New York University - Robert Wagner Graduate School of Public Service
P11.4212 (001) Cost-Effectiveness in Non Profit and Public Sectors - Spring 2009
Instructor: James (Jim) Herm
Classes: Thursdays 6:45 - 8:25 p.m. From March 12 to May 7, 2009
Room 206, 194 Mercer Street
Office hours: Can be arranged by appointment ideally on:
Thursdays – between 5.30-6.30 pm. Puck Building – an Adjunct Office
[As I live well out of the NYC, I will not normally be at the Wagner Adjuncts’ Offices before class unless someone makes an appointment. You may also discuss with me after class for 20-30 minutes. ]
Phone: 203-625-0126 e-mail: or
Purpose of the course
By the end of the course successful students will be able to:
1. Prepare a draft plan for a cost-effectiveness analysis (CEA) study (of each student’s interest and preference), defining the basic elements of this CEA and rationale for each element - relevant and needed for the proposed CEA study. [Students may indeed carry out the study after the class.]
2. Describe the different issues or problems in designing and developing a CEA, specifically those related to defining each major element – defining & calculating effectiveness and selecting and aggregating costs; and
3. Because CEA’s main use and value is to directly support decision making, students should be able to define and discuss which the pros and cons of CEA for various levels of decision making: (i) policy, (ii) strategy, (ii) program, and (iii) technical.
Suggested Pre-requisites:
P11.1018 Microeconomics for Public Management, Planning, and Policy Analysis;
P11.1021 Financial Management for Public, Nonprofit, and Health Organizations
P11.2140 Public Economics and Finance
Methodology
The abilities gained from this course should be useful to all Wagner students, but they should be at least as useful to substantive program managers as they are to those focused on public finance. Due to CEA’s name, many who have not practiced this economic analysis might consider it a process that only the “finance people” undertake and use. They may think it requires significant financial/economics background and involves sophisticated financial applications to complete. While some sophisticated financial tools have been and can be employed in a CEA, often, even normally they are not. In completing the CEA process, it is usually much more difficult to define and measure/calculate the effectiveness side of the equation. The results are generally more useful to general managers and program or substantive managers, than financial managers.
The course will be taught with a mix of discussion sessions and the case study method. The initial discussion session are intended to give students grounding in the principles and practices of cost-effectiveness analysis. The case studies are designed to give students a feel for actual application of cost-effectiveness. When the case studies are assigned for credit, some cases will be assigned in one class and discussed in the next, and some cases will be done within the same class session. Students are also expected to draw that information from the readings.
While the basic concept of CEA is simple, some of the practices are more difficult. Practices not understood by individual students may be raised during office hours, but everyone is encouraged to participate and clarify issues during class. The reading materials are either in the required text (Levin & McEwan) or those posted on the Blackboard in the Course Documents Section. Many classes also have a Powerpoint presentation – also available on the Blackboard (also under Course Documents); these should be considered what was felt were the highlights of the principles and practices for that part in the course.
In the listings below for the extra readings, besides the Levin & McEwan text, the title will be listed, then the File name you will find on the Blackboard will follow in brackets starting with [BB = ... ]. They are now listed in the same order as the syllabus. This should lead you to the relevant file that may or may not have the same or similar title as the document or spreadsheet. The Assignments will also be on the Blackboard in the Assignments section – each numbered Assignment folder will have at least one file to download, but most have a Word document and an Excel spreadsheet.
Texts:
· Required: Levin, Henry M. and Patrick J. McEwan Cost-effectiveness Analysis 2nd Edition Sage Publications, Inc. Thousand Oaks, CA. 2001 [this text is necessary and should be purchased or used from the library]
· Optional: Gold, Marthe R., Joanna E. Siegel, Louise B. Russell, Milton C. Weinstein Cost-effectiveness in Health and Medicine, Oxford University Press 1996 Chapter 3 "Framing and Designing the Cost-Effectiveness Analysis" [this text was originally a report of an expert panel commissioned by the U.S. Public Health Service who were to assess the state of the art in CEA application in health in the US. While it is now over a decade old, it is recommended that students in the health program consider reviewing it as it defines where the state of the art was and what the issues are regarding comparing various studies and carrying out meta analysis.]
· Optional: Muenning, Peter Designing and Conducting Cost-Effectiveness Analyses in Medicine and Health Care Jossey-Bass. 2002 [This recent text is very useful and its principles and practices can have cross-sector application; however, its examples and focus is completely on the health sector. Those in health care should find it a useful purchase.]
Supplementary Reading
Other materials are supplied via Blackboard and others may be added for specific class sessions.
Course Grading Approach:
Class Assignments and Class Participation - 25% of grade
Assignments for Credit will be assigned at the end of: Classes 3, 4, & 5
Results of Assignments will be discussed during: Classes 4, 5, & 6
Mid-Term Test – 25% of Grade
During Class 5 - April 16
Final Assignment - 50% grade
Final Assignment instructions & framework will be on Blackboard all the time. You may discuss with me Final Assignment topics at any time before or during the course. However, I do not have to “approve” your Final Assignment topic.
Instructions & Framework discussed during Class 7: April 30
Final Assignment due on: May 7
Assignment and Exam returned by: May 11
Topics to be covered in specific sessions:
Class 1 March 12
· Introductions
· An overview of the course and discussion/modification/agreement on objectives
· What is the definition and purpose of cost effectiveness analysis (CEA)?
· What are other analytical tools besides CEA and how do they relate?
· CEA use in decision making for policy, strategy, program, and technical classes of decisions
· Reading:
o Levin, Henry M. and Patrick J. McEwan Cost-effectiveness Analysis 2nd Edition Sage Publications, Inc. Thousand Oaks, CA. 2001 Chapters 1 and 9;
o Herm, James (editor) "Economic and Other Analyses for Managers" based on a paper from training materials "Feasibility Economics for Managers" by Practical Concepts Incorporated (no author defined - unpublished paper) [BB = Analytical Methods for Managers.doc]
o Session “notes” – a Powerpoint presentation [BB = First Session.ppt]
Class 2 March 26
· How to plan a CEA - Establishing an Analytic Framework
· What is included in a checklist for a good cost effectiveness analysis (CEA)?
· Case study – not for credit
· Reading:
o Levin, Henry M. and Patrick J. McEwan Cost-effectiveness Analysis 2nd Edition Chapters 2,
o “Establishing an Analytic Framework;” and Gold, Marthe R., Joanna E. Siegel, Louise B. Russell, Milton C. Weinstein Cost-effectiveness in Health and Medicine, Oxford University Press 1996 Introduction and Chapter 3 "Framing and Designing the Cost-Effectiveness Analysis" [BB=Chapt3 Framing & Designing the CEA.doc];
o Cost-Effectiveness Ratio [BB= CostERatio.doc];
o Summary of Analysis Tools for Relating Cost/Resources to Benefits/Effectiveness [BB = Summary of Analysis Tools for Relating Costs.doc];
o Guide to Designing Analyses and Selecting Tools [BB = Matrix Decisions Comparisons AnalysisTools.doc]; and Session “notes” - Powerpoint presentation [BB = Class 2Latest.ppt]
o Case Reading: John D Walker, M.D. "The Craft of Prevention" a Texas case of Parents as Teachers Program with multiple interventions and wide-ranging social, health and education benefits. [BB= The Craft of Prevention.doc]
o Case/Reading: Herm's text and spreadsheets on family planning program cost-effectiveness [BB= CEANNPop.doc and POPCE.xls – this is like other cases with questions]
Class 3 April 2
· Valuing Ingredients and Analyzing Costs
· Identifying and Estimating Costs - types of costs: Direct (personnel, facilities, equipment, supplies, tests, etc.) Indirect or Productivity costs (morbidity, mortality, underemployment, unemployment); deciding which to include; costs under alternative perspectives; valuation of resources in micro costing/market prices/adjusting market prices.
· Time preferences - Discounting costs; discounting consequences; adjustments for inflation; possible changes over time; choosing a discount rate ( average rates, rates by time horizon or economic life of program)
· Uncertainty - Sensitivity analyses (univariate multivariate sensitivity) Statistical approaches; simulation; Overall parameter uncertainty; Model uncertainty (structure, process).
· Case Study discussion – not for credit
· Assignment for credit: Case Study I with discussion questions – CEA for technical or program level decision-making
· Reading:
o Levin, Henry M. and Patrick J. McEwan Cost-effectiveness Analysis 2nd Edition Chapter 4 & 5,
o Ladd, Helen F. Holding Schools Accountable: Performance-Based Reform in Education The Brookings Institution 1996 - Chapter 8 "How and Why Money Matters: An Analysis of Alabama Schools" [BB= Chapter 8 How Why Money Matters.doc];
o Domains and Indicators for Health, Education, and Socio-economic Change [BB = Domains & Indicators.xls];
o The Rationale for Discounting in CEA [BB= discounting.doc ]
o Session “notes” - Powerpoint presentation [BB = Class 3.ppt]
o Cost Categories [BB = Cost Categories.doc];
o Rationale for Public Policy and Types of Policy Action [BB = Types of Macro Public Policy Decisions.doc];
o Modes of Decision Making [DECISION TYPES.doc];
o Session “notes” - Powerpoint presentation [BB = Class 5.ppt]
Class 4 April 9
· Assessing Effectiveness - services are effective when they achieve improvements in outcomes in real practice settings [as distinct from efficacy and appropriateness];
· Probability; data sources (randomized control trials, observational studies; synthesis methods) modeling to estimate effectiveness (analytic, longitudinal & cross-sectional, deterministic);
· Discussion of assignment Case Study I
· Reading:
o Levin, Henry M. and Patrick J. McEwan Cost-effectiveness Analysis 2nd Edition Chapters 6
o Calculation of net effects. Session “notes” - Powerpoint presentation [BB = Class 4.ppt]
· Assignment: Case Study II: Strategy decision making support with CEA
Class 5 April 16
· Mid-term Test on CEA Principles & Practices
· Discussion assignment of Case Study II
· Assignment III: Case with case questions - Making the most cost-effective policy decisions
· Reading:
o Education Programmatic decision making - Case/Reading: Ladd, Helen F. Holding Schools Accountable: Performance-Based Reform in Education The Brookings Institution 1996 - Chapter 9 "Economics of School Reform: Three Promising Models" [BB = Economics of Education Reform Three Promising Models.doc]
o Relating Policy and Allocation Decisions in Education - Case: The Harvard University/Research Triangle Institute's "Optimizing Policies for Educational Systems" computer simulation model [BB= OPES.exe ]
Class 6 April 23
· Reporting - Types (organizational, journal, technical) framework; methods and data; results; discussion and interpretation of results; disclosure; reporting checklist. Session “notes” - Powerpoint presentation [BB = Class 7.ppt]
· Discussion of assignment Case Study III
Class 7 April 30
· Discussion of Final Assignment: Define and defend how you would undertake a CEA for one of the following: a single or a set of policy decisions, a strategy decision, a program decision, or an operational/technical decision. The problem is not to actually complete a CEA, rather to define how and why you would design and plan it. This will be graded against a standard set of CEA design elements discussed in the first and second class - whether each is included and how each is rationally and completely treated. This may be done for the organization you currently work for; an organization or an organization type you would like to work for; or related to some topic you are interested in. You should to “explain” your CEA more completely with example data you may do so and the data can be drawn from real, hypothetical, or a mix of sources.
· Review of course objectives, content & methods
STUDENT INFORMATION SHEET
[Please fill out this page; then Print 1 copy; and bring to the first class, or send me an e-version of it via email before the first class as an attached Word file]
Name: ______
E-mail Address(es) ______
(Please enter the address that you want me to use – this may not be your NYU address)
Undergraduate major: ______
Year of Undergraduate Graduation ______
NYU/Wagner Program: ______
Specific Areas of Interest: ______
Why you are taking this course/What you want out of it?
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Have you had previous experience in Cost-effectiveness Analysis (CEA)? Yes ___, No ___ If yes, please describe briefly:
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What are your concerns about CEA (if any)
______
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Brief Description of your current Work Experience: (if any)
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