Heterogeneity in Cost-Effectiveness Analysis

Abstract

Cost-effectiveness analysis is conducted with the aim of maximizing population-level health outcomes given an exogenously determined budget constraint. Considerable health economic benefits can be achieved by reflecting heterogeneity in cost-effectiveness studies and implementing interventions based on this analysis. The following article describes forms of subgroup and heterogeneity in patient populations. It further discusses traditional decision rules employed in cost-effectiveness analysis and shows how these can be adapted to account for heterogeneity. This article discusses the theoretical basis for reflecting heterogeneity in cost-effectiveness analysis and methodology that can be employed to conduct such analysis. Reflecting heterogeneity in cost-effectiveness analysis allows decision-makers to define limited use criteria for treatments with a fixed price. This ensures that only those patients who are cost-effective to treat receive an intervention. Moreover, when price is not fixed, reflecting heterogeneity in cost-effectiveness analysis allows decision-makers to signal demand for healthcare interventions and ensure that payers achieve welfare gains when investing in health.