1. Siegel, Joanna E. ScD, RN
  2. Clancy, Carolyn M. MD

Article Content

IN this era of increasing possibilities for the use of healthcare dollars, and at the same time increasing demands for these dollars, nurses are becoming more aware of and interested in the economics of healthcare. In 1993, the National Nursing Research Agenda noted on its first page that "innovative changes in healthcare and the development of cost-effective systems for[horizontal ellipsis] care will be essential to meet the needs of society" and that "care must be delivered within systems validated as[horizontal ellipsis] achieving positive, cost-effective outcomes for individuals, families, and communities."1 These thoughts reflect the views of a wide constituency within the nursing leadership, including the American Nurses Association, whose statement Directions for Nursing Research described a primary goal to "design and evaluate alternative models for delivering healthcare and for administering healthcare systems so that nurses will be able to balance high quality and cost-effectiveness in meeting the nursing needs of identified populations."2


Over the last several years, a number of articles have appeared in the nursing literature, discussing the need for health economic research* in nursing and providing guidance on the conduct of cost-effectiveness and related studies.3-6 A recent workshop on cost-effectiveness analysis (CEA) sponsored by the National Institute of Nursing Research, with the assistance of the Agency for Healthcare Research and Quality (AHRQ) and the Johns Hopkins University, was rapidly oversubscribed, demonstrating a high level of interest in CEA among nurse researchers.


By way of definition, CEA is a form of analysis in which an investigator estimates the relative value of an intervention-the amount of health benefit that can be gained from the intervention compared with what could be achieved by investing the required money in the best possible alternative intervention instead. A cost-effectiveness ratio is essentially a unit price: the cost of a unit of healthcare benefit. A cost-effectiveness ratio of $45,000 per quality-adjusted life year means that using a particular intervention, one would need to invest $45,000 to extend a person's life in a "healthy" state by 1 year. Although cost-effectiveness ratios can be computed using a variety of health benefit measures-for example, cost per case of cancer identified-standards in the field consistently recommend that analysts use a measure of benefit that reflects both length and quality of life when both are important outcomes.7,8



Nurses have taken an interest in cost-effectiveness for a number of reasons. One reason is a commitment to improving the rationality and efficiency of our healthcare system. It makes sense to spend money on interventions that provide the most "bang for the buck." From a purely quantitative view, this approach provides the greatest overall return for the healthcare budget. Of course, there are a variety of other considerations in healthcare policy-the ethics of offering interventions that help an elderly population versus a younger population, prevention versus cure, and the relative desirability of helping one person a great deal versus helping many people less dramatically, to name a few. However, the argument for including cost-effectiveness information in policy-making processes is to allow decision makers to make informed choices-choices that incorporate information on the relative amount of health benefit one can obtain for investments in different healthcare interventions. Many nurses who have studied cost-effectiveness have become convinced that this information should be included more regularly and more widely in policy decisions.


Another reason that many nurses have become interested in cost-effectiveness is that, to be taken seriously within the financially constrained healthcare environments in which they work, they must demonstrate the economic feasibility of interventions they want to implement. This consciousness has generally become more pervasive in healthcare. For example, in a recent radio feature about new possibilities for pain reduction in children through the use of interactive virtual reality games, the reporter emphasized that because these games are costly, their developers must demonstrate that they are more effective in reducing pain than current approaches (ie, distracting a child by asking her to squeeze a rubber ball when she feels pain).9


When new therapies are cheaper than existing options with an equivalent health outcome, we can expect to hear strong support of these "cost-effective" interventions. (Actually, cost-saving is the correct term here.) Yet even when they are more expensive, interventions still can be cost-effective. If they are significantly more effective, even though more costly, we still may identify them as a desirable use of our limited resources relative to other uses. This is the interest of many nurses in the current environment. They have identified a nursing intervention that they believe improves health and well-being; they want to investigate its cost-effectiveness so they can make the argument that the intervention is not only effective but also a good use of resources. Nurses' recommendations will gain significant credibility if they can document cost savings or low cost for the incremental benefit afforded by a new intervention.


Finally, in truth, some element of recent interest in cost-effectiveness in nursing (and in other fields) reflects expediency on the part of researchers. In many research contexts, it is required-or at least advantageous-to study the cost-effectiveness of interventions. Some grants are available specifically for CEA. In others, it is recommended that investigators append a cost-effectiveness study to an effectiveness trial. In still other cases, the direction is more subtle. The researcher is "encouraged to consider" evaluating cost-effectiveness, a suggestion that demonstrates the funder's interest in establishing the value, rather than simply the effectiveness, of the intervention in question. In these cases, researchers are responding to incentives that reflect growing interest in effectiveness and efficiency across the healthcare system.



AHRQ's mission highlights a commitment to determining and communicating information on the effectiveness, cost, and efficiency of healthcare interventions to help decision makers at all levels make informed decisions about healthcare. The agency's activities in CEA, housed in the Research Initiative in Clinical Economics (RICE) program, support this commitment. RICE activities focus on 4 main goals: (1) facilitating the use and enhancing the credibility of economic analysis in decision making; (2) promoting the availability of standardized inputs to cost-effectiveness and related studies; (3) supporting advances in economic analysis methods; and (4) providing targeted support for extramural clinical economics studies to inform healthcare decision making. Activities are intended to improve the availability and quality of studies that will be useful inputs to decisions and also to facilitate their use in current and prospective policy processes.


Policy projects

Foremost among the agency's activities in clinical economics are efforts to improve the usefulness and relevance of economic analysis in policy settings. These efforts touch a variety of settings where nurses are employed, including managed care organizations and the Department of Veterans Affairs, as well as address the use more generally of CEA. An AHRQ-sponsored Medical Care supplement "Cost-effectiveness analysis in US healthcare decision-making: where is it going?"10 describes several recent efforts to integrate CEA in decision processes, considering the potential of economic analysis as well as obstacles to its wider use.


Recent studies the agency has undertaken to support the development of improved systems and mechanisms for using CEA include evaluation of a format developed by the Academy of Managed Care Pharmacy to request information on the effectiveness and cost-effectiveness of drugs being considered for inclusion on managed care formularies. This format represents a systematic attempt to introduce economic information into a healthcare decision-making setting, one that has critical implications for patient choice and the quality of patient care as well as important cost implications. In another AHRQ-sponsored project, investigators piloted an innovative approach for allowing public citizens to provide informed input into resource allocation decisions, investigating citizens' views and ability to digest information on the cost-effectiveness of healthcare interventions in addition to more familiar information on their effects.11


Database resources

An important requisite for using CEA is the ability to find and evaluate relevant studies at the time a decision is being made. Database resources provide a ready means for locating studies on a particular intervention or interventions addressing a health concern. AHRQ is the primary funder of CEA Registry, which provides public electronic access to more than 500 cost-utility ratios from the literature published from 1976 through 2001 ( CEA Registry is being expanded to include cost-effectiveness studies using cost per life year as the cost-effectiveness ratio, and it is being updated to 2003. AHRQ also maintains its own Clinical Economics Research Database of studies funded in part or entirely by federal agencies, including a broader spectrum of study types (


Standardized inputs to CEA

In 1996, the Panel on Cost-Effectiveness in Health and Medicine, a nonfederal expert task force sponsored by the Department of Health and Human Services, took an important step toward improving quality and standardization of health economics research, developing what are now widely cited guidelines for the conduct of studies. The Panel identified areas for future work, including research to improve standardization of inputs to CEA, specifically cost components and measures of health benefit. These improvements would serve both to facilitate individual studies and to improve comparability across studies.


Efforts by AHRQ to extend standardization and quality have addressed both health benefit measures and measures of cost. AHRQ funded a landmark study to adapt a widely used measure of health-related quality of life, the EuroQol EQ-5D, to reflect US values. This measure is often used in cost-effectiveness studies; such studies can now more accurately reflect the preferences of the US population, including the values US Hispanic and non-Hispanic black populations assign to health states as compared to the general population.13 Additional research has used data from AHRQ's Medical Expenditure Panel Survey, a national representative survey of healthcare utilization and expenditures in the US noninstitutionalized population, to develop means for translating across different measures of health-related quality of life.14,15


AHRQ is also overseeing an ambitious effort to improve the consistency of health benefit measures used in CEA of regulatory interventions affecting health and safety. In this project, sponsored by a consortium of federal agencies, the Institute of Medicine has assessed the scientific validity, ethical implications, and practical utility of a range of health benefit measures used or proposed for use in CEA. The project recommends future directions for the use of these measures in regulatory analysis.16


Cost data are an important source of variation in CEA, making it difficult to compare across studies. If studies of interventions approach cost collection differently and use different estimates, their conclusions may differ as a result of these methods rather than as a result of true differences in the expected cost-effectiveness of interventions. AHRQ is exploring ways in which consistency in the estimation of costs for cost-effectiveness can be improved. This may include identification of appropriate sources of data, identification of cost components for which standardized estimates are available and appropriate, types of variation that are appropriate, and recommendations for the development of guidelines that would improve consistency.


Clinical economic studies and methods

Although AHRQ has neither the resources nor the mandate to serve as a national center for the conduct of clinical economics studies, it funds a number of studies submitted through its extramural grant-making processes. Projects are selected on the basis of the quality of the proposal and relevance of the study for informing current healthcare practices. Studies range from cost-effectiveness analyses of preventive and diagnostic interventions based on simulation models, to large clinical trials where AHRQ joins with other federal agencies to support an economic analysis, such as that of lung volume reduction surgery conducted as part of the National Emphysema Treatment Trial.17 AHRQ has also been a major federal funder of studies of cost-effectiveness methods over the past several years.18 These studies have included development of statistical methods for conducting cost-effectiveness analyses and quality-of-life measures.



Nurses and others in the practice of healthcare are our greatest allies in the research endeavor, both as the source of innovations that merit investigation and as the lynchpin in efforts to improve the quality and efficiency of healthcare practice. As an agency dedicated to supporting informed decision making, it is our goal to provide useful tools and aid nurses in the conduct of studies of effectiveness, cost, and efficiency, as well as in the implementation of evidence-based practice.


Studies must be rigorous to estimate cost-effectiveness accurately rather than wishfully. The field of CEA has made marked progress over the past decade. The growing interest in this area on the part of the nursing community can only serve to improve the relevance of cost-effectiveness studies of nursing interventions and improve decisions regarding all options for resource allocation in healthcare practice.




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16. Miller W, Robinson LA, Lawrence RS, eds. Valuing Health for Regulatory Cost-Effectiveness Analysis. Washington, DC: National Academies Press; 2006. [Context Link]


17. Ramsey SD, Sullivan SD, Kaplan RM, et al. Economic analysis of lung volume reduction surgery as part of the national emphysema treatment trial. Ann Thorac Surg. 2001;71:995-1002. [Context Link]


18. Siegel JE, Byron SC, Lawrence WF. Federal sponsorship of cost-effectiveness and related research in health care: 1997-2001. Value Health. 2005;8(3):223-236. [Context Link]


The term health economic is used in a variety of ways. In this article, we use this term to refer to cost-effectiveness and related research in healthcare. [Context Link]

Section Description


This commentary on patient safety in nursing practice comes from the Agency for Healthcare Research and Quality.