CHAPTER 9

DECISION ANALYSIS

Decision Analysis
- The application of an analytical method for systemically
comparing different decision options
- Graphically displays choices and facilitates calculations of
values needed to compare options
- Assists in selecting the most cost effective alternative
- Assists in making decisions when the decision is complex and
there is uncertainty about some info

Steps in Decision Analysis

1.
2.
3.
4.
5.
6.

Identify the specific decision

Specify alternatives
Draw the decision analysis structure
Specify possible costs, outcomes & probabilities
Perform calculations
Conduct a sensitivity analysis

1. Identify the specific decision

- Specific decision to be evaluated should be clearly defined by
answering the following questions:
Whats the objective of the study?
Over what period of time will the analysis be conducted?
What perspective will be stated? (patient, organization, society)
- For our example:
The objective is whether to add a new antibiotic to an institution
formulary (essential drugs basket)
The perspective is that of institution
Time period: 2 weeks
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2. Specify alternatives
- Ideally, the most effective alternative should be compared
- New products may be compared against a standard (older, well
established) therapy
- Decision analysis may compare more than 2 treatment options
(comparison of 5 statins)
- May compare intervention with no intervention
- For our example Antibiotic A (new medication) to be compared
with standard Antibiotic B

3. Draw the decision analysis structure

Branches (arms) of decision tree :

Choice nodes
Chance nodes
Terminal (final outcome nodes)

4. Specify possible costs, outcomes &

probabilities
- For each option, information should be obtained for the
probability of occurrence & consequences of occurrence
- Probabilities are assigned for each branch of chance nodes
- The some of probabilities for each branch must be 1
- Consequences are reported as monetary outcomes, health
related outcomes or both

5. Perform calculations
- The probability at the terminal node is calculated by multiplying
the probability of each arm from choice node to terminal node
- Total costs are calculated by adding all the costs over all the
branches from choice node to terminal node
- Multiply (C x P) for each node
- Sum all results for each choice to get the average cost per
patient

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- Antibiotic B is less expensive even when including the costs of

treating adverse effects
- Antibiotic A is better clinical option (higher probability of
success and lower probability of adverse effects)
- Decision maker may use ICER or INB to determine whether to
add A to the formulary.
ICER= $700-$650 = $500 per extra success
0.9-0.8

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- Using INB: if the suggested range is between 1000 & 2000 $:

- INB =1000 = +$50
- INB =2000 = +$150 then A is cost effective

6. Conduct a sensitivity analysis

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