What is economic analysis?

An economic analysis can be defined as an analysis that uses analytical techniques to define choices in resource allocation. This article is based largely on a short booklet by Professor Michael Drummond1 and two of the forerunners to the “Users' Guides to the Medical Literature” series.2 3 A recent book, Elementary Economic Evaluation in Health Care, is also useful.4

Measuring costs and benefits of health interventions

Not long ago, I was taken to hospital to have my appendix removed. From the hospital's point of view, the cost of my care included my board and lodging for five days, a proportion of doctors' and nurses' time, drugs and dressings, and investigations (blood tests and a scan). Other direct costs (see box) included my general practitioner's time for attending me in the middle of the night and the cost of the petrol my husband used when visiting me (not to mention the grapes and flowers).

In addition to this, there were the indirect costs of my loss in productivity. I was off work for three weeks, and my domestic duties were temporarily carried out by various friends, neighbours, and a hired nanny. Also, from my point of view, there were several intangible costs, such as discomfort, loss of independence, and a cosmetically unsightly scar. As the box shows, these direct, indirect, and intangible costs constitute one side of the cost-benefit equation. On the benefit side, the operation greatly increased my chances of staying alive and I had a nice rest from work.

In this example, few patients (and even fewer purchasers) would perceive much freedom of choice in deciding to opt for the operation. But most health interventions do not concern definitive procedures for surgical emergencies. At some stage, almost all of us will be forced to …