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Quantifying short run cost-effectiveness during a gradual implementation process

Author

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  • Gijs Wetering
  • Willem Woertman
  • Andre Verbeek
  • Mireille Broeders
  • Eddy Adang

Abstract

This paper examines the short run inefficiencies that arise during gradual implementation of a new cost-effective technology in healthcare. These inefficiencies arise when health gains associated with the new technology cannot be obtained immediately because the new technology does not yet supply all patients, and when there is overcapacity for the old technology in the short run because the supply of care is divided among two mutually exclusive technologies. Such efficiency losses are not taken into account in standard textbook cost-effectiveness analysis in which a steady state is presented where costs and effects are assumed to be unchanging over time. A model is constructed to quantify such short run inefficiencies as well as to inform the decision maker about the optimal implementation pattern for the new technology. The model operates by integrating the incremental net benefit equations for both the period of co-existence of mutually exclusive technologies and the period after complete substitution of the old technology. It takes into account the rate of implementation of the new technology, depreciation of capital of the old technology as well as the demand curves for both technologies. The model is applied to the real world case of converting from screen film to digital mammography in the Netherlands. Copyright Springer-Verlag Berlin Heidelberg 2013

Suggested Citation

  • Gijs Wetering & Willem Woertman & Andre Verbeek & Mireille Broeders & Eddy Adang, 2013. "Quantifying short run cost-effectiveness during a gradual implementation process," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 14(6), pages 911-918, December.
    • Handle: RePEc:spr:eujhec:v:14:y:2013:i:6:p:911-918
    DOI: 10.1007/s10198-012-0435-2
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    References listed on IDEAS

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    1. Drummond, Michael F. & Sculpher, Mark J. & Torrance, George W. & O'Brien, Bernie J. & Stoddart, Greg L., 2005. "Methods for the Economic Evaluation of Health Care Programmes," OUP Catalogue, Oxford University Press, edition 3, number 9780198529453.
    2. Borger, Christine & Rutherford, Thomas F. & Won, Gregory Y., 2008. "Projecting long term medical spending growth," Journal of Health Economics, Elsevier, vol. 27(1), pages 69-88, January.
    3. 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.
    4. Sanjay Kallapur & Leslie Eldenburg, 2005. "Uncertainty, Real Options, and Cost Behavior: Evidence from Washington State Hospitals," Journal of Accounting Research, Wiley Blackwell, vol. 43(5), pages 735-752, December.
    5. Eddy Adang, 2008. "Economic evaluation of innovative technologies in health care should include a short-run perspective," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 9(4), pages 381-384, November.
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    Cited by:

    1. Stuart J. Wright & Mike Paulden & Katherine Payne, 2020. "Implementing Interventions with Varying Marginal Cost-Effectiveness: An Application in Precision Medicine," Medical Decision Making, , vol. 40(7), pages 924-938, October.

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    More about this item

    Keywords

    Economic evaluation; Technology substitution; Short run efficiency; Implementation; Cost behaviour; D01; D24; D60; D61;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D60 - Microeconomics - - Welfare Economics - - - General
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

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