Cost-effectiveness analysis evaluates the effectiveness of two or more treatments relative to their cost. The aim of the decision maker when assessing a new intervention is to maximise outcomes (i.e. QALYs) and minimise costs. In England, the decision around whether an intervention is cost-effective is made by The National Institute for Health and Care Excellence (NICE). Interventions that are both more effective at producing health benefits than other interventions and are associated with net cost savings (i.e. the additional cost of the intervention is outweighed by the cost savings elsewhere) are said to be a “dominant” strategy. In the event that an intervention is more effective and more costly, the decision makers weigh up the additional costs against the additional QALYs. NICE is generally willing to pay around £20,000 per QALY gained by a new treatment. For example if an intervention produced 0.5 additional QALYs and was associated with additional costs of no more than £10,000, then the intervention would be considered to be cost-effective.

How to cite: Cost-Effectiveness Analysis [online]. (2016). York; York Health Economics Consortium; 2016. https://www.yhec.co.uk/glossary/cost-effectiveness-analysis/

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