1. Nayyar Raza Kazmi
MBBS, DHPM, MPH, M.Sc
Cost Effectiveness Analysis in Health
Care Planning

2. Cost Effectiveness Methodology
Define Objectives
Structure Alternatives
Calculate Effectiveness
Estimate Costs
Choose a Criterion

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

9. C
Calculate Effectiveness
Usually measured in QALY’s, DALY’s, No of deaths averted,
No of Lives saved, No of children immunized.

10. Calculate Cost to effectiveness ratio

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.

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