# Definition, Types and Steps of cost analysis in public health services

## Definition of Cost Analysis

Cost analysis in public health services is a systematic and quantitative examination of the financial expenditures associated with delivering healthcare interventions, programs, or services to a community or population. It involves the careful assessment and documentation of all relevant costs, both direct and indirect, to provide a clear understanding of the financial resources required for the provision of these services.

The primary objective of cost analysis in public health is to determine the total cost of implementing a specific healthcare initiative or program, which can then be used for budgeting, resource allocation, and decision-making.

⇒ Health Economics Notes for BPH Students

In essence, cost analysis in public health services helps answer critical questions such as:

1. How much does it cost to provide a particular healthcare service or program to a defined population?
2. What are the key cost components, including personnel, materials, infrastructure, and overhead?
3. Are there more cost-effective ways to achieve the desired health outcomes?
4. How can limited resources be allocated to maximize the impact of public health interventions?

The results of cost analysis are essential for policymakers, public health administrators, and healthcare providers to make informed decisions about resource allocation, program sustainability, and the optimization of public health services. It enables them to assess the efficiency and cost-effectiveness of various interventions and prioritize those that offer the greatest value for the investment in improving the health of the community or population. Cost analysis is a valuable tool for ensuring transparency, accountability, and effective financial management in public health services.

## Types of Cost Analysis

### a. Cost-Utility Analysis (CUA):

• Meaning: Cost-utility analysis is a type of cost analysis that evaluates healthcare interventions by considering their costs in relation to the outcomes achieved, typically using quality-adjusted life years (QALYs) as the outcome measure. It aims to assess the value of an intervention by considering both the quantity and quality of life it provides.
• Steps:
1. Define the health problem and the interventions being compared.
2. Calculate the total costs associated with each intervention, including direct and indirect costs.
3. Measure the health outcomes in terms of QALYs.
4. Compute the cost per QALY gained for each intervention.
5. Compare the cost-effectiveness ratios and select the intervention with the lowest cost per QALY gained as the preferred option.

### b. Cost-Minimization Analysis (CMA):

• Meaning: Cost-minimization analysis focuses on comparing healthcare interventions that are expected to have equivalent outcomes. It aims to identify the intervention with the lowest cost while maintaining the same level of effectiveness.
• Steps:
1. Define the problem and the interventions that are considered equivalent in terms of outcomes.
2. Calculate the total costs associated with each of these equivalent interventions.
3. Compare the costs of the interventions and select the one with the lowest cost as the preferred option.

### c. Cost-Effectiveness Analysis (CEA):

• Meaning: Cost-effectiveness analysis evaluates healthcare interventions by comparing their costs to their health outcomes, typically measured in natural units (e.g., lives saved, cases prevented). It aims to identify the intervention that provides the most health benefits for a given cost.
• Steps:
1. Define the health problem and the interventions being compared.
2. Calculate the total costs associated with each intervention.
3. Measure the health outcomes in natural units (e.g., cases prevented).
4. Compute the cost per unit of health outcome (e.g., cost per life saved) for each intervention.
5. Compare the cost-effectiveness ratios and select the intervention with the most favorable cost-effectiveness ratio as the preferred option.

### d. Cost-Benefit Analysis (CBA):

• Meaning: Cost-benefit analysis assesses healthcare interventions by measuring both their costs and benefits in monetary terms. It aims to determine whether the benefits of an intervention exceed its costs, providing a net benefit to society.
• Steps:
1. Define the problem and the interventions being compared.
2. Calculate the total costs associated with each intervention, including both direct and indirect costs.
3. Measure the benefits in monetary terms, which may include improvements in health, productivity, or other economic factors.
4. Calculate the net present value of benefits minus costs for each intervention.
5. Compare the net benefits and select the intervention with the highest net benefit as the preferred option.

### e. Cost-Efficiency-Equity Analysis:

• Meaning: Cost-efficiency-equity analysis evaluates healthcare interventions by considering their efficiency in achieving desired health outcomes while also addressing equity concerns. It aims to balance the efficient use of resources with the distribution of benefits across different population groups.
• Steps: The steps for this type of analysis would combine elements of cost-effectiveness or cost-benefit analysis with a specific focus on equity considerations. The analysis would assess how efficiently resources are used to achieve outcomes and whether there are disparities in the distribution of benefits among various population groups.

Sample Cost Analysis Table:

Category Cost-Utility Analysis (CUA) Cost-Minimization Analysis (CMA) Cost-Effectiveness Analysis (CEA) Cost-Benefit Analysis (CBA) Cost-Efficiency-Equity Analysis
Intervention Details Hypothetical Intervention A Hypothetical Intervention B Hypothetical Intervention C Hypothetical Intervention D Hypothetical Intervention E
Costs (in dollars)
Direct Medical Costs \$100,000 \$120,000 \$90,000 \$80,000 \$110,000
Personnel Costs \$30,000 \$25,000 \$35,000 \$40,000 \$28,000
Infrastructure Costs \$20,000 \$15,000 \$18,000 \$25,000 \$22,000
Program Development Costs \$15,000 \$10,000 \$12,000 \$14,000 \$13,000
Preventive Intervention Costs \$40,000 \$35,000 \$42,000 \$38,000 \$45,000
Surveillance Costs \$10,000 \$8,000 \$9,000 \$12,000 \$11,000
Research and Evaluation Costs \$25,000 \$22,000 \$28,000 \$30,000 \$27,000
Administrative and Overhead Costs \$12,000 \$14,000 \$11,000 \$13,000 \$15,000
Total Costs \$252,000 \$249,000 \$245,000 \$252,000 \$263,000
Outcomes
Health Outcome (QALYs) 500 QALYs 480 QALYs 520 QALYs 490 QALYs 510 QALYs
Cases Prevented 50 cases 45 cases 55 cases 48 cases 52 cases
Lives Saved 10 lives 9 lives 11 lives 9 lives 10 lives
Monetary Benefits \$2,000,000 \$1,800,000 \$2,200,000 \$1,900,000 \$2,100,000
Analysis Results
Cost per QALY Gained \$504 per QALY gained \$518 per QALY gained \$471 per QALY gained \$514 per QALY gained \$515 per QALY gained
Cost per Case Prevented \$5,040 per case prevented \$5,533 per case prevented \$4,455 per case prevented \$5,250 per case prevented \$5,058 per case prevented
Cost per Life Saved \$25,200 per life saved \$27,667 per life saved \$22,273 per life saved \$28,000 per life saved \$26,300 per life saved
Net Benefit (Benefits – Costs) \$1,748,000 \$1,551,000 \$1,955,000 \$1,648,000 \$1,837,000
Efficiency and Equity Assessment High efficiency, consider equity aspects High efficiency, consider equity aspects High efficiency, consider equity aspects High efficiency, consider equity aspects High efficiency, consider equity aspects