Calculating costs

The inclusion of costs is common to all types of economic evaluation. As noted in Drummond et al (2005), many costing issues are context specific and the availability of data often limits the degree of accuracy with which costs are estimated. To cost a programme, the cost of the resources used to provide a programme should be calculated, however, it makes sense to focus on estimating the largest costs associated with programmes with the highest degree of accuracy. Resources used to provide a programme may include inputs from the health care sector and other public sectors as well as the private sector and voluntary sectors. In addition, the cost of patient and family and friends assistance may be included and the productivity losses associated with any time off work by the patient receiving care. Resource savings associated with a programme may also be considered.

The types of costs included in an economic evaluation will be influenced by a number of factors. The objective of the analysis is influenced by the viewpoint. For example, the NICE viewpoint considers health and personal social service costs rather than productivity losses, costs to non-health care sectors and informal care costs. The scope of the analysis is likely to be influenced by the objectives of the analysis. If the comparison is limited to comparing two programmes, costs which are identical across both programmes may be omitted. However, to aid the transferability of the results of a cost analysis it is preferable that the viewpoint of the analysis is broad and that the cost of all resource inputs are considered.

In order to estimate costs four basic steps may be followed as described in Allen and Beecham et al, 1993. The resource inputs are (i) described, (ii) the activities and unit of measurement are identified, (iii) the cost implications of the programme are estimated and, (iv) the unit costs are calculated. There are two approaches to estimating unit costs, that is the top-down approach and the bottom-up approach. The top-down approach divides the total expenditure on a service by units of activity. Units of activity are specific to the services for costing, for example, the cost per day of a hospital stay or the cost of a GP consultation. The bottom-up approach is more comprehensive and involves more detailed costing of all the elements used to cost the service. The different resources used to deliver the service are identified and a value is assigned to each, these values are then summed and linked to an appropriate unit of activity to generate the unit cost. A number of reports and papers provide more details on how to measure and value costs, the references for which are provided below.

References on how to estimate costs

Allen C, Beecham J. 1993 Costing services: ideals and reality, in A Netten and J Beecham (eds) Costing community care: Theory and practice, Avebury, Aldershot.
http://www.joint-reviews.gov.uk/money/unit%20costs.pdf

Beecham J. Unit Costs - Not Exactly Child's Play. A Guide to Estimating Unit Costs for Children's Social Care. The Department of Health Dartington Social Research Unit and the Personal Social Services Research Unit at the University of Kent. 2000. Kingfisher Print, Totnes.
http://www.pssru.ac.uk/

Byford S, McDaid D, Sefton, T. Because it's worth it. A practical guide to conducting economic evaluations in the social welfare field. Joseph Rowntree Foundation, York Publications, 2003.
http://www.jrf.org.uk/bookshop/

Drummond MF, Sculpher MJ, Torrance GW et al., Methods for the economic evaluation of health care programmes. 3rd ed. 2005, Oxford: Oxford University Press.
http://www.oup.com/uk/catalogue/?ci=9780198529453

Sefton T, Byford S, McDaid D, Hills J, Knapp M. Making the most of it: Economic Evaluation in the social welfare field. Joseph Rowntree Foundation, York Publications, 2002.
http://www.jrf.org.uk/bookshop/

References to obtain unit costs Unit costs for pharmaceuticals and health care equipment Joint Formulary Committee. British National Formulary. 52. London: British Medical Association and the Royal Pharmaceutical Society of Great Britain, 2006.
http://www.bnf.org/bnf

MIMS. Monthly Index of Medical Specialities. London: Haymarket Medical Publications.
http://www.haymarketbusinesssubs.com/subscriptions/?fuseaction=viewItem&cat=5&itemID=MIMWEB2007GBP01

NHS Purchasing and Supply Agency - cost data available to NHS staff only http://www.pasa.nhs.uk/ - medical consumables and medical equipment

Unit costs for social care services and health care services Curtis L, Netten A. Unit Costs of Health and Social Care. Canterbury: PSSRU, University of Kent, 2006. Available from:
http://www.pssru.ac.uk as a pdf file

NHS Reference Costs 2005 This document gives details on how and on what over £36 billion of NHS expenditure was used. Its main purpose is to provide a basis for comparison within (and outside) the NHS between organisations, and down to the level of individual treatments including;

• Reference Cost Index (RCI)
• NHS Trust Reference Cost Schedules
• NHS Trust and PCT Combined Reference Cost Schedules
• Non NHS Providers Schedules
• PMS and Pilot Reference Cost Schedules
• NHS Trust and PCT Combined Reference Cost Schedules

http://www.dh.gov.uk/PublicationsAndStatistics/Publications/PublicationsPolicyAndGuidance/
PublicationsPolicyAndGuidanceArticle/fs/en?CONTENT_ID=4133221&chk=TxHkqo

National salary scales for key staff working in the health services, 2000 to 2006. http://www.dh.gov.uk/PublicationsAndStatistics/LettersAndCirculars/AdvancedLetters/fs/en

• Administrative and clerical
• Ambulance men and women
• Ancillary staff
• Administrative dental officers and community dental officers
• Maintenance department staff
• Medical and dental staff
• Nursing and midwifery
• Pharmaceutical staff
• Professions allied to medicine
• Professional and technical staff
• Scientific and professional

Reference containing inflation indices to uprate unit costs Curtis L, Netten A. Unit Costs of Health and Social Care. Canterbury: PSSRU, University of Kent, 2006. Available from: http://www.pssru.ac.uk/ as a pdf file.