Cost Benefit Analysis
Cost Benefit Analysis
Description: Cost Benefit Analysis is defined as weighing the total expected costs against the total expected benefits of one or more actions in order to choose the best or most profitable option[1]. In health care cost benefit studies involves comparing the expenditure of resources for a specific intervention with the financial benefits gained from the treatment. Cost is generally ongoing or one time cost. The benefits are received over a period of time. This period of time is called payback period. Discount rate is added to the present value in order to evaluate future value. Cost benefit analysis is also used along with willingness of pay to make a decision
History:
Jules Dupuit, a French engineer and Alfred Marshall a British economist are the pioneers of CBA [2] Benefit-cost methods were introduced in the U.S. by the U.S. Army Corp of Engineers.
Principal Use:
• This is an important tool in medical decision making and used when there is a shortage of resources. When introducing a new drug , the cost and benefits are analyzed
Advantages:
Used to choose among a range of alternatives, to make comparable projects of differing lengths, and to identify instances where costs and benefits place identifiable groups at special advantage or disadvantage [2]
Shortcomings: Assigning monetary value for intangible factors such as life of a person is highly controversial and difficult to calculate Discount rate may not accurately define the future value Risks and uncertainties are difficult to predicate
Examples in Informatics:'
A Cost-Benefit Analysis of Electronic Medical Records in Primary Care - Department of Information Systems, Partners HealthCare System, Boston, Massachusetts 02481, USA.
[1] http://en.wikipedia.org/wiki/Cost-benefit_analysis
[2] http://sunsite.utk.edu/ncedr/tools/othertools/costbenefit/lead.htm
[3] http://www.12manage.com/methods_cost-benefit_analysis.html Retrieved from "http://www.informatics-review.com/wiki/index.php/User_talk:Informatics"
Category: BMI560-W-2007
