Open AccessTHE STATE OF THE ART OF COSTING HEALTH CARE FOR ECONOMIC EVALUATION
Author(s) -
Donaldson Cam
Publication year - 1990
Publication title -
community health studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.946
H-Index - 76
eISSN - 1753-6405
pISSN - 0314-9021
DOI - 10.1111/j.1753-6405.1990.tb00045.x
Subject(s) - activity based costing , discounting , economic evaluation , marginal cost , valuation (finance) , target costing , actuarial science , health care , capital cost , risk analysis (engineering) , operations management , economics , operations research , computer science , business , engineering , accounting , microeconomics , finance , macroeconomics , economic growth
In this paper, the principles of costing health care for economic evaluation are outlined. Hypothetical and published examples are used to illustrate these principles. First, the economic concept of opportunity cost is defined. Secondly, the techniques of economic evaluation which follow from this definition are introduced: they are cost‐benefit analysis, cost‐effectiveness analysis and cost‐utility analysis. Thirdly, a list of costs which should be considered for inclusion in either of these types of evaluation is provided, this listing being based on the concept of opportunity cost. Problems of measurement and valuation of costs are then outlined, focusing in particular on inflation, discounting, marginal costing, patient‐based versus per diem costing, allocating overheads, costing capital and equipment and adjusting distorted market valuations. An example of sensitivity analysis is provided and also a checklist of questions to ask when setting up any costing exercise within an economic evaluation.