Incremental Cost Effectiveness Ratio

1. See Also
   1. Decision Analysis (Decision Tree, Chance Graph)
   2. Expected Value Theory (or Expected Utility Theory, Time Trade Off, Standard Gamble, Visual Analogue)
   3. Quality Adjusted Life Year ( QALY)
2. 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
3. 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
4. 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
5. Resources
   1. Incremental Cost Effectiveness Ratio
      1. https://en.wikipedia.org/wiki/Incremental_cost-effectiveness_ratio
6. References
   1. Desai (2014) Clinical Decision Making, AMIA’s CIBRC Online Course