Probabilistic cost benefit analysis of generation investment in a deregulated electricity market

A new methodology is proposed for the analysis of generation capacity investment in a deregulated market environment. This methodology proposes to make the investment appraisal using a probabilistic framework. The probabilistic production simulation (PPC) algorithm is used to compute the expected energy generated, taking into account system load variations and plant forced outage rates, while the Monte Carlo approach has been applied to model the electricity price variability seen in a realistic network. The model is able to capture the price and hence the profitability uncertainties for generator companies. Seasonal variation in the electricity prices and the system demand are independently modeled. The method is validated on IEEE RTS system, augmented with realistic market and plant data, by using it to compare the financial viability of several generator investments applying either conventional or directly connected generator (powerformer) technologies. The significance of the results is assessed using several financial risk measures.

Normative influence and rational conflict decisions: Group norms and cost-benefit analyses for intergroup behavior

The present paper articulates a model in which ingroup and outgroup norms inform 'rational' decision-making (cost-benefit analysis) for conflict behaviors. Norms influence perceptions of the consequences of the behavior, and individuals may thus strategically conform to or violate norms in order to acquire benefits and avoid costs. Two studies demonstrate these processes in the context of conflict in Quebec. In the first study, Anglophones' perceptions of Francophone and Anglophone norms for pro-English behaviors predicted evaluations of the benefits and costs of the behaviors, and these cost-benefit evaluations in turn mediated the norm-intention links for both group norms. In the second study, a manipulated focus on supportive versus hostile ingroup and outgroup norms also predicted cost-benefit evaluations, which mediated the norm-intention relationships. The studies support a model of strategic conflict choices in which group norms inform, rather than suppress, rational expectancy value processes. Implications for theories of decision-making and normative influence are discussed.

Cost-effectiveness analysis of a kidney and cardiovascular disease treatment program in an Australian aboriginal population

The objective of the study was to assess, from a health service perspective, whether a systematic program to modify kidney and cardiovascular disease reduced the costs of treating end-stage kidney failure. The participants in the study were 1,800 aboriginal adults with hypertension, diabetes with microalbuminuria or overt albuminuria, and overt albuminuria, living on two islands in the Northern Territory of Australia during 1995 to 2000. Perindopril was the primary treatment agent, and other medications were also used to control blood pressure. Control of glucose and lipid levels were attempted, and health education was offered. Evaluation of program resource use and costs for follow-up periods was done at 3 and 4.7 years. On an intention-to-treat basis, the number of dialysis starts and dialysis-years avoided were estimated by comparing the fate of the treatment group with that of historical control subjects, matched for disease severity, who were followed in the before the treatment program began. For the first three years, an estimated 11.6 person-years of dialysis were avoided, and over 4.7 years, 27.7 person-years of dialysis were avoided. The net cost of the program was $1,210 more per person per year than status quo care, and dialyses avoided gave net savings of $1.0 million at 3 years and $3.4 million at 4.6 years. The treatment program provided significant health benefit and impressive cost savings in dialysis avoided. (C) 2005 by the National Kidney Foundation, Inc.

Refining the risk-benefit equation for thrombolysis: How to identity the low risk patient before administering thrombolytic therapy

In view of the relative risk of intracranial haemorrhage and major bleeding with thrombolytic therapy, it is important ro identify as early as possible the low risk patient who may not have a net clinical benefit from thrombolysis in the setting of acute myocardial infarction. An analysis of 5434 hospital-treated patients with myocardial infarction in the Perth MONICA study showed that age below 60 and absence of previous infarction or diabetes, shock, pulmonary oedema, cardiac arrest and Q-wave or left bundle branch block on the initial ECG identified a large group of patients with a 28 day mortality of only 1%, and one year mortality of only 2%. Identification of baseline risk in this way helps refine the risk-benefit equation for thrombolytic therapy, and may help avoid unnecessary use of thrombolysis in those unlikely to benefit.

Cost-effectiveness analysis of humanitarian relief interventions: visceral leishmaniasis treatment in the Sudan

Spending by aid agencies on emergencies has quadrupled over the last decade, to over US$ 6 billion. To date, cost-effectiveness has seldom been considered in the prioritization and evaluation of emergency interventions. The sheer volume of resources spent on humanitarian aid and the chronicity of many humanitarian interventions call for more attention to be paid to the issue of 'value for money'. In this paper we present data from a major humanitarian crisis, an epidemic of visceral leishmaniasis (VL) in war-torn Sudan. The special circumstances provided us, in retrospect, with unusually accurate data on excess mortality, costs of the intervention and its effects, thus allowing us to express cost-effectiveness as the cost per Disability Adjusted Life Year (DALY) averted. The cost-effectiveness ratio, of US$ 18.40 per DALY (uncertainty range between US$ 13.53 and US$ 27.63), places the treatment of VL in Sudan among health interventions considered 'very flood value for money' (interventions of less than US$ 25 per DALY). We discuss the usefulness of this analysis to the internal management of the VL programme, the procurement of funds for the programme, and more generally, to priority setting in humanitarian relief interventions. We feel that in evaluations of emergency interventions attempts could be made more often to perform cost-effectiveness analyses, including the use of DALYs, provided that the outcomes of these analyses are seen in the broad context of the emergency situation and its consequences on the affected population. This paper provides a first contribution to what is hoped to become an international database of cost-effectiveness studies of health outcome such as the DALY.

Assessing cost-effectiveness in mental health: family interventions for schizophrenia and related conditions

Objective: Existing evidence suggests that family interventions can be effective in reducing relapse rates in schizophrenia and related conditions. Despite this, such interventions are not routinely delivered in Australian mental health services. The objective of the current study is to investigate the incremental cost-effectiveness ratios (ICERs) of introducing three types of family interventions, namely: behavioural family management (BFM); behavioural intervention for families (BIF); and multiple family groups (MFG) into current mental health services in Australia. Method: The ICER of each of the family interventions is assessed from a health sector perspective, including the government, persons with schizophrenia and their families/carers using a standardized methodology. A two-stage approach is taken to the assessment of benefit. The first stage involves a quantitative analysis based on disability-adjusted life years (DALYs) averted. The second stage involves application of 'second filter' criteria (including equity, strength of evidence, feasibility and acceptability to stakeholders) to results. The robustness of results is tested using multivariate probabilistic sensitivity analysis. Results: The most cost-effective intervention, in order of magnitude, is BIF (A$8000 per DALY averted), followed by MFG (A$21 000 per DALY averted) and lastly BFM (A$28 000 per DALY averted). The inclusion of time costs makes BFM more cost-effective than MFG. Variation of discount rate has no effect on conclusions. Conclusions: All three interventions are considered 'value-for-money' within an Australian context. This conclusion needs to be tempered against the methodological challenge of converting clinical outcomes into a generic economic outcome measure (DALY). Issues surrounding the feasibility of routinely implementing such interventions need to be addressed.

Cost-effectiveness of cognitive behavioural therapy and selective serotonin reuptake inhibitors for major depression in children and adolescents

Objective: To assess from a health sector perspective the incremental cost-effectiveness of cognitive behavioural therapy (CBT) and selective serotonin reuptake inhibitors (SSRIs) for the treatment of major depressive disorder (MDD) in children and adolescents, compared to 'current practice'. Method: The health benefit is measured as a reduction in disability-adjusted life years (DALYs), based on effect size calculations from meta-analysis of randomised controlled trials. An assessment on second stage filter criteria ('equity'; 'strength of evidence', 'feasibility' and 'acceptability to stakeholders') is also undertaken to incorporate additional factors that impact on resource allocation decisions. Costs and benefits are tracked for the duration of a new episode of MDD arising in eligible children (age 6-17 years) in the Australian population in the year 2000. Simulation-modelling techniques are used to present a 95% uncertainty interval (UI) around the cost-effectiveness ratios. Results: Compared to current practice, CBT by public psychologists is the most cost-effective intervention for MDD in children and adolescents at A$9000 per DALY saved (95% UI A$3900 to A$24 000). SSRIs and CBT by other providers are less cost-effective but likely to be less than A$50 000 per DALY saved (> 80% chance). CBT is more effective than SSRIs in children and adolescents, resulting in a greater total health benefit (DALYs saved) than could be achieved with SSRIs. Issues that require attention for the CBT intervention include equity concerns, ensuring an adequate workforce, funding arrangements and acceptability to various stakeholders. Conclusions: Cognitive behavioural therapy provided by a public psychologist is the most effective and cost-effective option for the first-line treatment of MDD in children and adolescents. However, this option is not currently accessible by all patients and will require change in policy to allow more widespread uptake. It will also require 'start-up' costs and attention to ensuring an adequate workforce.

Cost-effectiveness of dexamphetamine and methylphenidate for the treatment of childhood attention deficit hyperactivity disorder

Objective: To analyze from a health sector perspective the cost-effectiveness of dexamphetamine (DEX) and methylphenidate (MPH) interventions to treat childhood attention deficit hyperactivity disorder (ADHD), compared to current practice. Method: Children eligible for the interventions are those aged between 4 and 17 years in 2000, who had ADHD and were seeking care for emotional or behavioural problems, but were not receiving stimulant medication. To determine health benefit, a meta-analysis of randomized controlled trials was performed for DEX and MPH, and the effect sizes were translated into utility values. An assessment on second stage filter criteria ('equity', 'strength of evidence', 'feasibility' and 'acceptability to stakeholders') is also undertaken to incorporate additional factors that impact on resource allocation decisions. Simulation modelling techniques are used to present a 95% uncertainty interval (UI) around the incremental cost-effectiveness ratio (ICER), which is calculated in cost (in A$) per DALY averted. Results: The ICER for DEX is A$4100/DALY saved (95% UI: negative to A$14 000) and for MPH is A$15 000/DALY saved (95% UI: A$9100-22 000). DEX is more costly than MPH for the government, but much less costly for the patient. Conclusions: MPH and DEX are cost-effective interventions for childhood ADHD. DEX is more cost-effective than MPH, although if MPH were listed at a lower price on the Pharmaceutical Benefits Scheme it would become more cost-effective. Increased uptake of stimulants for ADHD would require policy change. However, the medication of children and wider availability of stimulants may concern parents and the community.

Cost-effectiveness of psychological and pharmacological interventions for generalized anxiety disorder and panic disorder

Objective: To assess from a health sector perspective the incremental cost-effectiveness of interventions for generalized anxiety disorder (cognitive behavioural therapy [CBT] and serotonin and noradrenaline reuptake inhibitors [SNRIs]) and panic disorder (CBT, selective serotonin reuptake inhibitors [SSRIs] and tricyclic antidepressants [TCAs]). Method: The health benefit is measured as a reduction in disability-adjusted life years (DALYs), based on effect size calculations from meta-analyses of randomised controlled trials. An assessment on second stage filters ('equity', 'strength of evidence', 'feasibility' and 'acceptability to stakeholders') is also undertaken to incorporate additional factors that impact on resource allocation decisions. Costs and benefits are calculated for a period of one year for the eligible population (prevalent cases of generalized anxiety disorder/panic disorder identified in the National Survey of Mental Health and Wellbeing, extrapolated to the Australian population in the year 2000 for those aged 18 years and older). Simulation modelling techniques are used to present 95% uncertainty intervals (UI) around the incremental cost-effectiveness ratios (ICERs). Results: Compared to current practice, CBT by a psychologist on a public salary is the most cost-effective intervention for both generalized anxiety disorder (A$6900/DALY saved; 95% UI A$4000 to A$12 000) and panic disorder (A$6800/DALY saved; 95% UI A$2900 to A$15 000). Cognitive behavioural therapy results in a greater total health benefit than the drug interventions for both anxiety disorders, although equity and feasibility concerns for CBT interventions are also greater. Conclusions: Cognitive behavioural therapy is the most effective and cost-effective intervention for generalized anxiety disorder and panic disorder. However, its implementation would require policy change to enable more widespread access to a sufficient number of trained therapists for the treatment of anxiety disorders.

Achieving the millennium development goals for health - Cost effectiveness analysis of strategies for. maternal and neonatal health in developing countries

Objective To determine the costs and benefits of interventions for maternal and newborn health to assess the appropriateness of current strategies and guide future plans to attain the millennium development goals. Design Cost effectiveness analysis. Setting Two regions classified by the World Health Organization according to their epidemiological grouping: Afr-E, those countries in sub-Saharan Africa with very high adult and high child mortality, and Sear-D, comprising countries in South East Asia with high adult and high child mortality. Data sources Effectiveness data from several sources, including trials, observational studies, and expert opinion. For resource inputs, quantifies came from WHO guidelines, literature, and expert opinion, and prices from the WHO choosing interventions that are cost effective database. Main outcome measures Cost per disability adjusted life year (DALY) averted in year 2000 international dollars. Results The most cost effective mix of interventions was similar in Afr-E and Sear-D. These were the community based newborn care package, followed by antenatal care (tetanus toxoid, screening for pre-eclampsia, screening and treatment of asymptomatic bacteriuria and syphilis); skilled attendance at birth, offering first level maternal and neonatal care around childbirth; and emergency obstetric and neonatal care around and after birth. Screening and treatment of maternal syphilis, community based management of neonatal pneumonia, and steroids given during the antenatal period were relatively less cost effective in Sear-D. Scaling up all of the included interventions to 95% coverage would halve neonatal and maternal deaths. Conclusion Preventive interventions at the community level for newborn babies and at the primary care level for mothers and newborn babies are extremely cost effective, but the millennium development goals for maternal and child health will not be achieved without universal access to clinical services as well.

Introduction to Discounted Cash Flow Analysis and Financial Functions in Excel

The financial and economic analysis of investment projects is typically carried out using the technique of discounted cash flow (DCF) analysis. This module introduces concepts of discounting and DCF analysis for the derivation of project performance criteria such as net present value (NPV), internal rate of return (IRR) and benefit to cost (B/C) ratios. These concepts and criteria are introduced with respect to a simple example, for which calculations using MicroSoft Excel are demonstrated.