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From Wikipedia, the free encyclopedia

Cost-effectiveness analysis (CEA) is a form of economic analysis that compares the relative costs and outcomes (effects) of two or more courses of action. Cost-effectiveness analysis is distinct from cost-benefit analysis, which assigns a monetary value to the measure of effect.[1] Cost-effectiveness analysis is often used in the field of health services, where it may be inappropriate to monetize health effect. Typically the CEA is expressed in terms of a ratio where the denominator is a gain in health from a measure (years of life, premature births averted, sight-years gained) and the numerator is the cost associated with the health gain.[2] The most commonly used outcome measure is quality-adjusted life years (QALY).[1] Cost-utility analysis is similar to cost-effectiveness analysis.


CEA in Infrastructure Asset Management

Cost-effectiveness analysis is commonly used in Infrastructure Asset Management instead of a full cost-benefit analysis where the objective is to sustain the existing standard of service. The replacement or refurbishment of an existing Infrastructure Asset is a good example of this. In effect, the benefits side of the equation is held constant at some pre-determined standard of service, and various options for providing that standard of service are then compared, with the least-cost method identified as the preferred option.

The use of CEA is supported by the benefits identified in the Asset Management Plan where the whole-life cost is also detailed. As such, an indicative benefit-cost ratio is contained within the Asset Management Plan - allowing individual assets to be justified as part of a system of assets. This provides a framework for the safe use of CEA for individual assets.

CEA in pharmacoeconomics

In the context of pharmacoeconomics, the cost-effectiveness of a therapeutic or preventive intervention is the ratio of the cost of the intervention to a relevant measure of its effect. Cost refers to the resource expended for the intervention, usually measured in monetary terms such as dollars or pounds. The measure of effects depends on the intervention being considered. Examples include the number of people cured of a disease, the mm Hg reduction in diastolic blood pressure and the number of symptom-free days experienced by a patient. The selection of the appropriate effect measure should be based on clinical judgement in the context of the intervention being considered.

A special case of CEA is cost-utility analysis, where the effects are measured in terms of years of full health lived, using a measure such as quality-adjusted life years or disability-adjusted life years.

Cost-effectiveness is typically expressed as an incremental cost-effectiveness ratio (ICER), the ratio of change in costs to the change in effects.

A complete compilation of cost-utility analyses in the peer reviewed medical literature is available from the Cost-Effectiveness Analysis Registry website.

A 1995 study of the cost-effectiveness of over 500 life-saving medical interventions found that the median cost per intervention was $42,000 per life-year saved.[3] A 2006 systematic review found that industry-funded studies reported lower costs, as did studies with lower methodological quality and those from outside the U.S. and Europe.[4]

See also


  1. ^ a b Bleichrodt H, Quiggin J (December 1999). "Life-cycle preferences over consumption and health: when is cost-effectiveness analysis equivalent to cost-benefit analysis?". J Health Econ 18 (6): 681–708. PMID 10847930.  
  2. ^ Gold MR et al.. Cost-effectiveness in health and medicine. p. xviii.  
  3. ^ Tengs TO, Adams ME, Pliskin JS, et al (June 1995). "Five-hundred life-saving interventions and their cost-effectiveness". Risk Anal. 15 (3): 369–90. PMID 7604170.  
  4. ^ Bell CM, Urbach DR, Ray JG, et al (March 2006). "Bias in published cost effectiveness studies: systematic review". BMJ 332 (7543): 699–703. doi:10.1136/bmj.38737.607558.80. PMID 16495332.  

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