Opportunity Costs of New Health Care Technologies: A Research Agenda

For many years, health economists have been concerned with the development of methods for the estimation of cost-effectiveness thresholds. Yet in numerous cases, thresholds are used without an apparent evidence base. In a new OHE Research Paper, Karla Hernandez-Villafuerte (German Cancer Research Center, DKFZ), Bernarda Zamora and Adrian Towse set out a research agenda.

The authors propose new approaches in three areas to improve understanding of supply-side opportunity costs for the English NHS.

First, it is possible that some purchasers can introduce health services by improving efficiency rather than displacing an existing activity. Data Envelopment Analysis (DEA) can be used to explore differences in commissioner efficiency.

Second, health authorities (PCTs) have differences in their production functions. The paper sets out evidence of this from a cluster analysis of PCTs. Purchasers may displace those services with relatively smaller health losses. Current approaches estimate the relationship between expenditures and health outcomes using a linear regression methodology. However, if health locations are heterogeneous, a methodology that does not focus on the mean is preferable. One possible approach is to employ a quantile regression function which can accommodate non-linearity in the relationship between expenditures and outcomes, and variation in outcome elasticities at the margin.

Thirdly, there are observable health outcomes reflecting purchaser priorities other than reducing mortality. Use of DEA to analyse multi-outcome decisions will allow a more robust estimate of the cost-effectiveness threshold given the sources of local heterogeneity.

The proposed methods aim at gaining insight into the extent of heterogeneity in supply-side opportunity costs across English health services and how an estimate of a supply-side threshold that takes account of this might be established.


Hernandez-Villafuerte, K., Zamora, B., and Towse, A. 2018. Issues Surrounding the Estimation of the Opportunity Cost of Adopting a New Health Care Technology. OHE Research Paper 18/07, London: Office of Health Economics. RePEc

Related research

Barnsley, P., Towse, A., Karlsberg Schaffer, S. and Sussex, J. 2013. Critique of CHE Research Paper 81: Methods for the Estimation of the NICE Cost Effectiveness Threshold. OHE Occasional Paper. RePEc

Karlsberg Schaffer, S., Cubi-Molla, P., Devlin, N. and Towse, A. 2016. Shaping the Research Agenda to Estimate Cost-effectiveness Thresholds for Decision Making. OHE Consulting Report. RePEc

Danzon, P.M., Drummond, M.F., Towse, A. and Pauly, M.V. 2018. Objectives, Budgets, Thresholds, and Opportunity Costs—A Health Economics Approach: An ISPOR Special Task Force Report [4]. Value in Health 21(2), 140-145. DOI


Posted in Health Technology Assessment, NICE, Innovation | Tagged Research Papers