Concept Architecture
Concept
Theoretically, Full Economic Evaluation is a framework for comparing two or more healthcare interventions by examining both their costs and their consequences. It is founded on welfare economics and decision theory and exists to inform efficient allocation of scarce healthcare resources by evaluating the opportunity costs and health outcomes associated with alternative uses of those resources. A full economic evaluation differs from a partial economic evaluation because it explicitly compares competing alternatives while considering both costs and outcomes.
Mathematically, Full Economic Evaluation is represented through recognised economic evaluation frameworks rather than a single mathematical equation. Depending on the evaluation type, costs and outcomes are combined using measures such as incremental cost-effectiveness ratios, incremental net benefit or benefit-cost ratios. The mathematical framework estimates the relative value of competing healthcare interventions.
In practice, Full Economic Evaluation is conducted using established methods including cost-effectiveness analysis, cost-utility analysis, cost-benefit analysis and cost-consequence analysis. Costs and health outcomes are estimated from clinical trials, observational studies or decision-analytic models, discounted where appropriate, and compared across alternative interventions to support reimbursement, pricing and resource allocation decisions.
Purpose
Used to compare alternative healthcare interventions by jointly evaluating costs and consequences, support health technology assessment, inform reimbursement and funding decisions, and improve the efficient allocation of healthcare resources.
Mathematical Formulae
Primary Formula
There is no universally recognised canonical mathematical formula.
Supporting Formulae
Incremental Cost-Effectiveness Ratio (ICER):
ICER = ?C / ?E
Incremental Net Monetary Benefit (INMB):
INMB = ??E ? ?C
Benefit-Cost Ratio (BCR):
BCR = Benefits / Costs
Related Mathematical Methods
- Cost-Effectiveness Analysis (CEA)
- Cost-Utility Analysis (CUA)
- Cost-Benefit Analysis (CBA)
- Cost-Consequence Analysis (CCA)
- Incremental Analysis
- Decision-Analytic Modelling
- Markov Modelling
- Decision Tree Analysis
- Discounting
- Sensitivity Analysis
Example
A health authority compares two treatments for chronic heart failure.
| Intervention | Cost | QALYs |
|---|---|---|
| Standard care | �18,000 | 4.5 |
| New intervention | �24,000 | 5.0 |
Incremental cost:
?C = �24,000 ? �18,000 = �6,000
Incremental effectiveness:
?E = 5.0 ? 4.5 = 0.5 QALYs
Incremental Cost-Effectiveness Ratio:
ICER = �6,000 / 0.5 = �12,000 per QALY
If the willingness-to-pay threshold is �20,000 per QALY, the intervention would generally be considered cost-effective.
Excel Implementation
| Function | Example Formula | Health Economics Application |
|---|---|---|
| Subtraction | =B3-B2 | Calculates incremental costs or incremental outcomes. |
| Division | =(B3-B2)/(C3-C2) | Calculates the ICER. |
| SUM | =SUM(B2:B25) | Aggregates total programme costs. |
| NPV | =NPV(0.035,D2:D21) | Discounts future healthcare costs or outcomes where appropriate. |
| IF | =IF(ICER_Cell<20000,""Cost-effective"",""Not Cost-effective"") | Compares results with a willingness-to-pay threshold. |
VBA (Optional)
Automate the calculation of multiple economic evaluation metrics, sensitivity analyses and summary tables across alternative healthcare interventions.
Sources
- Drummond MF, Sculpher MJ, Claxton K, Stoddart GL, Torrance GW. Methods for the Economic Evaluation of Health Care Programmes. 4th ed.
- Briggs A, Claxton K, Sculpher M. Decision Modelling for Health Economic Evaluation.
- NICE. Health Technology Evaluation Manual.
- Husereau D, Drummond M, Augustovski F, et al. CHEERS 2022 Statement: Consolidated Health Economic Evaluation Reporting Standards.
- ISPOR. Good Practices for Outcomes Research.
Related Concepts (2)
Library
Publications
1
Methods for the Economic Evaluation of Health Care Programmes — Drummond, Sculpher, Claxton, Stoddart & Torrance, 4th Edition ed., 2015 (Oxford University Press)
The standard international reference text for economic evaluation methods in health care, covering cost-effectiveness, cost-utility and cost-benefit analysis, measurement of costs and outcomes, evidence synthesis, and the characterisation of uncertainty.
BookView source →
Frequently Asked Questions (6)
What is a full economic evaluation?
An economic evaluation comparing two or more alternatives in terms of both costs and consequences, unlike a partial evaluation examining costs or outcomes alone.
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.
What makes an economic evaluation full?
A full economic evaluation compares two or more alternatives in terms of both their costs and their consequences, unlike a partial evaluation that examines costs or outcomes alone or considers a single option without comparison. Both features are required: a comparison of alternatives, and the joint consideration of costs and effects. This allows the value of one option relative to another to be judged by what additional benefit its additional cost buys, which is the purpose of economic evaluation.
Source: Drummond et al. 2015
What are the forms of full economic evaluation?
Full economic evaluations share the comparison of costs and consequences across alternatives but differ in how outcomes are measured. Cost-effectiveness analysis measures outcomes in natural units such as life-years, cost-utility analysis in quality-adjusted life-years, and cost-benefit analysis in money. Cost-minimisation, used where outcomes are equivalent, compares costs alone. Each is a full evaluation because it sets alternatives against one another on both cost and effect, differing only in the metric applied to the consequences.
Source: Drummond et al. 2015
Why must a full economic evaluation include a comparator?
A comparison is required because the value of an intervention is not absolute but relative to what would otherwise be done, so its costs and effects are meaningful only against those of an alternative. Without a comparator, an analysis cannot show what additional benefit an option's additional cost secures, which is the question a decision poses. The comparator is usually current practice or the next best alternative, and its choice shapes the incremental result.
Source: Drummond et al. 2015
How does a full economic evaluation differ from a partial one?
A full economic evaluation both compares alternatives and considers costs and consequences together, whereas a partial evaluation lacks one of these: it may describe the costs or the outcomes of a single option without comparison, or compare options on cost or outcome alone. A partial study can be informative but cannot establish value for money, since that requires weighing the additional cost of one option against its additional benefit relative to another.
Source: Drummond et al. 2015
What does a full economic evaluation establish?
A full economic evaluation establishes the value for money of an option relative to its comparator, by expressing what its additional cost buys in additional outcome, usually as an incremental cost-effectiveness ratio or net benefit. This supports a decision about whether the option is worth adopting given what a decision maker will pay for the outcome. By joining costs and consequences across alternatives, it provides the basis on which economic evaluation informs the allocation of scarce resources.
Source: Drummond et al. 2015
Trust Record
Verified by Dr Darrin Baines
British health economist
Professional identity: darrinbaines.org
Verification date: 26 Aug 2025
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