Principles of Cost-Effective Resource Allocation in Health Care organizations

Cost-effectiveness analysis (CEA) is a method of economic evaluation that can be used to assess the efficiency with which health care technologies use limited resources to produce health outputs. However, inconsistencies in the way that such ratios are constructed often lead to misleading conclusions when CEAs are compared. Some of these inconsistencies, such as failure to discount or to calculate incremental ratios correctly, reflect analytical errors that, if corrected, would resolve the inconsistencies. Others reflect fundamental differences in the viewpoint of the analysis. The perspectives of different decision-making entities can properly lead to different items in the numerator and denominator of the cost-effectiveness (C/E) ratio. Producers and consumers of CEA need to be more conscious of the perspectives of analysis, so that C/E comparisons from a given perspective are based upon a common understanding of the elements that are properly included.