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A Three-Objective Optimization Approach to Cost Effectiveness Analysis Under Uncertainty

In: Operations Research Proceedings 2012

Author

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  • Walter J. Gutjahr

    (University of Vienna)

Abstract

The paper presents an approach to the selection of healthcare programmes based on cost and effect information estimates, both being subject to uncertainty. The decision maker is assumed as risk-averse, but it is argued why risk aversion in public health will often only refer to total cost but not to total effect. A recent theoretical result is used to show that in the obtained multi-objective stochastic program, the random variables for cost and for effect can be decoupled. This produces a mean-mean-risk model for which the Pareto frontier can be determined. The approach is applied to a class of health programme portfolio problems studied before by other authors, and illustrated by an example. For risk, a measure derived from absolute semideviation as well as the budget overrun probability are used alternatively. The semideviation-based choice usually leads to a degeneration of the Pareto frontier to a curve for which only expected cost and expected effect count. This does typically not happen for the budget-related measure.

Suggested Citation

  • Walter J. Gutjahr, 2014. "A Three-Objective Optimization Approach to Cost Effectiveness Analysis Under Uncertainty," Operations Research Proceedings, in: Stefan Helber & Michael Breitner & Daniel Rösch & Cornelia Schön & Johann-Matthias Graf von der Schu (ed.), Operations Research Proceedings 2012, edition 127, pages 239-244, Springer.
    • Handle: RePEc:spr:oprchp:978-3-319-00795-3_35
    DOI: 10.1007/978-3-319-00795-3_35
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