Incremental Cost Effectiveness Ratio

Aka: Incremental Cost Effectiveness Ratio, ICER

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II. Definition: Incremental Cost Effectiveness Ratio (ICER)

  1. Based on cost for an outcome utility or value (e.g. QALY)
  2. Cost effectiveness can be determined by comparing ICER to a willingness to pay

III. Technique

  1. Given
    1. Two strategies: 1 and 2 (e.g. treatment and no treatment)
  2. Calculation
    1. Incremental Cost Effectiveness Ratio (ICER) = Incremental_Cost / Incremental_Effectiveness
  3. Components
    1. Incremental Cost = c1-c2
    2. Incremental Effectiveness = e1-2

IV. Example

  1. Given
    1. Strategy 1: New intervention costs $100 and is assigned an effectiveness value of 0.9
    2. Strategy 2: Status Quo costs $1000 and is assigned an effectiveness value of 0.8
  2. Calculation
    1. Incremental cost =$100 - $1000 = -$900
    2. Incremental effectiveness = 0.9 - 0.8 = 0.1
    3. Incremental Cost Effectiveness Ratio (ICER) = -$900/0.1 = -$9000
      1. Each unit of effectiveness saves $9000 with the new intervention strategy

V. Resources

  1. Incremental Cost Effectiveness Ratio
    1. https://en.wikipedia.org/wiki/Incremental_cost-effectiveness_ratio

VI. References

  1. Desai (2014) Clinical Decision Making, AMIA’s CIBRC Online Course

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