IDEAS home Printed from https://ideas.repec.org/a/wly/hlthec/v21y2012i3p270-281.html
   My bibliography  Save this article

A model to correct for short‐run inefficiencies in economic evaluations in healthcare

Author

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

Abstract

Important assumptions that underlie cost‐effectiveness analysis (CEA) are that production technologies are convex and that production processes always perform at constant returns to scale. However, in the short run these assumptions are likely to be violated. Therefore, CEAs might overestimate cost‐effectiveness in the short run. To come up with a more precise cost‐effectiveness outcome, we present a model that is able to correct the long‐run incremental net benefit (INB) for short‐run inefficiencies. This provides decision makers with a more realistic view of the expected efficiency gains. This model starts by determining the initial efficiency losses inflicted by inflexible resources. Then the model is made dynamic in order to adjust the efficiency losses by allowing for refilling and writing off freed capacity. Finally, the model calculates the length of the short‐run time frame in which such efficiency losses exist, and a correction term with which the usual long‐run INB should be adjusted to account for short‐run inefficiencies. The model is applied to two cases: dialysis and digitizing a radiography department. The dialysis case shows moderate short‐run efficiency losses while in the radiography case short‐run efficiency losses are sufficiently large to cause a switch in cost‐effectiveness from favorable to inefficient in the short run. Copyright © 2011 John Wiley & Sons, Ltd.

Suggested Citation

  • Gijs Van de Wetering & Willem H. Woertman & Eddy M. M. Adang, 2012. "A model to correct for short‐run inefficiencies in economic evaluations in healthcare," Health Economics, John Wiley & Sons, Ltd., vol. 21(3), pages 270-281, March.
    • Handle: RePEc:wly:hlthec:v:21:y:2012:i:3:p:270-281
    DOI: 10.1002/hec.1705
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/hec.1705
    Download Restriction: no
    File URL: https://libkey.io/10.1002/hec.1705?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Tone, Kaoru & Sahoo, Biresh K., 2003. "Scale, indivisibilities and production function in data envelopment analysis," International Journal of Production Economics, Elsevier, vol. 84(2), pages 165-192, May.
    2. Walter Briec & Kristiaan Kerstens & Philippe Venden Eeckaut, 2004. "Non-convex Technologies and Cost Functions: Definitions, Duality and Nonparametric Tests of Convexity," Journal of Economics, Springer, vol. 81(2), pages 155-192, February.
    3. Adang, Eddy M.M. & Wensing, Michel, 2008. "Economic barriers to implementation of innovations in health care: Is the long run-short run efficiency discrepancy a paradox?," Health Policy, Elsevier, vol. 88(2-3), pages 236-242, December.
    4. Adang, Eddy & Voordijk, Leo & Jan van der Wilt, Gert & Ament, Andre, 2005. "Cost-effectiveness analysis in relation to budgetary constraints and reallocative restrictions," Health Policy, Elsevier, vol. 74(2), pages 146-156, October.
    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.
    6. Smet, Mike, 2002. "Cost characteristics of hospitals," Social Science & Medicine, Elsevier, vol. 55(6), pages 895-906, September.
    7. 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.
    8. de Wit, G.Ardine & Ramsteijn, Paul G & de Charro, Frank Th, 1998. "Economic evaluation of end stage renal disease treatment," Health Policy, Elsevier, vol. 44(3), pages 215-232, June.
    9. Elisabeth Fenwick & Karl Claxton & Mark Sculpher, 2008. "The Value of Implementation and the Value of Information: Combined and Uneven Development," Medical Decision Making, , vol. 28(1), pages 21-32, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. van Baal, Pieter & Morton, Alec & Severens, Johan L., 2018. "Health care input constraints and cost effectiveness analysis decision rules," Social Science & Medicine, Elsevier, vol. 200(C), pages 59-64.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Adang, Eddy M.M. & Wensing, Michel, 2008. "Economic barriers to implementation of innovations in health care: Is the long run-short run efficiency discrepancy a paradox?," Health Policy, Elsevier, vol. 88(2-3), pages 236-242, December.
    2. 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.
    3. J. Vakili & R. Sadighi Dizaji, 2021. "The closest strong efficient targets in the FDH technology: an enumeration method," Journal of Productivity Analysis, Springer, vol. 55(2), pages 91-105, April.
    4. 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.
    5. Cesaroni, Giovanni & Kerstens, Kristiaan & Van de Woestyne, Ignace, 2017. "Global and local scale characteristics in convex and nonconvex nonparametric technologies: A first empirical exploration," European Journal of Operational Research, Elsevier, vol. 259(2), pages 576-586.
    6. Bruno De Borger & Kristiaan Kerstens & Diego Prior & Ignace Van de Woestyne, 2013. "Static efficiency decompositions and capacity utilization: integrating economic and technical capacity notions," Applied Economics, Taylor & Francis Journals, vol. 45(24), pages 3529-3529, August.
    7. Emili GRIFELL‐TATJÉ & Kristiaan KERSTENS, 2008. "Incentive Regulation And The Role Of Convexity In Benchmarking Electricity Distribution: Economists Versus Engineers," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 79(2), pages 227-248, June.
    8. Sahoo, Biresh K. & Tone, Kaoru, 2013. "Non-parametric measurement of economies of scale and scope in non-competitive environment with price uncertainty," Omega, Elsevier, vol. 41(1), pages 97-111.
    9. Lauren E. Cipriano & Thomas A. Weber, 2018. "Population-level intervention and information collection in dynamic healthcare policy," Health Care Management Science, Springer, vol. 21(4), pages 604-631, December.
    10. Walter Briec & Kristiaan Kerstens, 2006. "Input, output and graph technical efficiency measures on non-convex FDH models with various scaling laws: An integrated approach based upon implicit enumeration algorithms," TOP: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 14(1), pages 135-166, June.
    11. Kerstens, Kristiaan & Sadeghi, Jafar & Van de Woestyne, Ignace, 2019. "Convex and nonconvex input-oriented technical and economic capacity measures: An empirical comparison," European Journal of Operational Research, Elsevier, vol. 276(2), pages 699-709.
    12. Gregory Merlo & Katie Page & Julie Ratcliffe & Kate Halton & Nicholas Graves, 2015. "Bridging the Gap: Exploring the Barriers to Using Economic Evidence in Healthcare Decision Making and Strategies for Improving Uptake," Applied Health Economics and Health Policy, Springer, vol. 13(3), pages 303-309, June.
    13. Jean-Philippe Boussemart & Walter Briec & Raluca Parvulescu & Paola Ravelojaona, 2022. "$\Lambda$-Returns to Scale and Individual Minimum Extrapolation Principle," Papers 2212.04724, arXiv.org, revised Dec 2023.
    14. van Baal, Pieter & Morton, Alec & Severens, Johan L., 2018. "Health care input constraints and cost effectiveness analysis decision rules," Social Science & Medicine, Elsevier, vol. 200(C), pages 59-64.
    15. 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.
    16. Kristiaan Kerstens & Ignace Van de Woestyne, 2018. "Enumeration algorithms for FDH directional distance functions under different returns to scale assumptions," Annals of Operations Research, Springer, vol. 271(2), pages 1067-1078, December.
    17. Saha, Sanjib & Gerdtham, Ulf-G. & Toresson, Håkan & Minthon, Lennart & Jarl, Johan, 2018. "Economic Evaluation of Interventions for Screening of Dementia," Working Papers 2018:20, Lund University, Department of Economics.
    18. Mark Oppe & Daniela Ortín-Sulbarán & Carlos Vila Silván & Anabel Estévez-Carrillo & Juan M. Ramos-Goñi, 2021. "Cost-effectiveness of adding Sativex® spray to spasticity care in Belgium: using bootstrapping instead of Monte Carlo simulation for probabilistic sensitivity analyses," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 22(5), pages 711-721, July.
    19. Ties Hoomans & Johan Severens & Nicole Roer & Gepke Delwel, 2012. "Methodological Quality of Economic Evaluations of New Pharmaceuticals in the Netherlands," PharmacoEconomics, Springer, vol. 30(3), pages 219-227, March.
    20. Kerstens, Kristiaan & Van de Woestyne, Ignace, 2014. "Comparing Malmquist and Hicks–Moorsteen productivity indices: Exploring the impact of unbalanced vs. balanced panel data," European Journal of Operational Research, Elsevier, vol. 233(3), pages 749-758.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:hlthec:v:21:y:2012:i:3:p:270-281. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www3.interscience.wiley.com/cgi-bin/jhome/5749 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.