MAT 543 Week 7 Discussion Decision Analysis

MAT 543 Week 7 Discussion Decision Analysis

Compare the primary strengths and weaknesses of cost-benefit analysis (CBA), cost-effectiveness analysis (CEA), and cost-utility analysis (CUA). Give your opinion on which method you believe to be the most effective in economic evaluation.

Is the measure of benefit appropriate? b) Is the method used to obtain clinical effect data valid? The primary diversity between the diverse types of financial practice is in how the profits are shared and valued. At this point I look at cost-effectiveness analysis (CEA), cost-utility analysis (CUA), and cost-benefit analysis (CBA) in detail of their strengths and weakness. Financial evaluation – documentation and assessment of benefits

Evaluative technique Benefits Unit of Measurement
Cost-effectiveness analysis Quantity of LifeORQuality of Life Life years gained
Cost-utility analysis Quantity+Quality of Life Health Years; e.g., QALYs, HYEs
Cost-benefit analysis Quantity+Quality of life(may include some non-health aspects Money;e.g., human capital, willingness to pay

Cost-effectiveness analysis (CEA) is rather simple to carry out and the profits are evaluated as a single unidimensional result; whereas, additional possibly vital outcomes might be overlooked. This unidimensionality might result in painting mistaken data from CEA. Cost-utility analysis (CUA) have its strengths and weaknesses. CUA regulates additional qualities of health and well-being than an individual ordinary unit. QALYs and HYEs speculate that merely the probable benefit from health care is advancement in health interrelated quality of life. The diverse approaches available to measure QALYs might not offer same outcomes and CUA is more complicated to take on than CEA. Cost-benefit analysis (CBA) is the exclusive method of assessment that tackles whether the advances of an intervention surpass its price. Willingness to pay provides volumes of potential advance of health care unrelated than just health improvement. It is hard to assign financial values to health care improvement. Finally, CBA can be extremely complicated, and costly, to take on. I believe that cost-effectiveness for instance an assessment of an organizations wellness program may review the plan in provisions of its expenses as opposed to the decrease in sick days taken by staffs. A cost-benefit assessment of the exact plan should evaluate benefits as the profit the organization saved in decreasing sick days.

Lewis, J.B., McGrath, R.J., & Seidel, L.F. (2011). Essentials of Applied Quantitative Methods for Health Services Managers. Boston, MA: Jones and Bartlett Publishers.

Using the umbrella decision-making example on page 198 of the textbook, suppose the probability of rain is 0.6, the ruined clothes cost is $30, and the lost umbrella costs are $2. Come to a decision based upon these assumptions, and determine the break-even probability of rain.

Expected payoff [carry]=

(0.6 × –2) + (0.2 × –2)

(.60 x -2) + (.40 x-2) = -2

Expected payoff [not carry]

(0.6 × –$30) + (0.2 × $0) = –$30

(.60 x -30) + (.40 x 0) = -18

–$2 = (p × –$30) + [(1 – p) × 0)]

     –2 = p x -30

and thus

p = 2/30

  = 0.06 or 6%

Lewis, J.B., McGrath, R.J., & Seidel, L.F. (2011). Essentials of Applied Quantitative Methods for Health Services Managers. Boston, MA: Jones and Bartlett Publishers.


Prohibits offering, paying, soliciting or receiving anything of value to induce or reward referrals or generate Federal health care program business

Referrals: Referrals from anyone

Items/Services: Any items or services

Intent: Intent must be proven (knowing and willful).

Penalties: Criminal: Fines up to $25,000 per violation Up to a 5-year prison term per violation Civil/Administrative: False Claims Act liability Civil monetary penalties and program exclusion Potential $50,000 CMP per violation Civil assessment of up to three times amount of kickback

Exceptions: Voluntary safe harbors

Federal Health Care Programs: All

THE STARK LAW (42 USC § 1395nn):

Prohibits a physician from referring Medicare patients for designated health services to an entity with which the physician (or immediate family member) has a financial relationship, unless an exception applies Prohibits the designated health services entity from submitting claims to Medicare for those services resulting from a prohibited referral

Referral: Referrals from a physician,

Items/Services: Designated health services

Intent: No intent standard for overpayment (strict liability) Intent required for civil monetary penalties for knowing violations

Penalties: Civil: Overpayment/refund obligation False Claims Act liability Civil monetary penalties and program exclusion for knowing violations Potential $15,000 CMP for each service Civil assessment of up to three times the amount claimed

Exceptions: Mandatory exceptions

Federal Health Care Programs: Medicare/Medicaid

The Anti-Kickback Statute is a statute passed by the American Congress, by which it is illegal for all types of healthcare providers –physicians included –to intentionally and consciously take bribes in any form or other forms of financial considerations, when they are part of federal health care program business such as Medicare, Medicaid or others.

The Anti-Kickback Statute and Stark Law

Stark Law is complementary and analogous with, but different from the Anti-Kickback Statute. It is implemented in stages known as Stark II and Stark III. The Stark Laws consider particular actions on the part of the physician as unlawful. Both these statutes have the same aim –that of eliminating malpractices in the healthcare sector.

Each of these statutes differs in some respects from each other.

In terms of prohibition

By the terms of the Anti-Kickback Statute, the physician cannot pay, offer, solicit or receive an article or service of value aimed at awarding referrals or generating business for a Federal health care program by referring a patient to any such program.

The Stark Law, on the other hand, prohibits a physician from referring a patient to a healthcare entity in which she has a financial interest, unless she is exercising the exceptions set out in this statute.

Items or services

While the Anti-Kickback Statute prohibits any kind of item or service; the Stark Laws prohibit only designated health services.


The Anti-Kickback Statute and the Stark Laws differ in terms of referrals, too. While the former prohibits any kind of referral; the latter prohibits a referral from a physician.


Penalties vary vastly between the Anti-Kickback Statute and the Stark Laws. While there are major differences in the actual quantum of punishment; the core difference lies in the nature of penalties. While for the Anti-Kickback Statute there are criminal and civil and administrative penalties; violations under the Stark Laws carry civil penalties.

Intent and exceptions

For the Anti-Kickback Statute, unlawful intent has to be demonstrated. The Stark Laws have no intent standard for overpayment, which is considered a strict liability, while intent is taken into consideration for violations carried out knowingly for civil monetary aspects.


Between the Anti-Kickback Statute and the Stark Laws, there are differences in terms of exceptions, too. Voluntary safe harbors are allowed in the Anti-Kickback Statute, whereas the Stark Laws carry mandatory exceptions.

Type of program

Finally, while the Anti-Kickback Statute applies to all federal healthcare programs; the Stark Laws apply only to Medicare and Medicaid. BS Bal – ‎2009 – ‎Cited by 68 – ‎Related articles Nov 26, 2008 –

Medical malpractice law in the US is derivative from English common law, and was developed by rulings in various state courts. To do so, four legal elements must be proven: (1) a professional duty owed to the patient; One early medical malpractice case from England, for example, held that both a held that both a servant and his master could sue for damages against a doctor who had treated the servant and made him more ill by employing “unwholesome medicine. The aggrieved patient who initiates the lawsuit before a court is called the plaintiff or complainant. By filing a lawsuit, the plaintiff seeks a legal remedy from the court. If the plaintiff is successful, the court will enter judgment for the plaintiff and issue a court order for damages. These elements include: (1) the existence of a legal duty on the part of the doctor to provide care or treatment to the patient; (2) a breach of this duty by a failure of the treating doctor to adhere to the standards of the profession; (3) a causal relationship between such breach of duty and injury to the patient; and (4) the existence of damages that flow from the injury such that the legal system can provide redress.

a cost-benefit from a cost-effectiveness analysis is to examine the units of measurement used in the analysis. Cost-benefit relies on a common measure, with costs and benefits expressed in monetary units. If the costs and outcomes of a program are expressed in dollars, for example, the analysis is a cost-benefit. Cost-effectiveness analysis measures project results in units rather than monetary figures.

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