Measurement of Costs

All differences between the intervention and the comparator in expected resource use and costs of delivery to the target population(s) should be incorporated into the evaluation.

This section is concerned with the costs of delivering interventions, regardless of whether they are incurred by public sector bodies (eg. ministries of health), donors, or other organisations involved in the delivery of health interventions. It should be read in conjunction with Section 2.7 which deals with ‘where’ costs fall and costs outside the direct costs of health care delivery.

Importance to decision making
Decision-makers need to know the resource use and costs associated with different alternatives because more costly alternatives result in foregone benefits of other interventions (and health opportunity costs), and less costly alternatives can free financial resources for investment in other interventions. Costs and resource use do not need to be included in cases where they do not differ between evaluated alternatives, as this will not impact on the difference in cost between alternatives. Examples of this type of cost could be some central level management costs. However, caution should be taken to ensure there is no significant cost difference before resource use or costs are excluded.

Overall costs of interventions (excluding costs that do not vary across alternatives) should be reported as a key component of cost-effectiveness. Where data are adequate, costs of resource inputs to deliver interventions should also be reported. In addition to reporting costs, quantities of resources should be reported separately from their unit costs/prices to help decision-makers assess whether quantities used are appropriate and valid within their jurisdictions, and whether unit costs/prices used in the evaluation are still relevant at the time a decision is made.

In some cases resource items may have been donated, or their costs may fall on the budgets of more than one organization involved in the delivery of health interventions (including international organizations). All resource items involved in the direct delivery of health interventions should be costed because there will always be opportunity costs, even if these fall in other jurisdictions (eg. if a country attracts international funding for the delivery of an intervention). Decision-makers may also be concerned about the source of funds. See Section 2.7 on reporting costs falling on more than one organization’s budget.

The average unit costs of an item of resource use may depend upon the scale at which a new intervention is delivered and the scope of other interventions delivered concomitantly. For example, the cost of each visit to a clinic nurse may differ depending on overall patient throughput in that clinic (scale), as well as on other interventions delivered at the clinic (scope). Average costs that fall (rise) with increasing scale and scope of delivery are called economies (diseconomies) of scale and scope.

Economies of scale and scope may be important and should be incorporated when feasible, particularly when alternatives are likely to differ in their scale and scope of implementation (see Section 2.2 on comparators and Section 2.10 on budget impact). However, in many cases, data from within a jurisdiction will be inadequate to reasonably establish this. Other social objectives may also be important when alternatives involve delivery at different scales and in different locations (eg. if an evaluation involves one comparator being delivered in a community or primary health care setting while another is delivered in a hospital setting). Caution should therefore be applied when applying cost functions if these cannot be supported with reliable evidence, or when other non-health effects may also have social value (see Sections 2.7 on non-health effects and 2.11 on equity).

Primacy should be placed on the transparency, reasonableness and reproducibility of cost estimates, so that different decision-makers can assess whether the results are generalisable to their jurisdictions.

Method specification
Costs should be estimated so that they reflect the resource use and unit costs/prices that are anticipated when interventions are rolled out in real health care settings. Clinical trial protocol-driven costs not anticipated with rollout should be excluded. Conversely any costs not incurred in a study setting but anticipated in real health care settings should be included.

Overall costs of interventions should be reported as well as costs of resource inputs. In addition, wherever possible it is useful to report quantities of resources separately from their unit costs/prices. In some cases top-down facility level cost estimates provide a useful source of data, particularly if the available resource use and unit cost/price data are insufficiently granular.

Capital and fixed costs can be annualized over the period of implementation, but decision-makers should also consider when costs are likely to be incurred (see Part 2.10 on budget impact).

It is recommended that where possible researchers corroborate their cost estimates with actual costs incurred when implementing the intervention(s) under evaluation, or other similar interventions, in real health care settings, for example using data from feasibility studies or pragmatic trials. This ‘reality check’ will assist the users of economic evaluations to relate the findings to current practice and costs. Where notable differences between predicted (modelled) and actual costs exist, reasons for these differences should be explored.

All resource items involved in the direct delivery of health interventions that are expected to differ between alternatives should be costed. This includes donated inputs (see Part 2.7 on reporting costs falling on more than one organization’s budget). Any resource items that do not differ across alternatives may be excluded.

Economies of scale and scope that are expected with the delivery of interventions should be estimated and incorporated where feasible (NB Part 2.2. recommends interventions are evaluation at different scales of implementation). However, these must be based on reliable data from the jurisdiction concerned. Cost functions should not be imposed if unsupported by reliable evidence.

The mechanism of delivering an intervention is not set exogenously – different delivery mechanisms are usually feasible and the choice of delivery mechanism should be consistent with the overall objectives of the health systems. Researchers should consider heterogeneity of beneficiaries (see Part 2.8), impacts on other budgets, including on individuals (see Parts 2.7, 2.11), and equity considerations (Part 2.10) when using cost functions to evaluate alternative delivery mechanisms.

Costs should be reported in US dollars and in local currency, and any costs that are estimated in other currencies should be converted to US dollars and local currency. The date and source of the exchange rate used should be reported, as well as whether the exchange rate is unadjusted (real) or adjusted for purchasing power parity (PPP). Further iterations of the Gates-RC will contain specifications regarding the use of PPP and real exchange rates.