Building Uncertainty Into Cost-Effectiveness Rankings
Portfolio Risk-Return Tradeoffs and Implications for Decision Rules
Bibliographic Data
| ID | 9099113 |
|---|---|
| Authors | Bernie J Oʼbrien (St. Joseph’s Healthcare Hamilton, corresponding author), Bernie J O'Brien, Mark Sculpher (0000-0003-3746-9913), Mark J Sculpher |
| Year | 2000 |
| Volume | 38 |
| Issue | 5 |
| Pages | 460-468 |
| Publication date | 2000-05-01 |
| Open Access | No |
| Type | ARTICLE |
| Venue | Medical Care (JOURNAL) |
| Journal identifiers | ISSN: 0025-7079 • E-ISSN: 1537-1948 |
| Publisher | Ovid Technologies (Wolters Kluwer Health) (PUBLISHER) |
| DOI | 10.1097/00005650-200005000-00003 |
| OpenAlex | W1481064025 |
| Language | EN |
| Citations received | 4 |
| References cited | 22 |
Background. Current principles of cost-effectiveness analysis emphasize the rank ordering of programs by expected economic return (eg, quality-adjusted life-years gained per dollar expended). This criterion ignores the variance associated with the cost-effectiveness of a program, yet variance is a common measure of risk when financial investment options are appraised. Variation in health care program return is likely to be a criterion of program selection for health care managers with fixed budgets and outcome performance targets. Methods. Characterizing health care resource allocation as a risky investment problem, we show how concepts of portfolio analysis from financial economics can be adopted as a conceptual framework for presenting cost-effectiveness data from multiple programs as mean-variance data. Results. Two specific propositions emerge: (1) the current convention of ranking programs by expected return is a special case of the portfolio selection problem in which the decision maker is assumed to be indifferent to risk, and (2) for risk-averse decision makers, the degree of joint risk or covariation in cost-effectiveness between programs will create incentives to diversify an investment portfolio. Conclusions. The conventional normative assumption of risk neutrality for social-level public investment decisions does not apply to a large number of health care resource allocation decisions in which health care managers seek to maximize returns subject to budget constraints and performance targets. Portfolio theory offers a useful framework for studying mean-variance tradeoffs in cost-effectiveness and offers some positive predictions (and explanations) of actual decision making in the health care sector
Actuarial science · Business · Econometrics · Economics · Risk analysis (engineering) · Computer Science · Environmental Science · Health Systems, Economic Evaluations, Quality of Life · Healthcare cost, quality, practices · Healthcare Policy and Management
Portfolio evaluation of health programs
Optimizing a portfolio of health care programs in the presence of uncertainty and constrained resources
Portfolio theory and the alternative decision rule of cost-effectiveness analysis
Revisiting the decision rule of cost-effectiveness analysis under certainty and uncertainty
| Citations per year | 0.17 |
|---|---|
| Citation span | 2003 - 2004 (2) |
| Highly cited | No |