Cost effectiveness analysis: health economic studies

This page is part of a guide to evaluating digital health products.

Cost effectiveness analysis (CEA) is one type of economic evaluation that compares the costs and effects of alternative health interventions. CEA focuses on assessing the intervention’s impact on clinical measures, unlike other types of economic evaluation that consider broader effects.

CEA measures effects in physical units of health outcomes. These are typically clinical outcomes, such as blood pressure and cardiovascular events. CEA enables you to compare the costs and health effects of your digital product with alternatives, as long as the effects of the different interventions are measured in the same units.

The incremental cost and incremental effect of your product can then be combined into a single metric, for example, cost per cardiovascular event averted.

CEA results can help decision-makers who want to achieve a specific health objective. For example, a CEA study can help a health commissioner decide which mobile app to invest in to manage the most patients with type-2 diabetes by identifying the app that provides the lowest cost per managed diabetes case.

What to use it for

Use a cost effectiveness analysis when:

  • you want to assess the value for money of your digital product compared to alternative options using the same unit of effect, usually to do with a particular disease
  • the benefits of using your product are mostly health-related
  • clinical measures are most appropriate to capture the health benefits from using your product


Advantages of CEA include:

  • clinical outcomes are relatively straightforward to measure, particularly if the economic evaluation is linked to a clinical trial
  • it gives you an assessment of alternative options based on disease-specific measures of health effects


Drawbacks of CEA include:

  • it cannot inform broader resource allocation decisions across different diseases because health benefits will often be measured in different units (different clinical outcomes)

How to carry out a cost effectiveness analysis

You should follow the general considerations for any economic evaluation study. Other points that are particularly relevant to cost effectiveness analysis (CEA) include:

Choosing your study perspective

CEA tends to be most useful to inform decisions for a particular disease. Because it is restricted to clinical outcomes, you may miss broader health-related benefits. For optimal disease management, your study will often take the perspective of the payer or health service provider, or the healthcare system.

Measuring effects

CEA allows you to choose the most relevant measure of effect for comparing your product with alternatives, according to the health problem you’re considering. For example:

  • clinical measures – blood glucose levels, cardiovascular events
  • disease-specific quality of life (QoL) measures – EORTC in cancer, HeartQoL
  • more generic measures of health – symptom-free days

Reporting the results

CEAs work out whether your product is cost-effective (the preferred alternative) by assessing how the effects and costs of your product compare with those of alternative products. This can be done by reporting incremental cost, incremental effect and cost per unit of effect gained.

If your product generates more effects and costs less than the alternatives, then it is unambiguously cost-effective and should be adopted. If your product generates less effect and costs more than the alternatives, then it is clearly not good value for money.

Some digital products are, however, both more effective and more costly than the alternatives. To work out whether the additional benefits are worth the extra cost, you need to look at the cost per unit of effect. Your product will be judged cost-effective if it provides the lowest cost per unit of effect, as in the HeLP-Diabetes example below.

Example: HeLP-Diabetes

Li and others (2018), ‘Cost-effectiveness of facilitated access to a self-management website, compared to usual care, for patients with type-2 diabetes (HeLP-Diabetes): randomized controlled trial.’

The study used a CEA to assess the costs, effects and cost-effectiveness of the HeLP-Diabetes programme compared to usual care for type 2 diabetic patients. The study took the perspective of the UK NHS and personal social services, so it excluded costs beyond those to the healthcare system and non-health effects.

The overall aim of HELP-Diabetes was to improve the management of diabetes, so the main health outcome considered was diabetes-related distress, measured by the Problem Areas in Diabetes (PAID) questionnaire. The PAID score ranges from 0 to 100, with lower scores indicating less stress across a range of areas, such as diabetes treatment, diet and social relationships.

The CEA mainly considered 2 types of costs:

1. Intervention costs

These included resources needed for the delivery and maintenance of the HELP-Diabetes program, such as:

  • costs related to hardware and software
  • staff costs related to engagement, revising the website content and moderating an online forum

In this case, costs associated with the development and optimisation of the HELP-Diabetes website related to research funding rather than NHS resources, so they were excluded from the analysis.

2. Healthcare resources

Resource use included:

  • primary care (GP and nurse consultations)
  • secondary care (out-of-hours services, A&E admissions)
  • community services (counselling, social care)

Resource use data were collected for both the intervention and control groups, using within-trial case report forms and retrospective self-reported questionnaires online.

Unit costs were taken mostly from the NHS Reference Costs and Unit Costs of Health and Social Care.

The CEA suggested that HELP-Diabetes was effective by reducing the PAID score at 12 months by 2 units, compared to usual care. The intervention cost more than the control group (difference in costs was £111). Overall, this led to a cost per unit improvement on PAID scale of £58.

More information and resources

Westbrook and others (2015), ‘Cost-effectiveness analysis of a hospital electronic medication management system’. The effectiveness measure considered in this study was the number of drug adverse events (during hospital admissions), and the CEA reported cost per drug adverse event averted.

Grustam and others (2018), ‘Cost-effectiveness analysis in telehealth: a comparison between home telemonitoring, nurse telephone support, and usual care in chronic heart failure management’. One of the health outcomes considered in this study was life years, and the CEA reported cost per life year gained.

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