Blogs 04.03.2024

What to consider when planning an economic evaluation

Particularly in publicly funded healthcare systems like the NHS, economic evaluations are important tools for informing choices between treatments and health service alternatives by evidencing their differing costs and benefits to services and patients. In this blog, Dr Adam Wagner explains why economic evaluations are important and discusses what you should consider when planning them.

Adam Wagner

Dr Adam Wagner leads the ARC East of England’s Health Economics and Prioritisation theme and is an Associate Professor in Health Economics at the University of East Anglia. 

As a Theme Lead at the ARC, I work across the research themes to develop and support evaluations of new interventions and management approaches. My work is varied across the research sector, ranging from clinical trials at the Norwich Clinical Trials Unit to applied evaluations, spanning clinical areas in topics such as learning disabilities, mental health, and, more recently, cystic fibrosis, including work being driven forward by our theme’s Dr Rory Cameron.

With a background in medical statistics, my interest in health economics developed from understanding the crucial role that analysing clinical data plays in healthcare. For example, research from my medical statistics PhD was utilised in Scotland to monitor mortality during the Swine Flu pandemic. This sparked my interest in how health economics, especially economic evaluations, address how, with limited funding, we find interventions that will do the most ‘good’.

Understanding the importance of economic evaluations

Within health care settings, economic evaluations compare both outcomes and costs between two or more health service alternatives or treatments. They aim to provide evidence to commissioners (and others) about which treatments and services should be funded to achieve the most impact within funding constraints. This is particularly important when health systems, such as those in the UK, are publicly funded, to help ensure public money is allocated in the most responsible and appropriate fashion.

Economic evaluations also contribute to a transparent system of justifying why particular alternatives are funded over others. By openly sharing this information, health economists, clinicians and the wider public can scrutinise and challenge the choices made.

"In health and care systems, there are never enough resources to address all the needs that people have (economists refer to this idea as 'scarcity’). Therefore, we must make choices about what to do with these limited resources and how to use the funding."

Dr Adam Wagner, Theme Lead for the ARC East of England Health Economics and Prioritisation theme

Questions to consider when planning an economic evaluation

There are a number of key questions that inform how an economic evaluation is conducted:

What is the costing perspective of interest? 

According to the York Health Economics Consortium, perspective “is the point of view adopted when deciding which types of costs and health benefits are to be included.” Perspectives vary from being 'narrow’ to as wide as possible, aiming to capture all costs and benefits; this is known as a 'societal’ perspective.

Perspective matters, as the wrong choice may mean you miss important costs and/or benefits. For example, in the UK, you might choose an NHS perspective. However, for some interventions, this may miss important impacts on social care. For example, early discharge from the hospital may make savings for the NHS but may have costly impacts on social care as they may need more support at home. To address this, most UK economic evaluations adopt an NHS and social care perspective.

The choice of perspective can also be impacted by practical considerations. Typically, the wider the perspective, the more challenging it can be to provide and collect all the required data.

How long will you monitor the costs and impacts of the interventions?

The ‘time horizon’ is the duration for collecting information on the costs and outcomes of an intervention. A lifetime horizon provides a complete picture of the costs and outcomes of a particular intervention, but collecting the corresponding data can be very challenging. Therefore, as a compromise, we often choose time horizons that capture the main costs and outcomes. For example, shorter time horizons may be sufficient for short-term conditions like simple bone fractures, while longer time horizons will be important for chronic or long-term conditions such as diabetes or mental health conditions.

How will you measure the impact of the intervention?

It is important to stress that economic evaluations are focused on BOTH costs AND outcomes. They are not intended to just capture cost impacts.

The different types of economic evaluations differ in how outcomes are measured. Evaluations where outcomes are measured in terms of clinical outcomes, such as weight loss or cancer cases detected, are known as cost-effectiveness analyses (CEAs). Another type of measure is the ‘quality adjusted life year’ (QALY), which is intended to capture intervention impacts on both quality of life and life extension. Where the QALY is used, a cost-utility analysis (CUA) is conducted. This allows comparison of interventions across different disease and clinical areas through the use of this common 'measure.’

The third main approach is cost-benefit analyses (CBAs) that measure outcomes in monetary terms. In principle, this allows comparison outside of health care. For example, the benefits of a health programme can then be compared to, say, a business investment. However, working out the monetary equivalent of health outcomes is challenging, making CBAs less common.

What might your economic evaluation miss?

It is important to think about the limitations of your economic evaluation so that its conclusions can be appropriately interpreted. For example, have you considered the impact of health inequalities? You may be able to show one intervention has better outcomes and lower costs than another, but that doesn’t necessarily indicate whether everyone can access that intervention. People who have more free time and more money may find it easier to engage with health interventions, but these may not be the people most in need of support. The impact on carers is also often neglected and is an area of growing interest.

When should you involve a health economist?

Ideally, as soon as possible! They can help you navigate the questions we have considered above and others needed to deliver a successful economic evaluation. There are often trade-offs required between what would be the perfect data and what is feasible to collect or access; discussions with a health economist can help identify the appropriate balance. Outside of economic evaluations, health economics can also be used to understand preferences for interventions or services, e.g., would people prefer shorter waiting times or longer appointments? and to model outcomes based on an analysis of existing data. These are some of the other things you can talk to a health economist about.

Beyond economic evaluations, when thinking about evaluation more broadly, I would also highlight the value of involving the public and patients. Their perspectives can help make sure you ask the right questions in the most appropriate way. Also, don’t forget suitable statistical input, as statisticians can help you think about the design of your evaluation and how your data should be analysed.

Find out more about ARC East of England’s Health Economics and Prioritisation theme here.