The primary outcome of a cost–utility analysis is the incremental cost- effectiveness ratio (ICER), otherwise known as the cost per QALY. This is calculated as the difference in the expected cost of two interventions, divided by the difference in the expected QALYs produced by the two interventions.

3 Cost Utility Analysis. Cost utility analysis (CUA) is an economic analysis in which the incremental cost of a program from a particular point of view is compared to the incremental health improvement expressed in the unit of quality adjusted life years (QALYs) [6].

Consumers use cost-benefit analysis whenever they need to make a decision. Cost-benefit analysis occurs when you study a decision by analyzing the costs that this will represent (money, time, opportunity, etc.) By doing this analysis, a consumer can better decide whether the action is worth taking.

The major steps in a cost-benefit analysis

1. Step 1: Specify the set of options.
2. Step 2: Decide whose costs and benefits count.
3. Step 3: Identify the impacts and select measurement indicators.
4. Step 4: Predict the impacts over the life of the proposed regulation.
5. Step 5: Monetise (place dollar values on) impacts.

Utility analysis provides managers information they can use to evaluate the financial impact of an intervention, including computing a return on their investment in implementing it.

The basic idea underlying the QALY is simple: it assumes that a year of life lived in perfect health is worth 1 QALY (1 Year of Life × 1 Utility = 1 QALY) and that a year of life lived in a state of less than this perfect health is worth less than 1.

$50,000 to $150,000

QALYs (Quality-Adjusted Life Year) and DALYs (Disability-Adjusted Life Year) are common terms used within this framework. QALYs are a measure of years lived in perfect health gained whereas DALYs are a measure of years in perfect health lost. They are the most frequently cited metrics for risk-benefit assessment.

The quality-adjusted life year (QALY) has been developed in order to capture both of these impacts and is widely used in health economics as a summary measure of health outcome, which can inform healthcare resource allocation decisions.

One QALY equates to one year in perfect health. QALY scores range from 1 (perfect health) to 0 (dead). QALYs can be used to inform health insurance coverage determinations, treatment decisions, to evaluate programs, and to set priorities for future programs.

They explain the concept of negative QALYs, effectively time spent living (and suffering) in a state worse than death. Individuals with terminal diseases and/or chronic pain stipulate their current state is indeed worse than death and therefore they experience a QALY less than zero – a negative QALY.

The QALY is used in cost-utility analysis as the measure of health benefits of medical interventions and to compare the value of different medicines. QALYs assess the effect of a given treatment on how long a patient will live multiplied by their quality of life in those remaining years with that treatment.

QALYs (Quality-Adjusted Life Year) and DALYs (Disability-Adjusted Life Year) are common terms used within this framework. QALYs are a measure of years lived in perfect health gained whereas DALYs are a measure of years in perfect health lost.

Technical efficiency is measured as a distance to the frontier. Allocative efficiency is measured by comparing different points on the frontier for the extent to which they improve the health status of the population.

QALY GAIN = (QALY for new treatment) – (QALY for existing treatment)4 An example of a QALY gain is as follows: The QALY is used by HTAs to determine the additional value of a particular treatment or intervention. This is done by calculating the cost per QALY.

In a very unsophisticated model, we would simply take the number of patients for the month and divide that into $100,000 to get the cost per patient. If the practice saw 50 patients per day for 30 days in June, the total number of patients seen that month would have been 1,500.

NICE uses a unit of measurement called the “Qaly” – the “quality-adjusted life year”. It gauges drug effectiveness in terms of how much it would cost to give you a year of healthy life.

The National Institute for Health and Clinical Excellence (NICE) has been using a cost-effectiveness threshold range between 20,000 pound sterling and 30,000 pound sterling for over 7 years.

The cost-effectiveness threshold is the maximum amount a decision-maker is willing to pay for a unit of health outcome.

: producing good results without costing a lot of money cost-effective measures to combat poverty Robot spot welding can be quite cost-effective …—