PETER MUENNIG, MD, MPH, is a professor in the Department of Health Policy and Management at Columbia University. MARK BOUNTHAVONG, PharmD, MPH is a pharmacoeconomist at the Veterans Affairs San Diego Health Care System and an adjunct faculty member of the Skaggs School of Pharmacy and Pharmaceutical Sciences at the University of California, San Diego.

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• List of Tables, Figures, and Exhibits xiPreface xxiAcknowledgments xxvAbout the Author xxviiChapter 1 Introduction to Cost-Effectiveness 1Learning Objectives 1Overview 1Why Cost-Effectiveness Is Useful 2Elements of Cost-Effectiveness Analysis 4The Average and Incremental Cost-Effectiveness Ratio 9Why Conduct Cost-Effectiveness Analysis? 11The Reference Case Analysis 14Cost-Effectiveness Analysis and Policy 17Summary 24Further Readings 24References 25Chapter 2 Principles of Cost-Effectiveness Analysis 29Learning Objectives 29Overview 29The Perspective of a Cost-Effectiveness Analysis 29Capturing Costs 33Capturing Quality 35Interpreting the Cost-Effectiveness Ratio 39Types of Economic Analysis 43Summary 48Further Readings 49References 49Chapter 3 Developing a Research Project 53Learning Objectives 53Overview 53Eight Steps to a Perfect Research Project 53Developing a Research Question 55Designing Your Analysis 64Summary 70Further Readings 70References 70Chapter 4 Working with Costs 73Learning Objectives 73Overview 73Opportunity Costs 74Identifying Costs 77Micro-Costing and Gross Costing 80Getting Cost Data 82Using Diagnosis Codes 84Adjusting Costs 86Costs Associated with Pain and Suffering 95Assessing the ‘‘Relevancy’’ of Cost Data 97Other Cost Considerations 98Summary 102Further Readings 103References103Chapter 5 Probabilities and Decision Analysis Models 105Learning Objectives 105Overview 105The Idea Behind Decision Analysis 105Probabilities 109Decision Analysis Models 114Summary 131Further Reading 132References 132Chapter 6 Calculating Life Expectancy 135Learning Objectives 135Overview 135Hand-Calculating Years Gained 135Calculating Life-Years Lost Using Markov Models 140Summary 150Further Readings 151References 151Chapter 7 Working with Health-Related Quality-of-Life Measures 153Learning Objectives 153Overview 153Framework 154Deriving HRQL Scores 158Other Considerations and Reminders 168Using Disability-Adjusted Life-Years 171Summary 172Further Readings 173References 173Chapter 8 Calculating QALYs 177Learning Objectives 177Overview 177Using the Summation Method 178Using the Life Table Method 180More On Discounting 189Issues with QALYs 191Calculating Incremental Cost-Effectiveness 192Disability-Adjusted Life-Year (DALY) 195Summary 196Further Readings 196References 196Chapter 9 Conducting a Sensitivity Analysis 199Learning Objectives 199Overview 199Performing a Sensitivity Analysis 199Sensitivity Analysis 201One-Way Sensitivity Analysis 203Two-Way Sensitivity Analysis 207Tornado Diagram 208Multiway Sensitivity Analysis 210Summary 222Further Readings 222References 223Chapter 10 Preparing Your Study for Publication 225Learning Objectives 225Overview 225Content and Structure of Cost-Effectiveness Articles 225Title and Abstract 230Introduction 231Methods 233Results 235Discussion 238Other 238Technical Appendix 239Figures and Illustrations 240Summary 240Further Reading 241References 241Chapter 11 Basic Concepts in Epidemiology and Application to Cost-Effectiveness Analysis 243Learning Objectives 243Overview 243Review of Incidence 244Understanding Error 252Managing Error in Cost-Effectiveness Analysis 255Calculating Weighted Means 261Evaluating Study Limitations 263Summary 274Further Readings 275References 276Chapter 12 Finding the Data You Need 279Learning Objectives 279Overview 279Finding Data in the Medical Literature 279Grading Published Data 281Using Electronic Datasets 282Data Extraction Tools 290Using Unpublished Data 293Using Expert Opinion 294Organizing Your Data 295Summary 295Further Readings 296References 296Chapter 13 A Worked Example 299Learning Objectives 299Overview 299Helping Students Learn 299Laboratory Exercise One: Building a Markov Tree 300Laboratory Exercise Two: Comparing Interventions 320Laboratory Exercise Three: The Cost-Effectiveness of Health Insurance 333Laboratory Exercise Four: Sensitivity Analysis 344Summary 358Appendix A Answer Key to Exercises 359Appendix B Life Expectancy and Quality-Adjusted Life Expectancy Tables 375Appendix C EQ-5D-5L Health Questionnaire (English Version for the United States) 379Appendix D Diagnosis, Charges, Medicare Reimbursement, Average Length of Stay, and Cost-to-Charge Ratio by Diagnosis-Related Groups, 2011 383Glossary 419Index 431

PETER MUENNIG, MD, MPH, is a professor in the Department of Health Policy and Management at Columbia University. MARK BOUNTHAVONG, PharmD, MPH is a pharmacoeconomist at the Veterans Affairs San Diego Health Care System and an adjunct faculty member of the Skaggs School of Pharmacy and Pharmaceutical Sciences at the University of California, San Diego.

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• List of Tables, Figures, and Exhibits xiPreface xxiAcknowledgments xxvAbout the Author xxviiChapter 1 Introduction to Cost-Effectiveness 1Learning Objectives 1Overview 1Why Cost-Effectiveness Is Useful 2Elements of Cost-Effectiveness Analysis 4The Average and Incremental Cost-Effectiveness Ratio 9Why Conduct Cost-Effectiveness Analysis? 11The Reference Case Analysis 14Cost-Effectiveness Analysis and Policy 17Summary 24Further Readings 24References 25Chapter 2 Principles of Cost-Effectiveness Analysis 29Learning Objectives 29Overview 29The Perspective of a Cost-Effectiveness Analysis 29Capturing Costs 33Capturing Quality 35Interpreting the Cost-Effectiveness Ratio 39Types of Economic Analysis 43Summary 48Further Readings 49References 49Chapter 3 Developing a Research Project 53Learning Objectives 53Overview 53Eight Steps to a Perfect Research Project 53Developing a Research Question 55Designing Your Analysis 64Summary 70Further Readings 70References 70Chapter 4 Working with Costs 73Learning Objectives 73Overview 73Opportunity Costs 74Identifying Costs 77Micro-Costing and Gross Costing 80Getting Cost Data 82Using Diagnosis Codes 84Adjusting Costs 86Costs Associated with Pain and Suffering 95Assessing the ‘‘Relevancy’’ of Cost Data 97Other Cost Considerations 98Summary 102Further Readings 103References103Chapter 5 Probabilities and Decision Analysis Models 105Learning Objectives 105Overview 105The Idea Behind Decision Analysis 105Probabilities 109Decision Analysis Models 114Summary 131Further Reading 132References 132Chapter 6 Calculating Life Expectancy 135Learning Objectives 135Overview 135Hand-Calculating Years Gained 135Calculating Life-Years Lost Using Markov Models 140Summary 150Further Readings 151References 151Chapter 7 Working with Health-Related Quality-of-Life Measures 153Learning Objectives 153Overview 153Framework 154Deriving HRQL Scores 158Other Considerations and Reminders 168Using Disability-Adjusted Life-Years 171Summary 172Further Readings 173References 173Chapter 8 Calculating QALYs 177Learning Objectives 177Overview 177Using the Summation Method 178Using the Life Table Method 180More On Discounting 189Issues with QALYs 191Calculating Incremental Cost-Effectiveness 192Disability-Adjusted Life-Year (DALY) 195Summary 196Further Readings 196References 196Chapter 9 Conducting a Sensitivity Analysis 199Learning Objectives 199Overview 199Performing a Sensitivity Analysis 199Sensitivity Analysis 201One-Way Sensitivity Analysis 203Two-Way Sensitivity Analysis 207Tornado Diagram 208Multiway Sensitivity Analysis 210Summary 222Further Readings 222References 223Chapter 10 Preparing Your Study for Publication 225Learning Objectives 225Overview 225Content and Structure of Cost-Effectiveness Articles 225Title and Abstract 230Introduction 231Methods 233Results 235Discussion 238Other 238Technical Appendix 239Figures and Illustrations 240Summary 240Further Reading 241References 241Chapter 11 Basic Concepts in Epidemiology and Application to Cost-Effectiveness Analysis 243Learning Objectives 243Overview 243Review of Incidence 244Understanding Error 252Managing Error in Cost-Effectiveness Analysis 255Calculating Weighted Means 261Evaluating Study Limitations 263Summary 274Further Readings 275References 276Chapter 12 Finding the Data You Need 279Learning Objectives 279Overview 279Finding Data in the Medical Literature 279Grading Published Data 281Using Electronic Datasets 282Data Extraction Tools 290Using Unpublished Data 293Using Expert Opinion 294Organizing Your Data 295Summary 295Further Readings 296References 296Chapter 13 A Worked Example 299Learning Objectives 299Overview 299Helping Students Learn 299Laboratory Exercise One: Building a Markov Tree 300Laboratory Exercise Two: Comparing Interventions 320Laboratory Exercise Three: The Cost-Effectiveness of Health Insurance 333Laboratory Exercise Four: Sensitivity Analysis 344Summary 358Appendix A Answer Key to Exercises 359Appendix B Life Expectancy and Quality-Adjusted Life Expectancy Tables 375Appendix C EQ-5D-5L Health Questionnaire (English Version for the United States) 379Appendix D Diagnosis, Charges, Medicare Reimbursement, Average Length of Stay, and Cost-to-Charge Ratio by Diagnosis-Related Groups, 2011 383Glossary 419Index 431

PETER MUENNIG, MD, MPH, is a professor in the Department of Health Policy and Management at Columbia University. MARK BOUNTHAVONG, PharmD, MPH is a pharmacoeconomist at the Veterans Affairs San Diego Health Care System and an adjunct faculty member of the Skaggs School of Pharmacy and Pharmaceutical Sciences at the University of California, San Diego.

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• List of Tables, Figures, and Exhibits xiPreface xxiAcknowledgments xxvAbout the Author xxviiChapter 1 Introduction to Cost-Effectiveness 1Learning Objectives 1Overview 1Why Cost-Effectiveness Is Useful 2Elements of Cost-Effectiveness Analysis 4The Average and Incremental Cost-Effectiveness Ratio 9Why Conduct Cost-Effectiveness Analysis? 11The Reference Case Analysis 14Cost-Effectiveness Analysis and Policy 17Summary 24Further Readings 24References 25Chapter 2 Principles of Cost-Effectiveness Analysis 29Learning Objectives 29Overview 29The Perspective of a Cost-Effectiveness Analysis 29Capturing Costs 33Capturing Quality 35Interpreting the Cost-Effectiveness Ratio 39Types of Economic Analysis 43Summary 48Further Readings 49References 49Chapter 3 Developing a Research Project 53Learning Objectives 53Overview 53Eight Steps to a Perfect Research Project 53Developing a Research Question 55Designing Your Analysis 64Summary 70Further Readings 70References 70Chapter 4 Working with Costs 73Learning Objectives 73Overview 73Opportunity Costs 74Identifying Costs 77Micro-Costing and Gross Costing 80Getting Cost Data 82Using Diagnosis Codes 84Adjusting Costs 86Costs Associated with Pain and Suffering 95Assessing the ‘‘Relevancy’’ of Cost Data 97Other Cost Considerations 98Summary 102Further Readings 103References103Chapter 5 Probabilities and Decision Analysis Models 105Learning Objectives 105Overview 105The Idea Behind Decision Analysis 105Probabilities 109Decision Analysis Models 114Summary 131Further Reading 132References 132Chapter 6 Calculating Life Expectancy 135Learning Objectives 135Overview 135Hand-Calculating Years Gained 135Calculating Life-Years Lost Using Markov Models 140Summary 150Further Readings 151References 151Chapter 7 Working with Health-Related Quality-of-Life Measures 153Learning Objectives 153Overview 153Framework 154Deriving HRQL Scores 158Other Considerations and Reminders 168Using Disability-Adjusted Life-Years 171Summary 172Further Readings 173References 173Chapter 8 Calculating QALYs 177Learning Objectives 177Overview 177Using the Summation Method 178Using the Life Table Method 180More On Discounting 189Issues with QALYs 191Calculating Incremental Cost-Effectiveness 192Disability-Adjusted Life-Year (DALY) 195Summary 196Further Readings 196References 196Chapter 9 Conducting a Sensitivity Analysis 199Learning Objectives 199Overview 199Performing a Sensitivity Analysis 199Sensitivity Analysis 201One-Way Sensitivity Analysis 203Two-Way Sensitivity Analysis 207Tornado Diagram 208Multiway Sensitivity Analysis 210Summary 222Further Readings 222References 223Chapter 10 Preparing Your Study for Publication 225Learning Objectives 225Overview 225Content and Structure of Cost-Effectiveness Articles 225Title and Abstract 230Introduction 231Methods 233Results 235Discussion 238Other 238Technical Appendix 239Figures and Illustrations 240Summary 240Further Reading 241References 241Chapter 11 Basic Concepts in Epidemiology and Application to Cost-Effectiveness Analysis 243Learning Objectives 243Overview 243Review of Incidence 244Understanding Error 252Managing Error in Cost-Effectiveness Analysis 255Calculating Weighted Means 261Evaluating Study Limitations 263Summary 274Further Readings 275References 276Chapter 12 Finding the Data You Need 279Learning Objectives 279Overview 279Finding Data in the Medical Literature 279Grading Published Data 281Using Electronic Datasets 282Data Extraction Tools 290Using Unpublished Data 293Using Expert Opinion 294Organizing Your Data 295Summary 295Further Readings 296References 296Chapter 13 A Worked Example 299Learning Objectives 299Overview 299Helping Students Learn 299Laboratory Exercise One: Building a Markov Tree 300Laboratory Exercise Two: Comparing Interventions 320Laboratory Exercise Three: The Cost-Effectiveness of Health Insurance 333Laboratory Exercise Four: Sensitivity Analysis 344Summary 358Appendix A Answer Key to Exercises 359Appendix B Life Expectancy and Quality-Adjusted Life Expectancy Tables 375Appendix C EQ-5D-5L Health Questionnaire (English Version for the United States) 379Appendix D Diagnosis, Charges, Medicare Reimbursement, Average Length of Stay, and Cost-to-Charge Ratio by Diagnosis-Related Groups, 2011 383Glossary 419Index 431