Instruction:
University Hospital is developing its budget for the next operating year. As part of the management team, you are involved in this decision-making process. Your team is faced with tough decisions on how resources should be allocated, so you recommend using economic evaluation to assist with making these decisions.

The first decision your team needs to make is whether to purchase new MRI machines or update the hospital’s revenue cycle management system. Why cost-benefit analysis is the most applicable economic evaluation to use to make this decision? Calculate and interpret the cost-benefit ratio for each option.

Total costs Total benefits
(Savings to organization)
New MRI machines $550,675 $985,500
Update revenue cycle management system $300,750 $745,225

The second decision your team needs to make is whether epinephrine or atropine should be used as the clinically recommended drug for cardiac arrests in the ER. The purpose of these medications is to prevent death from cardiac arrest. Why is cost-effectiveness analysis appropriate to make this decision? Calculate and interpret the cost per unit of effectiveness for each medication.

Total costs Total effectiveness
(number of deaths prevented)
Epinephrine $12,750 845
Atropine $11,675 816

The third decision your team needs to make is whether to invest in a diabetes prevention program or an asthma treatment program. Why is cost-utility analysis appropriate to make this decision? Calculate and interpret the cost per QALY for each program.

Total costs Total QALYs
Diabetes Prevention $37,205 612
Asthma Treatment $54,980 675

SELECT ANSWER KEY:
1. MRI: $0.56/$1 or $1/$1.79 ; Revenue Cycle: $0.40/$1 or $1/$2.48
2. Epinephrine: $15.09; Atropine: $14.31
3. Diabetes prevention: $60.79; Asthma treatment: $81.45