COSTING INTERVENTIONS

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Frederick Hardy
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1 ASAP Regional Training on Epidemiological and Economic Tools for HIV/AIDS Strategic Planning COSTING INTERVENTIONS Julian Naidoo (Ph.D) Durban, November 2007

2 STRATEGY RESULTS CYCLE Formulate/Revise HIV/AIDS Strategy Evaluate Changes in Outcomes M4 Econ Evaluation Costing, RNM Analyze HIV/AIDS and National Response Data Implementation & process monitoring (indicators, resource tracking) Select Interventions Resource Needs, Funding Identify Key National Outcomes & Priorities Select Principal Program Strategies

3 Objectives of this session Introduce basic cost concepts from economics Discuss the key issues and methods in costing health interventions Practical Exercise Interactive Group Work

4 Cost Concepts Economics is about choosing how to use scarce resources that have alternative uses (Samuelson adapted) Cost in economics includes all the financial costs, costs of donated goods or in-kind services, and all opportunity costs Opportunity cost: potential benefit sacrificed or forgone from using resources in one program. If usage in one program precludes usage in another program, there is an opportunity cost. For instance, deciding where to allocate one extra nurse among one of the following programmes in a PHC center: Hypertension control, Immunizations or Antenatal care Other examples: the OC of your attending this lecture

5 Cost Definitions (2) Total cost: All the costs incurred to produce a given level of output/final health outcome Average cost: The cost per outcome gained. Total cost / Quantity of output or final health care outcome Marginal cost: The extra cost of producing an additional unit of health care outcome or the change in costs associated with changes in outputs (within the same programme) Incremental cost: The additional cost of moving from one programme to another in order to increase outputs.

6 Average Cost Marginal Cost Cost Number of units

7 Types of Costs to be Considered Direct all the cost incurred in delivering the health service Indirect costs those additional costs, usually from the perspective of the patient, in accessing the program, eg. Transport, loss of productivity, loss of income etc Intangible costs those difficult to identify and measure eg. The drawbacks due to illness, depression, loss of quality of life

8 Direct Cost Categories Recurrent costs: resource costs which may vary from year to year or costs that are consistently incurred on a regular/yearly basis (staff time, supplies including medicines and diagnostic tests, general operating costs); Capital costs: costs associated with inputs that last for more than one year (buildings, equipment, vehicles);

9 Direct Cost Categories Sunken Cost: Costs that have already been incurred and which cannot be recovered. E.g If a mass media campaign was designed at a cost of $100,000 and it was never implemented, this would be a sunk cost. Shared Costs: A cost which is directly related to the production of a particular output or outcome, but is spread across several programs. E.g Building and equipment costs, administrative costs etc.

10 Allocating Shared Costs Item Vehicles Basis for cost allocation Distance travelled Equipment Intensity of use (length/number of time used, amount of units consumed etc) Building space Space used (m 2 ) Personnel Supplies Time worked Units/quantity used/patient number Administration Patient numbers/ staff numbers

11 Indirect Costs to Consider The range of Out of Pocket Expenditure and societal costs considered when costing from the perspective of the patient, may include: Cost of transportation to health provider (direct cost) Cost of waiting time for service (indirect cost) Cost of absenteeism from work or daily activities owing to illness (opportunity cost) Costs associated with use of service (user fees, dispensing fees) Why and when are these costs relevant? For example, when deciding the delivery mechanism of a health programme such as immunizations. (facility base vs outreach activities) These can be more difficult to assess - Usually assessed in patient interviews / exit surveys

12 Cost estimation can be divided into three parts: Identification of the relevant costs Quantity of resources used (Qs) Value of resources used (C=P*Q) P= price Q= quantity

13 Key Points Costing gives information about how much a programme would cost for a given level of output Often combined with an evaluation of the benefits from the programme. A useful tool for planning and for advocacy

ASAP Regional Training on Epidemiological and Economic Tools for HIV/AIDS Strategic Planning S P ECONOMIC EVALUATION IN HEALTH CARE

ASAP Regional Training on Epidemiological and Economic Tools for HIV/AIDS Strategic Planning ECONOMIC EVALUATION IN HEALTH CARE Outline of the Session 1. What is Economic Evaluation? 2. Why do Economic