Concept Architecture
Concept
Theoretically, a Budget Impact Model (BIM) is a quantitative decision model used to estimate the financial consequences of adopting a healthcare intervention within a defined budget setting. It is based on the principles of Budget Impact Analysis and health economic modelling, recognising that changes in healthcare expenditure depend on population size, treatment uptake, market share, resource utilisation and unit costs. The model exists to support affordability assessments and budget planning rather than estimates of cost-effectiveness.
Mathematically, a Budget Impact Model represents total healthcare expenditure under alternative adoption scenarios by combining epidemiological, clinical and economic parameters over a specified time horizon. The mathematical framework estimates the difference in expenditure between current practice and the introduction of a new intervention.
In practice, Budget Impact Models are implemented using spreadsheets or decision-analytic software populated with epidemiological data, treatment pathways, uptake assumptions, market share forecasts and healthcare costs. They are routinely used by health technology assessment agencies, payers and healthcare organisations to inform reimbursement, formulary decisions and financial planning.
Purpose
Used to estimate the financial impact of adopting healthcare interventions, assess affordability, support reimbursement decisions, inform budget planning, and evaluate alternative implementation scenarios.
Mathematical Formulae
Primary Formula
TC? = P? ? U? ? M? ? C?
Where:
- TC? = Total intervention cost in period t
- P? = Eligible population
- U? = Treatment uptake
- M? = Market share
- C? = Cost per treated patient
Supporting Formulae
Budget impact:
BI = ????? (TC??w,? ? TCc??????,?)
Related Mathematical Methods
- Budget Impact Analysis
- Decision-Analytic Modelling
- Market Share Modelling
- Scenario Analysis
- Sensitivity Analysis
Example
A Budget Impact Model evaluates the introduction of a new biologic therapy.
- Eligible population = 8,000
- Treatment uptake = 35%
- Market share = 60%
- Annual treatment cost = �3,200
Annual expenditure:
8,000 ? 0.35 ? 0.60 ? �3,200 = �5,376,000
The model compares this expenditure with current practice to estimate the annual and cumulative budget impact over five years.
Excel Implementation
| Function | Example Formula | Health Economics Application |
|---|---|---|
| PRODUCT | =PRODUCT(B2:B5) | Calculate projected intervention expenditure. |
| SUMPRODUCT | =SUMPRODUCT(B2:B20,C2:C20) | Calculate expenditure across multiple interventions or patient groups. |
| IF | =IF(B10>B11,B10-B11,0) | Calculate positive budget impact under an alternative scenario. |
| Data Table | =TABLE() | Perform one-way or two-way sensitivity analyses on model assumptions. |
VBA (Optional)
Automate multi-year budget impact modelling with scenario, uptake and sensitivity analyses for healthcare technologies.
Sources
- Sullivan SD, Mauskopf JA, Augustovski F, et al. Budget Impact Analysis?Principles of Good Practice: Report of the ISPOR 2012 Budget Impact Analysis Good Practice II Task Force. Value in Health.
- Mauskopf J, Sullivan SD, Annemans L, et al. Principles of Good Practice for Budget Impact Analysis. ISPOR Task Force Report.
- Briggs A, Claxton K, Sculpher M. Decision Modelling for Health Economic Evaluation. Oxford University Press.
- Drummond MF, Sculpher MJ, Claxton K, Stoddart GL, Torrance GW. Methods for the Economic Evaluation of Health Care Programmes. Oxford University Press.
Related Concepts (2)
Library
Budget Impact Analysis—Principles of Good Practice: Report of the ISPOR 2012 Budget Impact Analysis Good Practice II Task Force — Sullivan, Mauskopf, Augustovski, Caro, Lee, Minchin, Orlewska, Penna, Rodriguez Barrios & Shau, 2014 (Value in Health)
Approved authoritative resource supporting Budget Impact Analysis methods or institutional application.
Web/PDFView source →
Frequently Asked Questions (6)
What is a budget impact model?
The analytical structure, typically built in a spreadsheet, used to estimate the financial consequences of adopting a new health technology.
Source: Sullivan et al. 2014
What are the structural components of a budget impact model?
A usable model separates four things. An input section holds every parameter with its source and its permitted range. A calculation section derives the population, applies uptake and market shares, and computes costs for both scenarios. An output section presents results by year and by category. A control section holds the switches that select scenarios and settings. Keeping these apart is what allows a payer to change an assumption without needing to understand the calculation behind it.
Source: Sullivan et al. 2014
What design practices make a budget impact model reliable?
Every parameter should appear once, in the input section, and be referenced from there rather than typed into formulas, since a value entered in several places will eventually be updated in some of them and not others. Calculations should contain no numbers other than references. Units and price years should be labelled at every point. Intermediate results should be visible rather than compressed into a single expression, because a chain that cannot be inspected cannot be checked.
Source: healtheconomics.wiki
Why is a budget impact model built in a spreadsheet, and what does that cost?
They are used because payers can open, inspect and alter them without specialist software, which matters when the model must be adapted to local circumstances during a negotiation. The cost is that error rates in operational spreadsheets are high and consistent across studies, with mistakes concentrated in formulas copied across ranges, in references that shift when rows are inserted, and in values overwritten by hand. Nothing about the subject matter of a budget impact model exempts it from this.
Source: Panko 2008
What makes a budget impact model auditable?
A written specification describing the intended calculation, against which the implementation can be checked. Version control with a record of what changed and why. Test cases with known answers, including the case where uptake is zero and the two scenarios must coincide exactly. Traceability from each output back through the calculation to a named input and its source. Without these an error can only be found by someone reconstructing the whole model, which in practice means it is not found.
Source: healtheconomics.wiki
What should a payer be able to change in a budget impact model?
The population size and the criteria that define it, since these are local. The uptake profile, because the submitted curve reflects the manufacturer's expectation rather than local capacity. The price, since the terms under negotiation are not those in the submitted version. The treatments displaced and their costs, which depend on local practice. A model locking any of these prevents the payer from answering the question they actually face, which is what the analysis would cost in their own system.
Source: Sullivan et al. 2014
Trust Record
Verified by Dr Darrin Baines
British health economist
Professional identity: darrinbaines.org
Verification date: 18 Jul 2025
Content version: 1.0.0
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- Persistent URI
- https://healtheconomics.wiki/concept/budget-impact-model
- Term code
- HE-EE-BIA-013
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