Cost minimization

1. COST MINIMIZATION
ANALYSIS
- KAMALA NEHRU UPHC

2. 

Refers to comparison of two interventions or strategies which are
assumed to have the same outcome or effects to find out which of the
two is least costly option.
The goal is to determine which intervention has the lowest cost, thereby
minimizing expenditure while achieving the same outcomes.
DEFINITION

3. 1. The interventions being compared must have identical clinical
effectiveness.
2. The focus is purely on cost differences between the alternatives.
KEY ASSUMPTIONS…

4. EXAMPLES
A hospital is considering two
antibiotics, Drug A and Drug B,
to treat a bacterial infection.
Clinical studies have shown
that both drugs have the same
effectiveness, safety profile,
and treatment duration. The
hospital wants to choose the
cheaper option.
Cost component Drug A (per patient) Drug B(per patient)
Drug cost 50 40
Administrations of
cost
20 30
Monitoring cost 10 15
Total cost 80 85

5. 1. Simple and Easy to Use - straightforward because it only compares costs
without requiring complex effectiveness assessments.
2. Useful for Identical Outcomes – It is ideal when two or more medical
interventions have proven equal effectiveness, making cost the primary
decision factor.
3. Supports Cost-Effective Decision-Making - Helps healthcare providers and
policymakers reduce expenses without compromising patient care.
ADVANTAGES

6. ADVANTAGES…
4. Time and Resource Efficient - Since it doesn't require in-depth
clinical comparisons, it saves time and resources in economic
evaluations.
5. Widely Applicable - Used in selecting drugs (generic vs. brand),
surgical techniques, anesthesia methods, and treatment settings
(home vs. hospital care)

7. DISADVATAGES
1. Requires Proven Equal Effectiveness - CMA is only valid when treatments
are clinically identical in outcomes, which is not always the case.
2. Limited Scope - It does not consider differences in patient preferences,
side effects, or long-term health benefits.

8. 3. Potential for Inaccurate Cost Estimates - Costs can vary based on factors like hospital
infrastructure, healthcare policies, and unexpected complications.
4. Ignores Quality of Life Factors - Does not evaluate patient satisfaction, adherence rates,
or long-term health benefits that might differ between treatments.
5. Not Suitable for New or Evolving Treatments - Many new treatments lack sufficient
long-term data to confirm equal effectiveness, limiting CMA's use.
DISADVANTAGES

9. 

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Generic vs. Brand-name Drugs: If both have the same efficacy, the cheaper
generic drug is preferred.
Surgical Techniques: When two methods achieve the same patient outcomes, the
one with lower operational costs is chosen.
Medical Equipment: Hospitals may compare maintenance costs of two identical-
function machines.
CMA is widely used in pharmacoeconomics, hospital management, and
healthcare policy to ensure cost-effective treatment choices without
compromising patient care quality
REAL-WORLD APPLICATION OF CMA

10. CMA is a valuable tool for healthcare cost control but should only
be used when treatments have proven identical outcomes. If
effectiveness varies, other economic evaluations (like cost-
effectiveness analysis) are more appropriate.
CONCLUSION

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