Health Economics Metrics Health economics maths, examples, and reasoning for software engineers.
A comprehensive introduction to health economics math, examples, and reasoning, written for software engineers building for national health service organizations worldwide. Each file covers one metric or concept: definition, why it matters, the math, a worked example, the software engineering connection, pitfalls, and sources.
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Start here The three ideas everything else builds on.
1 Economic reasoning foundations 1.0 Opportunity Cost the value of the best alternative forgone; why fixed budgets make every choice a displacement 1.1 Discounting and Time Preference present values, the 3.5% Green Book/NICE rate 1.2 Analysis Perspective payer vs provider vs societal: whose costs count 1.3 Time Horizon how long to count costs and effects, and horizon gaming 1.4 Marginal vs Average Cost why freeing a bed doesn't save its average cost 1.5 Cash-Releasing vs Non-Cash-Releasing Savings the honesty test for every "time saved" claim 1.6 Sensitivity Analysis tornado diagrams; which assumption carries your case 1.7 Probabilistic Sensitivity Analysis (PSA) Monte Carlo, CEACs, probability of being right 1.8 Expected Value of Perfect Information (EVPI) pricing the pilot before you run it 1.9 Expected Value of Sample Information (EVSI) pricing a *specific* proposed study, not eliminating all uncertainty 1.10 Real Options Valuation pricing the option to expand a phased project later, rather than the option to gather information first 1.11 Human Capital Approach vs Friction Cost Method two ways to value lost productivity, a 2x+ difference in reported cost 1.12 Dominance and the Efficiency Frontier eliminating options nobody should pick 2.0 Quality-Adjusted Life Year (QALY) the common currency of health value 2.1 Disability-Adjusted Life Year (DALY) the burden-side mirror; global health's metric 2.2 EQ-5D the instrument behind most QALY utility weights 2.3 Time Trade-Off (TTO) Utility Elicitation how a utility weight is actually elicited from a respondent 2.4 Incremental Cost-Effectiveness Ratio (ICER) extra cost per extra unit of health 2.5 Willingness-to-Pay Thresholds NICE £20–30k/QALY and the world's other lines 2.6 Value of a Statistical Life (VSL) the labor-market alternative to threshold-based valuation 2.7 Net Monetary Benefit (NMB) value minus cost, done properly 2.8 Life-Years Gained (LYG) survival math, and the evLYG equity variant 2.9 Health-Adjusted Life Expectancy (HALE) population-level healthy-years accounting 2.10 QALY Shortfall and Severity Modifiers why sicker populations' QALYs count more 2.11 Work Productivity and Activity Impairment (WPAI) absenteeism vs presenteeism, the hidden half of the cost 3 Economic analysis types 3.0 Cost-Effectiveness Analysis (CEA) cost per natural unit of outcome 3.1 Cost-Utility Analysis (CUA) cost per QALY; comparing unlike interventions 3.2 Cost-Benefit Analysis (CBA) everything in money; Green Book NPV 3.3 Cost-Minimization Analysis (CMA) cheapest option, after proving equivalence 3.4 Cost-Consequence Analysis (CCA) the disaggregated table; NICE's preference for digital health 3.5 Budget Impact Analysis (BIA) affordability, as distinct from value 3.6 Return on Investment (ROI) the shared metric, with declared parameters 3.7 Social Return on Investment (SROI) monetizing what markets don't price 3.8 Cross-Currency ICER Comparison PPP vs market FX; the conversion choice that can flip an adoption decision 4 Health system operational economics 4.0 Bed Days Saved the workhorse benefit, and its valuation traps 4.1 Length of Stay (LOS) the hospital's cycle time 4.2 Readmission Rate the health system's change failure rate 4.3 Did-Not-Attend (DNA) Rate missed appointments; the purest waste metric 4.4 Emergency Attendance Avoidance upstream intervention economics 4.5 National Tariff and Unit Costs the NHS price book and costing infrastructure 4.6 Referral to Treatment (RTT) the 18-week standard as a lead-time metric 4.7 Waiting List Impact converting saved hours into patients seen 4.8 Practitioner Time valuing bottleneck capacity, not wages 4.9 Workforce Retention turnover costs and burnout economics 4.10 Avoidable Outsourcing Costs repatriating premium-rate work 4.11 Downstream Resource Optimization unblocking the role everyone waits on 4.12 Earlier Intervention the economics of treating before progression 4.13 Value-Generating Capacity (Operational Turnaround) minting capacity without hiring 4.14 Hard Cash-Releasing Savings (Deficit Defense) deleting budget lines; the CFO's metric 5 HTA frameworks and prevention economics 5.0 Health Technology Assessment (HTA) NICE, ICER (US), CADTH: who decides what's worth buying 5.1 Markov Cohort Simulation how a multi-cycle HTA model is actually simulated cohort-by-cycle 5.2 NICE Evidence Standards Framework (ESF) risk-tiered evidence requirements for digital health 5.3 Germany's DiGA Fast-Track apps on prescription; provisional listing with an evidence deadline 5.4 Number Needed to Treat (NNT) effort-per-benefit units that keep claims honest 5.5 Population Attributable Fraction (PAF) how much disease burden a risk factor is really worth chasing 5.6 Prevention Economics why prevention is cost-effective but rarely cost-saving 5.7 Screening Economics Wilson–Jungner, PPV collapse at low prevalence, alert fatigue 5.8 Number Needed to Screen (NNS) NNT's screening-program-level analog 5.9 Avoided Downstream Costs cost offsets and the rules that make them credible 5.10 Multi-Criteria Decision Analysis (MCDA) weighted scoring when a single threshold isn't enough 5.11 Carbon Footprint per QALY the NHS net-zero commitment meets cost-per-QALY 6 Software engineering and digital delivery 6.0 Cost of Delay (CoD) £/week or QALYs/week of non-delivery; the master bridge metric 6.1 DORA Metrics delivery performance, translated into health-economics terms 6.2 Flow Metrics Little's Law, WIP, flow efficiency; the shared queueing math of hospitals and pipelines 6.3 WSJF and CD3 value-density prioritization; the backlog as a QALY league table 6.4 SPACE and DevEx multi-dimensional productivity; the EQ-5D lesson for engineering metrics 6.5 Technical Debt principal, interest, and chronic-disease economics for codebases 6.6 Total Cost of Ownership (TCO) maintenance is 50–80%; the naive-drug-price error in software 6.7 Cloud Unit Economics (FinOps) cost per unit of output; the digital service's reference cost 6.8 Exact-Cents Cost Allocation the largest-remainder method; splitting a total so the parts sum exactly back 6.9 Currency-Safe Cost Rollup exact-decimal `Money`, not `f64`, for totals that must reconcile to the penny 6.10 Build vs Buy risk-adjusted comparison with the delay term priced 6.11 Benefits Realization auditing that forecast benefits actually happened 6.12 GDS Service Metrics cost per transaction, satisfaction, completion, take-up 7.0 AI Developer Productivity Copilot RCT vs METR RCT; efficacy vs effectiveness 7.1 AI Return on Investment the 95%-no-return finding and what the 5% did differently 7.2 Inference Unit Economics cost per token, and modeling relentless price decline 7.3 AI Quality Metrics hallucination rates as harm rates with a price 7.4 Clinical AI Evaluation sensitivity, specificity, AUROC, and why prevalence rules the economics 7.5 AI Regulatory Evaluation FDA SaMD, PCCPs, and the economics of model updates 8 Consumer health apps and devices 8.0 Engagement Metrics engagement as clinical dose 8.1 Retention and Churn the law of attrition; retention curves as treatment windows 8.2 Activation and Uptake the front gates of the value funnel 8.3 Adherence and Persistence MPR, PDC, effective engagement, minimum effective dose 8.4 Patient-Reported Outcomes (PROMs, PREMs, MCID) PROMs, PREMs, and the MCID honesty bar 8.5 Digital Endpoints and Biomarkers from sensor telemetry to regulator-grade evidence 8.6 Wearable Validation MAPE, agreement statistics, wear-time, completeness 8.7 Remote Patient Monitoring Economics CPT code stacks and hospital-at-home substitution 8.8 Health App Unit Economics CAC, LTV, PMPM, and ROI vs VOI 8.9 Reach and Equity RE-AIM; population impact = reach × effectiveness 8.10 Concentration Index a formal statistical measure of socioeconomic-related health inequality Benchmark freshness
Many quoted figures refresh annually (NHS unit costs, payment scheme prices, DORA clusters, DiGA counts, LLM prices). Each doc dates its benchmarks in-line; re-verify before using in a live business case.
Claude skills
This repo ships two Claude Skills — drop either into a project's .claude/skills/ (or point Claude at this repo's skills/) to put this book to work directly inside an agentic coding session:
health-economics-metrics-skill — for general use: explain a concept, compute a metric from your own numbers, or assemble a multi-metric business case, grounded in this book's formulas, worked examples, and pitfalls rather than generic recall.health-economics-metrics-maintainer-skill — for maintainers of this repo: the per-topic template, README indexing conventions, and a link/sync validation checklist for adding or editing topics.