3. The Crucial Issue
Construct Alternatives that hold something constant
Hold Cost Constant and Maximize Effectiveness
o Or
Hold Effectiveness Constant and minimize costs
4. Applications
To buy a 1.5 tesla MRI Scanner or buy 3 Ct Scanners
To increase no of TB Diagnostic Centres or Fund Free TB
Drugs
Construct a new tertiary care hospital or upgrade one
DHQH and 3 THQH
5. Costing
Costing estimates are done by historical estimates or by
current market survey
Stepwise the costing process involves
Charting the activities of a plan
Calculating Unit costs based on current market rates
Calculating carrying costs, costs of operations, fixtures,
personnel, again in unit terms
6. Costing- Contd
In other words
Acquisition (non-recurring)
– Development
– Procurement
• Land
• Facilities
• Equipment (depends on number of systems)
– Salvage
• Operations and Support (recurring)
– Operations and Maintenance
– Personnel
7. Adding to original costs, we can calculate costs in terms of
Fixed, Variable and Marginal Costs, as in practice costs are
fluctuating at different levels of outputs
13. Consider two strategies intended to lengthen life in patients
with heart disease. One is simple and cheap (e.g., aspirin and
-blockers); the other is more complex, more expensive, and
more effective (e.g., medication plus cardiac catheterization,
angioplasty, stents, and bypass). For simplicity, we will
assume that doing nothing has no cost and no effectiveness.
14.
15. Because CEA involves marginal cost and benefits, the choice
of which strategies to compare can drive the calculation and
the conclusion of a CEA. Consider the effect of repeating the
above analysis without the simple strategy