What Is a Cost-Benefit Analysis in Healthcare?

A cost-benefit analysis in healthcare is an assessment of the costs associated with a given medical treatment contrasted with the benefits for the patient or society at large. This is a component of health care economics, the study of economic factors that may play a role in decisions about medical treatment from patients, doctors, insurance companies, and public health agencies. Subjecting medical decisions to this type of analysis makes some patients uncomfortable, and it may be balanced with evidence-based medicine and other measures to determine whether a treatment should proceed.

One use for a cost-benefit analysis in healthcare is when limited resources are available and care providers want to use them efficiently to provide the greatest good to the greatest number. This comes up particularly markedly in triage, where care providers need to make snap decisions about who gets care and when. In the wake of a major train accident, paramedics and other personnel may decide not to exert substantial energy and effort on saving a person with serious and probably fatal energies if it means depriving multiple people of care that could help them survive, for example. In this case, the cost could be counted in resources and human lives, versus the marginal benefit of maybe saving one life.

Insurance companies routinely use cost-benefit analysis in healthcare to set policies and decide whether to approve claims. Many companies have blanket policies on general treatments, to either approve or deny them. If the cost is unacceptably high and the benefit is marginal or low, the company may deny treatment. In the event of an appeal, it can perform a more rigorous analysis of the situation. For example, a cancer patient who will die may not receive approval for a medication that adds two weeks of life, on the grounds that the drug is expensive and the benefit is minimal.

Hospitals and clinics can use cost-benefit analysis in healthcare to make policy decisions as well. An obligation to treat patients at serious risk of death is present in many regions, but hospitals can be selective about the kind of treatments they provide and how much support to offer to patients who cannot afford treatment. While hospitals and clinics want to promote health, they also don't want to go bankrupt expending resources, thus depriving the whole community of their services.

Individual patients can also use a cost-benefit analysis in healthcare, and some may find it helpful for making treatment decisions. A doctor can lay out a series of treatment options and their costs, not just in monetary terms but also in terms of side effects, potential complications, and risks. The patient can consider the benefits, like whether treatments will be curative, could extend life, or might offer a chance at survival while waiting for a better treatment to become available. Patients may opt out of high-cost, low-benefit treatments if they feel that the costs are simply not worth it to them.