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Good Technologies Gone Bad

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  • Charles E. Phelps

Abstract

Cost-effectiveness (CE) ratios vary considerably, not only across interventions, but within single interventions. Using a simple decision-tree model of the treat-vs no-treat decision to organize the analysis, four potential errors leading to these within-treatment differences in CE ratios are identified. These errors arise from estimates relating to 1) prior probabilities of disease; 2) treatment efficacies; 3) costs of treatment; and 4) patient preferences. Systematic biases, where present, suggest overuse of medical interventions. For diagnostic tests, two additional potential sources of error are con sidered (using a simple decision tree incorporating both test and treat decisions). These involve 5) sensitivity and specificity of the diagnostic test and 6) inappropriate choice of "cutoff" to determine abnormal patients, in part arising from errors in esti mating prior probability of disease. Key words: cost-effectiveness; biases; errors; re source use; utilities. (Med Decis Making 1997;17:107-117)

Suggested Citation

  • Charles E. Phelps, 1997. "Good Technologies Gone Bad," Medical Decision Making, , vol. 17(1), pages 107-117, February.
    • Handle: RePEc:sae:medema:v:17:y:1997:i:1:p:107-117
    DOI: 10.1177/0272989X9701700113
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    References listed on IDEAS

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    1. Woodward, Robert S. & Warren-Boulton, Frederick, 1984. "Considering the effects of financial incentives and professional ethics on `appropriate' medical care," Journal of Health Economics, Elsevier, vol. 3(3), pages 223-237, December.
    2. Charles E. Phelps & Alvin I. Mushlin, 1988. "Focusing Technology Assessment Using Medical Decision Theory," Medical Decision Making, , vol. 8(4), pages 279-289, December.
    3. Viscusi, W Kip, 1989. "Prospective Reference Theory: Toward an Explanation of the Paradoxes," Journal of Risk and Uncertainty, Springer, vol. 2(3), pages 235-263, September.
    4. Charles E. Phelps, 1992. "Diffusion of Information in Medical Care," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 23-42, Summer.
    5. Dranove, David, 1988. "Demand Inducement and the Physician/Patient Relationship," Economic Inquiry, Western Economic Association International, vol. 26(2), pages 281-298, April.
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    Cited by:

    1. Abe C. Dunn & Adam Shapiro & Eli Liebman, 2011. "Geographic Variation in Commercial Medical Care Expenditures: A Decomposition Between Price and Utilization," BEA Working Papers 0075, Bureau of Economic Analysis.
    2. Yizhe Xu & Tom H. Greene & Adam P. Bress & Brandon K. Bellows & Yue Zhang & Zugui Zhang & Paul Kolm & William S. Weintraub & Andrew S. Moran & Jincheng Shen, 2022. "An Efficient Approach for Optimizing the Cost-effective Individualized Treatment Rule Using Conditional Random Forest," Papers 2204.10971, arXiv.org.
    3. John Mullahy, 2001. "Live long, live well: quantifying the health of heterogeneous populations," Health Economics, John Wiley & Sons, Ltd., vol. 10(5), pages 429-440, July.

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