Cost-effectiveness threshold

The cost-effectiveness threshold is the maximum amount a decision maker is prepared to pay for a unit of health outcome, such as a quality-adjusted life year (QALY). When the cost-effectiveness of a new intervention (measured by its incremental cost-effectiveness ratio) is estimated to be below this threshold, it is likely to be recommended. Conversely, if the ICER is above the threshold, the intervention is less likely to be considered a cost-effective use of resources. For values close to the threshold, the level of uncertainty around the ICER may contribute to the final decision.

Thresholds are not outputs of cost-effectiveness analyses themselves, but rather guides for interpreting these results in decision making. They are specific to the unit of health outcome used. The threshold is closely related to the economic concept of opportunity cost, which represents the value of what is foregone when a specific intervention is implemented. The threshold value essentially represents the health outcomes that could have been achieved by using the same resources on other healthcare interventions. While related, the cost-effectiveness threshold and opportunity cost are distinct concepts and do not necessarily have to align.

Some countries, such as England through the National Institute for Health and Care Excellence (NICE), make their cost-effectiveness thresholds explicit. In other countries, thresholds may not be explicit and can vary across different healthcare sectors or disease areas.