must address the needs of all persons, clinicians, legislators, and public health officials involved. A well-written problem identification section typically specifies the audience.
Whose Perspective?
Typically, the societal perspective is used in CEA studies dealing with public health issues.
What is the Time Frame?
The study must also specify the time during which the intervention is in effect. In other words, the time frame for a CEA of a varicella vaccination program should span the entire vaccination delivery schedule, not just the screening process.
What is the Analytic Horizon?
The researcher must make sure to include all costs and outcomes attributable to the intervention over the entire period that these costs and outcomes are observable or measurable.
In a CEA study for the varicella vaccination program described above, the analytic horizon would include the time frame (screening and delivery) plus the time during which the vaccine provides protective effects against acquiring the disease.
What is the Study Format?
The study format for a CEA may be:
  • a prospective study,
  • a retrospective study, or
  • a model.
What Outcome Measures Are We Interested In?
CEA outcomes are measured in natural or physical units and can be intermediate outcomes or final outcomes.
What Are the Available Alternatives?
After the study has been carefully framed, all appropriate interventions for comparison must be selected. For a CEA to be useful, the program under evaluation must be compared with all relevant alternatives.
The baseline comparator generally refers to the existing program and must be included as an option in the analysis. Alternatively, the baseline can be "no program." Including the baseline measure meets the needs of policy makers, who typically are interested in a new program's incremental costs (i.e., the costs beyond current expenditures) as well as in its effectiveness.
As a general rule, all programs that effectively achieve the same outcome among a given population and are deemed socially and politically acceptable should be considered as alternatives.
Which Costs Are Included in the CEA?
A CEA typically includes all tangible costs and excludes intangible costs.
Cost is referred to as the net cost, which is program costs minus 1) the cost of disease averted and 2) the cost of productivity losses averted. In a CEA, the costs of the disease averted and the cost of productivity losses averted are assessed by using the cost of illness (COI) method.
Net cost = Program cost – Cost of disease averted – Cost of productivity losses averted
Net cost is a summary measure that subtracts overall savings from gross program costs. Cost of disease averted and cost of productivity losses averted are subtracted because they are savings, and excluding them from the net cost equation will result in overestimating costs.
If the analysis is conducted from a societal perspective, averted productivity losses should be included in the net cost calculation. From a health-care system perspective, productivity losses might not be relevant.
Cost of Productivity Losses Averted
In a CEA, the human capital (HC) approach, a COI method, can be used to assess productivity losses.
The HC approach uses as its assessment measure forgone income attributable to morbidity and premature mortality as the result of some injury or illness. The HC methods are generally used to value productivity changes attributable to health problems.
An Example
Adopting a Research Strategy: Lifestyle versus structured interventions
Problem Sedentary lifestyles are:
  • thought to be associated with cardiovascular disease and diabetes, and
  • prevalent among adults in the United States.
Target audience
  • health-care providers who wish to improve the health of their patients, and
  • third-party payers who must consider health, costs, and service utilization of their enrollees.
CEA perspective The provider perspective was used, because costs individual to the patient are not included.
Time frame Twenty-four months for both interventions, the first 6 months being more intensive than the last 18 months.
Analytic horizon In this study, the analytic horizon is identical to the time frame, e.g., 24 months, because only intermediate outcome measures were assessed.
Study format Prospective.
Outcome measure under investigation The study used intermediate outcomes in the form of average units of improvement, including such measures as:
  • "change in energy expenditure,"
  • self-reported activity levels,
  • weight, and
  • blood pressure.
Costs included in the CEA Program costs included direct nonmedical costs, such as:
  • personnel (e.g., health educator and nutritionist),
  • capital equipment (e.g., computerized tracking system),
  • curriculum materials,
  • supplies (e.g., postage and printing),
  • facilities, and
  • health club memberships.
Costs borne by the patient (e.g., travel expenses) were not included in the cost inventory.
Test Your Understanding
  1. Is it appropriate to define the research problem clearly before adopting a strategy?
  2. Who is the audience for a study?
  3. What is the perspective of a study?
  4. Which costs are included in a study conducted from a societal perspective?
  5. Would patient travel costs be included in a study conducted from a health-care system perspective?
  6. What is the difference between a study time frame and analytic horizon?
  7. Is it possible to conduct a prospective study to assess the cost of a program that was recently terminated?
  8. List two intermediate outcomes that could be used to assess the effectiveness of a nursing home vaccination program.
  9. Give an example of a final outcome for this same program.
  10. List two alternative programs for a community wide education campaign for increasing child safety seat use.
  11. What are the components of the net cost equation?
  12. Why are cost of disease averted and cost of productivity losses averted deducted from the program cost in the net cost equation?
  13. In which of these studies should the cost of productivity losses averted be included in the net cost equation?
    A study conducted from a societal perspective
    A study conducted from the patient's perspective
    A study conducted from the health-care system perspective
  14. The cost of an intervention was estimated at $740,000 for 50 participants. The program averted 60% of disease conditions, and the average cost of the disease per person was estimated at $20,000. The total cost of productivity losses averted was estimated at $300,000.
    1. Calculate the cost of disease averted.
    2. Calculate the net cost from the societal perspective.
    3. Calculate the net cost from the health-care system perspective.
  15. Given your answer to question 14B above, should the program be implemented?
Our Answers
  1. Is it appropriate to define the research problem clearly before adopting a strategy?
    Generally, yes, because once projects are under way, their objectives and characteristics need to be defined so that appropriate research is conducted and succinct results are reported.
  2. Who is the audience for a study?
    The users or consumers of the final results.
  3. What is the perspective of a study?
    The perspective of a study is the viewpoint from which it is conducted. A study's perspective defines both the costs and benefits that are measured.
  4. Which costs are included in a study conducted from a societal perspective?
    A study conducted from a societal perspective includes all relevant costs, regardless of who incurs them.
  5. Would patient travel costs be included in a study conducted from a health-care system perspective?
    No. Travel cost borne by the patient would not be relevant to a health-care system; however, a study conducted from a patient or societal perspective would include such costs.
  6. What is the difference between a study time frame and analytic horizon?
    • The time frame is the period over which program/intervention costs are tracked.
    • The analytic horizon is the period over which the costs and outcomes associated with the impact of the program/intervention are tracked.
  7. Is it possible to conduct a prospective study to assess the cost of a program that was recently terminated?
    No. In a prospective study, information about costs is collected as the costs are incurred. No information can be collected prospectively if no program activity exists.
  8. List two intermediate outcomes that could be used to assess the effectiveness of a nursing home vaccination program.
    • Number of vaccine doses administered
    • Number of persons receiving vaccine
  9. Give an example of a final outcome for this same program.
    Number of life years gained from use of vaccine.
  10. List two alternative programs for a community wide education campaign for increasing child safety seat use.
    • Incentive programs
    • Child safety seat laws
    • A combined distribution and education program
  11. What are the components of the net cost equation?
    The three components are:
    1. program cost,
    2. cost of disease averted, and
    3. cost of productivity losses averted.
  12. Why are cost of disease averted and cost of productivity losses averted deducted from the program cost in the net cost equation?
    Cost of disease averted and the cost of productivity losses averted are deducted from the program cost because they are savings.
    Ignoring costs averted understates the benefits and consequently overstates the cost of the program.
  13. In which of these studies should the cost of productivity losses averted be included in the net cost equation?
    A study conducted from a societal perspective
    A study conducted from the patient's perspective
    A study conducted from the health-care system perspective
    The cost of productivity losses averted should be included in the net cost equation if the study is conducted from either:
    • a societal perspective, or
    • the patient's perspective.
  14. The cost of an intervention was estimated at $740,000 for 50 participants. The program averted 60% of disease conditions, and the average cost of the disease per person was estimated at $20,000. The total cost of productivity losses averted was estimated at $300,000.
    1. Calculate the cost of disease averted.
      Using:
      Cost of disease per person = $20,000
      Number of persons with averted disease conditions = 0.6 x 50
        = 30
      Then:
      Total cost of disease averted = $20,000 x 30
        = $600,000
    2. Calculate the net cost from the societal perspective.
      Using:
      Program cost = $740,000
      Cost of disease averted = $600,000
      Cost of productivity losses averted = $300,000
      Then:
      Net cost = Program cost – Cost of disease averted – Cost of productivity losses averted
      Net cost = $740,000 – $600,000 – $300,000
        = –$160,000
    3. Calculate the net cost from the health-care system perspective.
      Using:
      Net cost = Program cost – Cost of disease averted
      Then:
      Net cost = $740,000 – $600,000
        = $140,000
  15. Given your answer to question 14B above, should the program be implemented?
    Negative net costs imply savings, and such programs typically are implemented.
 Which Outcomes are Relevant in CEA?Jump to page 3.
 Interpreting CEA ResultsJump to page 4.
 Glossary — CEAJump to page Glossary.
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Acknowledgements
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Based on earlier, paper-based Framing &
Cost Analysis self-study guides by
Phaedra Corso, NCIPC
Odile Ferroussier, NCHSTP
Amanda Schofield
Additional acknowledgements
Vilma Carande-Kulis, OCSO
Sajal Chattopadhyay, OSI
Martin Meltzer, NCID
Contacts
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