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Emergent Challenges in Determining Costs for Economic Evaluations

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Abstract

This paper describes methods of determining costs for economic evaluations of healthcare and considers how cost determination is being affected by recent developments in healthcare. The literature was reviewed to identify the strengths and weaknesses of the four principal methods of cost determination: micro-costing, activity-based costing, charge-based costing, and gross costing. A scoping review was conducted to identify key trends in healthcare delivery and to identify costing issues associated with these changes. Existing guidelines provide information on how to implement various costing methods. Bottom-up costing is needed when accuracy is paramount, but top-down approaches are often the only feasible approach. We describe six healthcare trends that have important implications for costing methodology: (1) reform in payment mechanisms; (2) care delivery in less restrictive settings; (3) the growth of telehealth interventions; (4) the proliferation of new technology; (5) patient privacy concerns; and (6) growing efforts to implement guidelines. Some costs are difficult to measure and have been overlooked. These include physician services for inpatients, facility costs for outpatient services, the cost of developing treatment innovations, patient and caregiver costs, and the indirect costs of organizational interventions. Standardized methods are needed to determine social welfare and productivity costs. In the future, cost determination will be facilitated by technological advances but hindered by the shift to capitated payment, to the provision of care in less restrictive settings, and by heightened concern for medical record privacy.

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Author contributions

JJ and PB both contributed to the conceptualization, literature search, synthesis and drafting of the paper. Both authors act as the guarantor for this work.

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  1. VA Health Economics Resource Center, 795 Willow Rd. (152), Menlo Park, CA, 94025, USA

    Josephine C. Jacobs & Paul G. Barnett

  2. Department of Health Research and Policy, Stanford University School of Medicine, Stanford, CA, USA

    Paul G. Barnett

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  1. Josephine C. Jacobs
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Correspondence to Josephine C. Jacobs.

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JJ and PB declare have no conflicts of interest. This research was supported by the US Department of Veterans Affairs Health Services Research and Development Service (ECN-99-017-16S2).

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Jacobs, J.C., Barnett, P.G. Emergent Challenges in Determining Costs for Economic Evaluations. PharmacoEconomics 35, 129–139 (2017). https://doi.org/10.1007/s40273-016-0465-1

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