1. Schneider Institute for Health Policy Heller School Brandeis University September 2001 1 by Donald S. Shepard, Ph.D. Schneider Institute for Health Policy Heller School, MS 035 Brandeis University Waltham, MA 02454-9110 USA Tel: 781-736-3975 Fax: 781-736-3965 Web: http://www.sihp.brandeis.edu/shepard E-mail: Shepard@Brandeis.edu Monday, Sept 10: Principles of Cost-Effectiveness Analysis

2. Schneider Institute for Health Policy Heller School Brandeis University September 2001 2 Donald S. Shepard, Ph.D. Schneider Institute for Health Policy Heller School, MS 035 Brandeis University Waltham, MA 02454-9110 USA Tel: 781-736-3975 Fax: 781-736-3965 Web: http://www.sihp.brandeis.edu/shepard E-mail: Shepard@Brandeis.edu Module I September 5, 2001 – October 22, 2001 Cost-effectiveness of health programs In health services and other sectors HS 422f

3. Schneider Institute for Health Policy Heller School Brandeis University September 2001 3 Practical information Teaching assistant: Jsuaya@Brandeis.edu Administrative assistant: Linda Purrini, Next to library in Heller 781-736-3930 Purrini@Brandeis.edu Cost of packet (including diskette): $6.00

4. Schneider Institute for Health Policy Heller School Brandeis University September 2001 4 Web page

5. Schneider Institute for Health Policy Heller School Brandeis University September 2001 5 Overview of topics 1.Principles 2.Measuring effectiveness 3.Applications 4.Policy uses

6. Schneider Institute for Health Policy Heller School Brandeis University September 2001 6 Types of costs Recurrent costs (one year or less) –personnel cost (faculty and supporting staff ) –materials (copies, etc.) –building upkeep Capital items (greater than one year) –equipment –buildings

7. Schneider Institute for Health Policy Heller School Brandeis University September 2001 7 Illustrative calculation of costs of PhD program at Heller, based on hypothetical survey of 3 faculty

8. Schneider Institute for Health Policy Heller School Brandeis University September 2001 8 Impact of PhD program Outputs – number of graduates Outcome – impact of the graduates Graduates: independent funded research projects

9. Schneider Institute for Health Policy Heller School Brandeis University September 2001 9 Two perspectives on capital costs

10. Schneider Institute for Health Policy Heller School Brandeis University September 2001 10 Perspective University Student Society

11. Schneider Institute for Health Policy Heller School Brandeis University September 2001 11 Direct and indirect costs Direct cost = cost of medical care for that condition Indirect cost = all cost outside of the health sector, especially value of lost productivity (morbidity and mortality)

12. Schneider Institute for Health Policy Heller School Brandeis University September 2001 12 Cost-benefit vs cost-effectiveness Type of cost Cost- effectiveness Cost-benefit analysis DirectIncluded Indirect costCounted in physical terms Counted in monetary terms

13. Schneider Institute for Health Policy Heller School Brandeis University September 2001 13 Discounting Adjust for differences in timing between costs or benefits. FV = future value PV = present value R = annual interest rate N = number of years FV = PV (1+R) N PV = FV [1/(1+R) N ] Discount factor = [1/(1+R) N ]

14. Schneider Institute for Health Policy Heller School Brandeis University September 2001 14 Expected cost Cost if event occurs x probability of its occurence

15. Schneider Institute for Health Policy Heller School Brandeis University September 2001 15 Purchasing power parity