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State Transition Model

A general term for a decision-analytic model, such as a Markov model, representing disease progression as movement between defined health states.

Last reviewedDarrin Baines IP Ltd

Concept Architecture

Concept

Theoretically, State Transition Model is a mathematical modelling framework in which individuals or cohorts move between a finite set of mutually exclusive health states over time according to defined transition probabilities. The framework represents disease progression, treatment pathways and clinical outcomes by describing how patients transition between health states during successive time intervals. In health economics, state transition models provide the principal framework for evaluating chronic diseases, recurrent events and long-term healthcare interventions.

Mathematically, a state transition model is represented by an initial state distribution together with a transition probability matrix governing movement between health states. At each model cycle, the current state distribution is updated using the transition matrix. Expected costs and health outcomes are obtained by combining state occupancy with state-specific costs and utilities over the model time horizon.

In practice, state transition models are constructed by defining health states, transition probabilities, cycle length and model horizon. Transition probabilities are estimated from clinical trials, observational studies or survival analyses, while costs and health utilities are obtained from economic and quality-of-life studies. Model outputs are validated through calibration, sensitivity analysis and comparison with observed data before informing health technology assessment and reimbursement decisions.


Purpose

Used to estimate disease progression, healthcare costs and health outcomes by modelling transitions between health states over time, supporting economic evaluation of healthcare interventions.


Mathematical Formulae

Primary Formula

State distribution update:

????? = ?????

where:

  • ??? = state distribution at cycle t
  • ?? = transition probability matrix

Supporting Formulae

State distribution after n cycles:

??? = ?????�

Expected total cost:

C = ????? ?????

Expected total health outcome:

E = ????? ?????

where:

  • ?? = vector of state-specific costs
  • ?? = vector of state-specific health outcomes

Related Mathematical Methods

  • Markov chains
  • Matrix algebra
  • Cohort simulation
  • Microsimulation
  • Survival analysis
  • Half-cycle correction
  • Probabilistic sensitivity analysis

Example

A state transition model evaluates two treatments for chronic heart failure using four health states: Stable Disease, Hospitalised, Post-Hospitalisation and Death.

The initial cohort is:

??? = [1, 0, 0, 0]

At each annual cycle, the transition probability matrix updates the cohort distribution. State-specific costs and quality-adjusted life years are accumulated over a lifetime horizon, allowing estimation of incremental costs, incremental QALYs and the incremental cost-effectiveness ratio for the competing treatments.


Excel Implementation

FunctionExample FormulaHealth Economics Application
MMULT=MMULT(StateVector,TransitionMatrix)Update the state distribution each cycle
SUMPRODUCT=SUMPRODUCT(StateVector,CostVector)Calculate expected costs for each cycle
SUMPRODUCT=SUMPRODUCT(StateVector,UtilityVector)Calculate expected QALYs for each cycle
SEQUENCE=SEQUENCE(NumberCycles)Generate model cycle numbers
MUNIT=MUNIT(NumberStates)Create identity matrices during model development

VBA (Optional)

Automate repeated state-transition calculations, accumulation of discounted outcomes and probabilistic sensitivity analyses across multiple intervention strategies.


Sources

  • Siebert U, Alagoz O, Bayoumi AM, et al. State-transition modeling: a report of the ISPOR-SMDM Modeling Good Research Practices Task Force-3. Medical Decision Making. 2012;32(5):690?700.
  • Sonnenberg FA, Beck JR. Markov models in medical decision making: a practical guide. Medical Decision Making. 1993;13(4):322?338.
  • Briggs A, Claxton K, Sculpher M. Decision Modelling for Health Economic Evaluation. Oxford University Press; 2006.
  • Caro JJ, Briggs AH, Siebert U, Kuntz KM. Modeling good research practices: overview. Medical Decision Making. 2012;32(5):667?677.
  • NICE. Health Technology Evaluation Manual.
  • Drummond MF, Sculpher MJ, Claxton K, Stoddart GL, Torrance GW. Methods for the Economic Evaluation of Health Care Programmes. 4th ed. Oxford University Press.

Library

Publications

1
  • Book

    Markov Processes for Stochastic Modeling — Masaaki Kijima, 1st Edition ed., 1997 (Chapman & Hall)

    An applied mathematical treatment of discrete- and continuous-time Markov processes for modeling the transient behaviour of stochastic systems.

Frequently Asked Questions (7)

  • What is a state transition model?

    A general term for a decision-analytic model, such as a Markov model, representing disease progression as movement between defined health states.

    Source: Sonnenberg FA, Beck JR. Markov models in medical decision making: a practical guide. Medical Decision Making. 1993;13(4):322-338. doi:10.1177/0272989X9301300409.

  • What is a state-transition model?

    A state-transition model is a general term for a decision-analytic model, such as a Markov model, that represents disease progression as the movement of patients between defined health states over time. Patients occupy mutually exclusive states and transition between them according to specified probabilities, with costs and effects accruing as they do. The term covers both cohort and individual-level forms and is used broadly for models built on health states and transitions, of which the Markov model is the most common example.

    Source: Sonnenberg & Beck 1993

  • What disease-progression framework is a state-transition model?

    A state-transition model is a framework that represents disease progression as movement between a set of defined health states over time. Patients occupy one state at a time and may move to others at the end of each cycle according to transition probabilities. The approach covers both cohort Markov models, which track proportions of a group, and individual simulations, which follow one patient at a time. It is widely used in economic evaluation because many diseases can be described naturally in terms of distinct clinical states. Careful choice of states and cycle length shapes its accuracy.

    Source: Siebert et al. 2012

  • What characterises a state-transition model?

    A state-transition model is characterised by representing the disease as a set of defined health states and modelling patients' movement between them over time through transition probabilities, with costs and health effects attached to states or transitions. It captures disease progression as a sequence of state changes rather than as continuous processes or fixed pathways. This state-and-transition structure, whether followed by a cohort or by individuals, is the defining feature that distinguishes state-transition models from other modelling approaches such as decision trees.

    Source: Sonnenberg & Beck 1993

  • What forms can a state-transition model take?

    A state-transition model can take a cohort form, in which a hypothetical cohort is tracked as proportions across states using average transition probabilities, or an individual, or microsimulation, form, in which patients are simulated one at a time through their own state histories. The cohort form is simpler and deterministic; the individual form captures heterogeneity and history at greater computational cost. Both share the state-and-transition structure, so the term state-transition model encompasses these related approaches to representing disease progression.

    Source: Sonnenberg & Beck 1993

  • How does a state-transition model relate to a Markov model?

    A Markov model is the most common type of state-transition model, one in which transitions depend only on the current state, the Markov assumption. The broader term state-transition model covers models built on states and transitions generally, including those that relax the Markov assumption, for instance by using individual simulation with memory. So all Markov models are state-transition models, but the state-transition category is more general, encompassing related models that represent disease as movement between states.

    Source: Sonnenberg & Beck 1993

  • When is a state-transition model used?

    A state-transition model is used to represent conditions where disease progression can be described as movement between distinct health states over time, particularly chronic and recurring conditions where events repeat and outcomes accrue over years. It suits problems that a decision tree would represent awkwardly because of recurring events or long horizons. By capturing the states patients pass through and their transitions, a state-transition model efficiently represents ongoing disease processes, making it a standard approach in health economic evaluation of long-term conditions.

    Source: Sonnenberg & Beck 1993

Trust Record

Verified by Dr Darrin Baines

British health economist

Professional identity: darrinbaines.org

Verification date: 7 Oct 2025

Content version: 1.0.0

Canonical Identity

Term code
HE-EM-MM-020

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