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Cost-Effectiveness on a Local Level

Author

Listed:
  • Willem H. Woertman
  • Gijs Van De Wetering
  • Eddy M. M. Adang

Abstract

Cost-effectiveness analysis has become a widely accepted tool for decision making in health care. The standard textbook cost-effectiveness analysis focuses on whether to make the switch from an old or common practice technology to an innovative technology, and in doing so, it takes a global perspective. In this article, we are interested in a local perspective, and we look at the questions of whether and when the switch from old to new should be made. A new approach to cost-effectiveness from a local (e.g., a hospital) perspective, by means of a mathematical model for cost-effectiveness that explicitly incorporates time, is proposed. A decision rule is derived for establishing whether a new technology should be adopted, as well as a general rule for establishing when it pays to postpone adoption by 1 more period, and a set of decision rules that can be used to determine the optimal timing of adoption. Finally, a simple example is presented to illustrate our model and how it leads to optimal decision making in a number of cases.

Suggested Citation

  • Willem H. Woertman & Gijs Van De Wetering & Eddy M. M. Adang, 2014. "Cost-Effectiveness on a Local Level," Medical Decision Making, , vol. 34(3), pages 379-386, April.
    • Handle: RePEc:sae:medema:v:34:y:2014:i:3:p:379-386
    DOI: 10.1177/0272989X13497995
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    References listed on IDEAS

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    1. Gijs Wetering & Willem Woertman & Eddy Adang, 2012. "Time to incorporate time in cost-effectiveness analysis," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 13(3), pages 223-226, June.
    2. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
    3. Arthur E. Attema & Anna K. Lugnér & Talitha L. Feenstra, 2010. "Investment in antiviral drugs: a real options approach," Health Economics, John Wiley & Sons, Ltd., vol. 19(10), pages 1240-1254, October.
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