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## Incremental Cost Effectiveness Ratio

Aka: Incremental Cost Effectiveness Ratio, ICER
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

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