Health Economics Metrics

Topic 3 of 76 · Economic reasoning foundations

Analysis Perspective

Perspective defines whose costs and benefits count in an economic analysis: the payer's, the provider's, or society's as a whole. The same intervention can look brilliant from one perspective and terrible from another.

Why it matters

Every economic evaluation must declare its perspective up front, because the perspective determines which line items exist:

  • Payer perspective (e.g., NHS commissioner, insurer): only costs the payer reimburses.
  • Provider perspective (e.g., a hospital trust): internal delivery costs, staffing, estates.
  • Societal perspective: everything — including patient time, travel, informal care by family, and productivity losses to employers.

NICE's reference case uses the NHS and Personal Social Services (PSS) perspective for costs. The US Second Panel on Cost-Effectiveness recommends reporting both a healthcare-sector and a societal analysis with an "impact inventory" listing what's included.

The math

No formula — a scoping rule applied before any math:

Included cost/benefit categories = f(perspective)

A useful check: build an impact inventory table with one row per cost/benefit and one column per perspective, and mark which cells count.

Worked example

A symptom-checker app diverts 10,000 GP visits per year to self-care.

  • Payer (NHS): saves 10,000 × £42 per GP consultation = £420,000/year — strongly positive.
  • Provider (GP practice): if practices are paid by capitation, their income is unchanged but workload falls — mildly positive.
  • Societal: add patients' saved travel and waiting time, say 10,000 × 2 hours × £15/hour = £300,000 of time value; but subtract harm if 2% are falsely reassured and present later, sicker, at 200 × £3,000 = £600,000 of extra treatment. Societal net: 420,000 + 300,000 − 600,000 = £120,000/year — positive, but dominated by the safety assumption.

Same app, three different answers. The declaration of perspective is what makes the numbers comparable and honest.

Software engineering connection

Tool and platform ROI has perspectives too:

  • Team budget ("payer"): does the license fee fit my cost center?
  • Platform org ("provider"): total cost including integration, support, and maintenance.
  • Company ("societal"): include customer impact, security externalities, and the time of every team affected.

A CI tool that is cheap for the buying team but pushes migration work onto 40 other teams is the software version of cost-shifting — visible only from the wider perspective. State the perspective in every business case; reviewers can't challenge assumptions they can't see.

Pitfalls

  • Silent perspective switching: counting societal benefits but only payer costs makes anything look cost-effective.
  • Double counting when perspectives are merged (e.g., counting a saved GP appointment as both payer savings and patient time savings when the payer figure already includes staff time).
  • Ignoring cost-shifting: "savings" that just move cost to patients, carers, or another department.

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