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Non-linearity in the cost-effectiveness frontier

Non-linearity in the cost-effectiveness frontier
Non-linearity in the cost-effectiveness frontier
Conventional cost-effectiveness decision rules rely on the assumptions that all health care programmes are divisible and exhibit constant returns to scale for a homogeneous population; hence, the path between adjacent programmes on a cost-effectiveness frontier must be linear. In this paper we build a framework to analyse non-linear 'expansion' paths. We model the impact of two key sources of non-linearity: economies of scale or scope in the production of health care; and prioritisation of patients who are most likely to benefit from more expensive and more effective treatments. We conclude that the expansion path might be linear, convex or concave, depending on the situation. The path might also exhibit vertical discontinuity due to fixed costs or horizontal discontinuity due to indivisibility. The efficiency of resource allocation might be improved by empirical estimation of expansion paths. We discuss the advantages and disadvantages of this approach compared with a standard stratified analysis
cost-effectiveness analysis, resource allocation, non-linearity, decision rules, expansion path
1099-1050
565-577
Lord, J.
fd3b2bf0-9403-466a-8184-9303bdc80a9a
Laking, G.
57ab162a-d1f8-4da1-b0ed-e0bb822c65c0
Fischer, A.
798c82d9-aa26-4b05-8604-b80f4db8d75e
Lord, J.
fd3b2bf0-9403-466a-8184-9303bdc80a9a
Laking, G.
57ab162a-d1f8-4da1-b0ed-e0bb822c65c0
Fischer, A.
798c82d9-aa26-4b05-8604-b80f4db8d75e

Lord, J., Laking, G. and Fischer, A. (2006) Non-linearity in the cost-effectiveness frontier. Health Economics, 15 (6), 565-577. (doi:10.1002/hec.1083). (PMID:16416416)

Record type: Article

Abstract

Conventional cost-effectiveness decision rules rely on the assumptions that all health care programmes are divisible and exhibit constant returns to scale for a homogeneous population; hence, the path between adjacent programmes on a cost-effectiveness frontier must be linear. In this paper we build a framework to analyse non-linear 'expansion' paths. We model the impact of two key sources of non-linearity: economies of scale or scope in the production of health care; and prioritisation of patients who are most likely to benefit from more expensive and more effective treatments. We conclude that the expansion path might be linear, convex or concave, depending on the situation. The path might also exhibit vertical discontinuity due to fixed costs or horizontal discontinuity due to indivisibility. The efficiency of resource allocation might be improved by empirical estimation of expansion paths. We discuss the advantages and disadvantages of this approach compared with a standard stratified analysis

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More information

e-pub ahead of print date: 27 October 2005
Published date: June 2006
Keywords: cost-effectiveness analysis, resource allocation, non-linearity, decision rules, expansion path
Organisations: Primary Care & Population Sciences

Identifiers

Local EPrints ID: 382184
URI: http://eprints.soton.ac.uk/id/eprint/382184
ISSN: 1099-1050
PURE UUID: a8108a80-8d99-4839-a48b-2b521cd389b1
ORCID for J. Lord: ORCID iD orcid.org/0000-0003-1086-1624

Catalogue record

Date deposited: 22 Jan 2016 16:23
Last modified: 03 Dec 2019 01:33

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