Health Economics Metrics

Topic 11 of 76 · Outcome measures

Quality-Adjusted Life Year (QALY)

A QALY is one year of life lived in perfect health. It combines how long people live with how well they live, so that a year in poor health counts as less than one QALY — making utterly different health interventions comparable on a single scale.

Why it matters

The QALY is the common currency of health technology assessment. NICE (England) values health gains at £20,000–£30,000 per QALY: an intervention that buys QALYs cheaper than that threshold is normally recommended; one that buys them dearer is normally rejected. This one number is how a national health service compares a cancer drug, a hip replacement, and a triage app on the same axis. If your software can credibly claim QALYs — by preventing deterioration, accelerating treatment, or improving safety — you can price its health value in the same currency as medicine itself.

The math

QALYs = Σ_i (duration_i × utility_i)

duration_i = years spent in health state i
utility_i  = quality weight of state i, anchored at 1 = perfect health, 0 = dead
             (negative values allowed for states worse than death)

Utility weights come from validated instruments, most commonly EQ-5D. QALY gain from an intervention is the difference between the QALY streams with and without it, discounted at 3.5%/year in the NICE reference case.

Worked example

A patient waits for cardiac treatment in a state with utility 0.6. Treatment restores them to utility 0.85.

  • Treated now: 1 year at 0.85 = 0.85 QALYs this year.
  • Treated after a 6-month delay: 0.5 × 0.6 + 0.5 × 0.85 = 0.725 QALYs.
  • QALY loss per patient from the delay: 0.85 − 0.725 = 0.125 QALYs.

Monetized at NICE's threshold: 0.125 × £20,000–£30,000 = £2,500–£3,750 of health value lost per patient per 6-month delay. If software that accelerates the pathway removes that delay for 400 patients/year, the health value is 50 QALYs ≈ £1.0–£1.5 million/year — before counting any operational savings.

Software engineering connection

  • Faster pathways = earlier QALYs. Anything that shortens referral to treatment converts waiting-time disutility into health gain, valued as above.
  • Safety = QALYs preserved. Prevented medication errors and missed diagnoses are QALY losses avoided.
  • The QALY is also a metric-design template: a composite of quantity × quality, with quality weights elicited from a standardized instrument. A "quality-adjusted engineer year" (time × DevEx-survey weight) is the same construction — see SPACE and DevEx.
  • To turn QALYs into money for a business case, use net monetary benefit; to turn them into a decision, use willingness-to-pay thresholds.

Pitfalls

  • Inventing utility weights. Weights must come from validated instruments (EQ-5D) and published value sets, not intuition.
  • Claiming QALYs without a causal pathway. "Our app improves wellbeing" is not a QALY claim; "removes X weeks of waiting in state utility 0.6" is.
  • Double counting: claiming both the QALY gain and the cost savings of the same avoided deterioration requires care that they are genuinely separate.
  • Equity blind spots: QALYs value a year of life extension by baseline utility, which can disadvantage people with disabilities — the reason ICER (US) also reports the evLYG (see life-years gained).

Sources