Step 3: Select the Appropriate Type of Analysis

Once the method of economic evaluation has been chosen (e.g., prospective, retrospective, or modeling), the next step is to choose an appropriate type of health economic evaluation. Here we provide a brief overview of basic health economic evaluation types and refer the reader to other sources for more detailed discussions (see e.g., Methods for the Economic Evaluation of Health Care Programs; Drummond, Sculpher, Torrance, O’Brien, & Stoddart, 2005; Russell, Gold, Siegel, Daniels, & Weinstein, 1996; Siegel, Weinstein, Russell, & Gold, 1996; Weinstein, Siegel, Gold, Kamlet, & Russell, 1996).

The five main types of health economic evaluations are summarized in Table 18.3 and include cost studies, cost-effectiveness analysis, cost-utility analysis, and cost-benefit analysis.

TABLE 18.3 Types of Economic Evaluation

Type of Evaluation

Measures Needed

When to Use

Cost study

  • 1. Return on investment
  • 2. Cost of illness
  • 3. Budget impact


  • 1. To determine if an intervention reduces cost in the long run
  • 2. To calculate the total cost burden of a disease
  • 3. Cost to a payer for implementing an intervention



Cost and a measure of clinical effectiveness

Comparing competing interventions where effectiveness can be measured using the same clinical endpoint (e.g., cognitive score, depressive symptoms, functional status, blood pressure, hemoglobin A1c)

Cost-utility analysis

Cost and health utility

A type of cost-effectiveness analysis where effectiveness of the competing interventions can be measured using quality of life and/or quantity of life (e.g., survival)




A type of cost-effectiveness analysis where the competing interventions have equivalent effectiveness; therefore, the preferred intervention is that which has lower cost

Cost-benefit analysis

Cost and benefits measured in dollars

When effectiveness can be valued in monetary terms (e.g., dollars), therefore the goal is to examine whether the treatment results in

a net financial benefit or a net financial loss

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