In health care being cost effective is important because of the strict budget guidelines and the importance of providing good health care services. Cost effectiveness is utilizing resources to the best of their ability and creating a good health care outcome. There are many different ways to use cost effective techniques to bring change into a facility. The practice of using cost effective methods is important to know because it has a direct relationship to the evaluation of health services and outcomes.
Robinson defines cost-effectiveness analysis as, “a form of economic evaluation in which the costs of alternative procedures or programmes are compared with outcomes measured in natural units-for example, cost per life year saved, cost per case cured, cost per symptom free day” (1993, p. 307). Simply put, “cost-effectiveness analysis and cost-utility analysis provide information about the differences in outcomes in relation to differences in costs” (Hicks, 2014, p.342).
This comparison is important in many health care organizations because as new technology and medical procedures come out, it is important to know if a change from the current tools and practices should be made to the new ones. To be effective in providing good medical care an organization has to know if a new procedure will improve health outcomes or not. If an organization does not pay attention to the costs of adding new technology, then it can create a deficit in the budget and push back regular activities the organization could have normally provided; had it not used up the money set aside for those tasks.
Detsky, & Laupacis state that a cost effective analysis, “requires allocating a fixed budget across all competing programs and is specifically aimed at maximizing an outcome variable subject to budgetary constraints” (2007, p.224). This definition is accurate because when testing measures the budget has to be a carefully monitored. Another important reason for utilizing cost effective strategies is the Patient Protection and Affordable Care Act (PPACA), which requires health care organizations to utilize their budgets to improve the health of the people it serves.
Cost effectiveness is also used, “When different healthcare interventions are not expected to produce the same outcomes both the costs and the consequences of the options need to be assessed” (Robinson, 1993, p.307) so that data with comparable outputs can be produced. It is also important to keep in mind that, “Many cost-effective analyses rely on existing published studies for effectiveness of data as it is often too costly or time consuming to collect data on cost and effectiveness during a clinical trial” (Robinson, 1993, p.307). It is often easier to understand cost effectiveness by using studies that have already been conducted. ...