How to measure costs and benefits

Benefits

In order to transform the intended outcomes of a service, intervention or project into economic, health or social impacts, each outcome needs to first be identified as a benefit, and then monetised, where possible. There are a number of different types of benefits as described below:

NHS cash releasing benefits

Benefits that provide immediate cashable savings to a provider. Examples may be:

Reduction in medical equipment purchases
Decommissioning of services

NHS non-cash releasing benefits

Benefits that help to reduce the demand and strain on services but for which a fiscal value cannot be realised without the decommissioning of services. Examples may be:

Reduction in appointments
Saving clinician time

Benefits that relate to quality of life. They use a Quality Adjusted Life Year (QALY) calculation, which provides a valuation for a particular health state by calculating the number of years of life spent in that state, multiplied by a health state utility-based weighting. Examples of benefits relating to QALYs may be:

Improvement in the quality of life of a patient, owing to reduced severity of a stroke
Improvement in the quality of life of a patient from avoiding an amputation

Benefits that relate to the overall benefit to the public including, but not limited to, improved health and wellbeing. Examples may be:

Reduction in patient travel costs

Environmental

Benefits relating to environmental impact of an intervention. Examples may be:

Reduction in carbon emissions
Reduction in packaging
Reduction in toxic disposal

Costs

All incurred costs as a direct result should be considered as well as potential indirect impacts on the healthcare system. Costs of the project team, implementation, equipment, training as well as retraining or technical faults should be understood when conducting a health economic evaluation.

Baseline or comparator

When conducting a health economic evaluation, the solution or intervention should be assessed against a comparator. This can be the service provided before the intervention or the service running in parallel without the solution (current standard of care). Collection of comparator data is essential prior to the start of the implementation to establish the counterfactual.