{"id":280,"date":"2025-10-06T15:45:23","date_gmt":"2025-10-06T19:45:23","guid":{"rendered":"https:\/\/pressbooks.bccampus.ca\/foundationsofevaluation\/?post_type=chapter&p=280"},"modified":"2026-05-26T18:09:00","modified_gmt":"2026-05-26T22:09:00","slug":"background","status":"publish","type":"chapter","link":"https:\/\/pressbooks.bccampus.ca\/foundationsofevaluation\/chapter\/background\/","title":{"raw":"10.3 Background","rendered":"10.3 Background"},"content":{"raw":"Economic evaluation aims at providing information on the efficiency of interventions. Its methodologies encompass different types of studies, including cost-effectiveness analysis, cost-utility analysis, cost-benefit analysis, and cost-consequence analysis.\r\n\r\nCosts are measured in the same way in all types of economic evaluations. What differs is how effects are measured and the degree of synthesis. Cost-consequence analysis provides disaggregated information, while other economic evaluations offer a synthetic index to assess efficiency. Cost-effectiveness analysis uses effects measured in natural units, whereas cost-utility analysis captures effects and impacts on quality of life through a synthetic measure called 'utility' (in economics, a proxy for satisfaction). In cost-benefit analysis, effects are converted into monetary values. Return on investment studies are a derivative of cost-benefit analysis.\r\n\r\nEconomic evaluation methodologies have expanded in application domains where market regulation is not used. In the healthcare system, allocations often rely on economic evaluation results to make decisions regarding technology and drug coverage. This sector has been a major driver in the development of economic evaluation methodologies. Of course, economic evaluation studies can also be traced back to other sectors, such as large-scale public works. In this chapter, we will primarily draw from the literature in the field of health and healthcare, but the insights can be applied to practice in other domains.\r\n\r\nWhat is efficiency about?\r\n
\r\n
Efficiency results when benefits are maximized and opportunity costs (i.e., the value of benefits forgone by choosing one particular allocation of scarce resources over another) minimized (Donaldson et al., 2002). Initially, economic evaluation was a method intended to help health care decision-makers make the best choices under conditions of uncertainty, conflicting objectives and resource constraints (Weinstein, 2006). However, it rapidly proved inadequate for setting health care priorities. For example, in 1990, the state of Oregon tried using economic evaluation for health care priority setting. To determine what services would be covered by Medicaid, the Health Services Commission used cost-utility ratios to rank services according to efficiency (Tengs et al., 1996); in those results, life-saving interventions were ranked below less critical items such as headache treatment (Hadorn, 1991; Tengs et al., 1996). This experience clearly demonstrated the unacceptability of using efficiency as the only criterion to prioritize health care resource allocations (Hadorn, 1991, 1996; Pinkerton et al., 2002; Tengs et al., 1996; Ubel et al., 1996). Since then, several authors have analyzed the philosophical and theoretical foundations of the utilitarian approach to economic evaluation in relation to access to care, emphasizing the inadequacy of considering only this value in priority setting (Domenighetti, 1998; Veatch, 1995; Williams, 1992; Williams & Cookson, 2006). Nevertheless, economic evaluation has become increasingly institutionalized with, among other things, the creation of the National Institute for Health and Clinical Excellence (NICE) in England and Wales and a growing number of health technology assessment (HTA) agencies around the world. The trend toward evidence-based decision-making reinforced the need to base resource allocation decisions on rational criteria, with effectiveness and efficiency being especially important. In fact, it is widely recognized that inefficient resource allocations have important consequences in terms of opportunity costs, e.g. reduced access to care for other patients. Furthermore, it is now recognized that other criteria, such as equity of access to care and the rule of rescue (Caro, 2009; Domenighetti, 1998; McKie & Richardson, 2003; Nord et al., 1999)should be considered at the same time as efficiency of interventions. (as cited in Brousselle & Lessard, 2011, p. 832)<\/blockquote>\r\n<\/div>\r\nThe rule of rescue is based on the assumption that saving the life of someone facing avoidable death should trump the efficiency criteria (McKie & Richardson, 2003; Rozworski, 2014).","rendered":"

Economic evaluation aims at providing information on the efficiency of interventions. Its methodologies encompass different types of studies, including cost-effectiveness analysis, cost-utility analysis, cost-benefit analysis, and cost-consequence analysis.<\/p>\n

Costs are measured in the same way in all types of economic evaluations. What differs is how effects are measured and the degree of synthesis. Cost-consequence analysis provides disaggregated information, while other economic evaluations offer a synthetic index to assess efficiency. Cost-effectiveness analysis uses effects measured in natural units, whereas cost-utility analysis captures effects and impacts on quality of life through a synthetic measure called ‘utility’ (in economics, a proxy for satisfaction). In cost-benefit analysis, effects are converted into monetary values. Return on investment studies are a derivative of cost-benefit analysis.<\/p>\n

Economic evaluation methodologies have expanded in application domains where market regulation is not used. In the healthcare system, allocations often rely on economic evaluation results to make decisions regarding technology and drug coverage. This sector has been a major driver in the development of economic evaluation methodologies. Of course, economic evaluation studies can also be traced back to other sectors, such as large-scale public works. In this chapter, we will primarily draw from the literature in the field of health and healthcare, but the insights can be applied to practice in other domains.<\/p>\n

What is efficiency about?<\/p>\n

\n

Efficiency results when benefits are maximized and opportunity costs (i.e., the value of benefits forgone by choosing one particular allocation of scarce resources over another) minimized (Donaldson et al., 2002). Initially, economic evaluation was a method intended to help health care decision-makers make the best choices under conditions of uncertainty, conflicting objectives and resource constraints (Weinstein, 2006). However, it rapidly proved inadequate for setting health care priorities. For example, in 1990, the state of Oregon tried using economic evaluation for health care priority setting. To determine what services would be covered by Medicaid, the Health Services Commission used cost-utility ratios to rank services according to efficiency (Tengs et al., 1996); in those results, life-saving interventions were ranked below less critical items such as headache treatment (Hadorn, 1991; Tengs et al., 1996). This experience clearly demonstrated the unacceptability of using efficiency as the only criterion to prioritize health care resource allocations (Hadorn, 1991, 1996; Pinkerton et al., 2002; Tengs et al., 1996; Ubel et al., 1996). Since then, several authors have analyzed the philosophical and theoretical foundations of the utilitarian approach to economic evaluation in relation to access to care, emphasizing the inadequacy of considering only this value in priority setting (Domenighetti, 1998; Veatch, 1995; Williams, 1992; Williams & Cookson, 2006). Nevertheless, economic evaluation has become increasingly institutionalized with, among other things, the creation of the National Institute for Health and Clinical Excellence (NICE) in England and Wales and a growing number of health technology assessment (HTA) agencies around the world. The trend toward evidence-based decision-making reinforced the need to base resource allocation decisions on rational criteria, with effectiveness and efficiency being especially important. In fact, it is widely recognized that inefficient resource allocations have important consequences in terms of opportunity costs, e.g. reduced access to care for other patients. Furthermore, it is now recognized that other criteria, such as equity of access to care and the rule of rescue (Caro, 2009; Domenighetti, 1998; McKie & Richardson, 2003; Nord et al., 1999)should be considered at the same time as efficiency of interventions. (as cited in Brousselle & Lessard, 2011, p. 832)<\/p><\/blockquote>\n<\/div>\n

The rule of rescue is based on the assumption that saving the life of someone facing avoidable death should trump the efficiency criteria (McKie & Richardson, 2003; Rozworski, 2014).<\/p>\n","protected":false},"author":20,"menu_order":3,"template":"","meta":{"pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[49],"contributor":[],"license":[],"class_list":["post-280","chapter","type-chapter","status-publish","hentry","chapter-type-numberless"],"part":273,"_links":{"self":[{"href":"https:\/\/pressbooks.bccampus.ca\/foundationsofevaluation\/wp-json\/pressbooks\/v2\/chapters\/280","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/pressbooks.bccampus.ca\/foundationsofevaluation\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/pressbooks.bccampus.ca\/foundationsofevaluation\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/pressbooks.bccampus.ca\/foundationsofevaluation\/wp-json\/wp\/v2\/users\/20"}],"version-history":[{"count":2,"href":"https:\/\/pressbooks.bccampus.ca\/foundationsofevaluation\/wp-json\/pressbooks\/v2\/chapters\/280\/revisions"}],"predecessor-version":[{"id":665,"href":"https:\/\/pressbooks.bccampus.ca\/foundationsofevaluation\/wp-json\/pressbooks\/v2\/chapters\/280\/revisions\/665"}],"part":[{"href":"https:\/\/pressbooks.bccampus.ca\/foundationsofevaluation\/wp-json\/pressbooks\/v2\/parts\/273"}],"metadata":[{"href":"https:\/\/pressbooks.bccampus.ca\/foundationsofevaluation\/wp-json\/pressbooks\/v2\/chapters\/280\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/pressbooks.bccampus.ca\/foundationsofevaluation\/wp-json\/wp\/v2\/media?parent=280"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/pressbooks.bccampus.ca\/foundationsofevaluation\/wp-json\/pressbooks\/v2\/chapter-type?post=280"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/pressbooks.bccampus.ca\/foundationsofevaluation\/wp-json\/wp\/v2\/contributor?post=280"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/pressbooks.bccampus.ca\/foundationsofevaluation\/wp-json\/wp\/v2\/license?post=280"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}