Average Cost-Effectiveness Ratio

The total cost of an intervention divided by its total health effect, calculated for each option rather than as a comparison.

Source: Drummond MF, Sculpher MJ, Claxton K, Stoddart GL, Torrance GW. Methods for the Economic Evaluation of Health Care Programmes. 4th ed. Oxford University Press; 2015.

The total cost of an intervention is divided by the total health effect it produces, giving a cost per unit of outcome for that option considered on its own. The implicit comparison is with doing nothing, since the totals are measured against a baseline of no intervention rather than against another option. Each option in a set therefore generates its own ratio, and the ratios are computed independently rather than in relation to one another.

Source: Drummond et al. 2015

Because decisions are almost never between an intervention and nothing at all, and the question that matters is what additional health the additional money buys relative to the next best available option. Ranking options by their average ratios can place them in a different order from the one their incremental performance implies, so a set of decisions each defensible on its own ratio can produce an allocation that yields less health than an alternative allocation costing the same.

Source: Weinstein & Stason 1977

It favours options that achieve a small effect cheaply over options that achieve a much larger effect for a moderate additional outlay, because the ratio rewards a low cost per unit rather than the value of what the extra spending purchases. A programme reaching many people with a slight benefit can therefore dominate a ranking while an intervention producing substantially more health per patient is passed over. The distortion is systematic rather than occasional, which is why the measure is not used for choosing.

Source: Karlsson & Johannesson 1996

It carries meaning where the alternative genuinely is no intervention, which occurs when a service is being introduced where none exists, and where the options under consideration are independent rather than mutually exclusive so that adopting one does not preclude another. It is also used descriptively to characterise the overall efficiency of a programme already in place. Outside these circumstances it describes a comparison that nobody is making. It is also occasionally reported alongside incremental results as a description of the intervention in isolation, which is unobjectionable provided it is not the figure the decision rests on.

Source: Drummond et al. 2015

The incremental ratio divides the difference in cost between two options by the difference in effect, answering what the additional health from moving to the more effective option costs. The average ratio is the special case in which the comparator is no intervention, so its numerator and denominator happen to be totals. Analysis that ranks options correctly proceeds by ordering them by effect, discarding those that cost more and achieve less, and calculating incremental ratios between the survivors.

Source: Gold, Siegel, Russell & Weinstein 1996