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This JAMA Guide to Statistics and Methods reviews the use of cost-effectiveness analysis to quantify the tradeoffs in costs, harms, and benefits of new health care interventions compared with existing interventions.

Health care decision makers, including patients, clinicians, hospitals, private health systems, and public payers (eg, Medicare), are often challenged with choosing among several new or existing interventions or programs to commit their limited resources to. This choice is ideally based on a comparison of health benefits, harms, and costs associated with each alternative. How best to determine the optimal intervention is a challenging task because benefits, harms, and costs must be weighed for a given option and compared with alternatives.

One way to inform such decisions is to perform a cost-effectiveness analysis. A cost-effectiveness analysis is an analytic method for quantifying the relative benefits and costs among 2 or more alternative interventions in a consistent framework. In a study published in JAMA Oncology, Moss et al1 examined the cost-effectiveness of multimodal ovarian cancer screening with serum cancer antigen 125 compared with no screening in the United States, based on findings from the large United Kingdom Collaborative Trial of Ovarian Cancer Screening (UKCTOCS). The UKCTOCS evaluated the effect of screening on ovarian cancer mortality2 and demonstrated that multimodal screening reduced mortality among women without prevalent ovarian cancer.


Choosing among alternative treatments or programs is complicated because benefits, harms, and costs vary in the following ways: (1) benefits may be reflected in varying patterns of reduced morbidity or mortality in patients; (2) interventions vary in price and also in costs of acquiring or providing them (eg, time costs); and (3) benefits and costs accrue differently to different constituents (patients, caregivers, clinicians, health systems, and society). A cost-effectiveness analysis is designed to allow decision makers to clearly understand the tradeoffs of costs, harms, and benefits between alternative treatments and to combine those considerations into a single metric, the incremental cost-effectiveness ratio (ICER), that can be used to inform decision making when limited resources are available.


Cost-effectiveness analysis is an analytic tool in which the costs and harms and benefits of an intervention (intervention A) and at least 1 alternative (intervention B) are calculated and presented as a ratio of the incremental cost (cost of intervention A − cost of intervention B) and the incremental effect (effectiveness of intervention A − effectiveness of intervention B). This ratio is known as the ICER.

The incremental cost in the numerator represents the additional resources (eg, medical care costs, costs from productivity changes) incurred from the use of intervention A over intervention B. The incremental effect in the denominator of the ICER represents the additional health outcomes (eg, the number of cases of a disease prevented or the quality-adjusted life-years ...

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