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Rates and Probabilities in Economic Modelling

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  • Rachael Fleurence
  • Christopher Hollenbeak

Abstract

Economic modelling is increasingly being used to evaluate the cost effectiveness of health technologies. One of the requirements for good practice in modelling is appropriate application of rates and probabilities. In spite of previous descriptions of appropriate use of rates and probabilities, confusions persist beyond a simple understanding of their definitions. The objective of this article is to provide a concise guide to understanding the issues surrounding the use of rates and probabilities reported in the literature in economic models, and an understanding of when and how to transform them appropriately. The article begins by defining rates and probabilities and shows the essential difference between the two measures. Appropriate conversions between rates and probabilities are discussed, and simple examples are provided to illustrate the techniques and pitfalls. How the transformed rates and probabilities may be used in economic models is then described and some recommendations are suggested. Copyright Adis Data Information BV 2007

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  • Rachael Fleurence & Christopher Hollenbeak, 2007. "Rates and Probabilities in Economic Modelling," PharmacoEconomics, Springer, vol. 25(1), pages 3-6, January.
    • Handle: RePEc:spr:pharme:v:25:y:2007:i:1:p:3-6
    DOI: 10.2165/00019053-200725010-00002
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    References listed on IDEAS

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    1. Douglas K. Miller & Sharon M. Homan, 1994. "Determining Transition Probabilities," Medical Decision Making, , vol. 14(1), pages 52-58, February.
    2. Nicky J. Welton & A. E. Ades, 2005. "Estimation of Markov Chain Transition Probabilities and Rates from Fully and Partially Observed Data: Uncertainty Propagation, Evidence Synthesis, and Model Calibration," Medical Decision Making, , vol. 25(6), pages 633-645, November.
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    Cited by:

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    5. Louisa G. Gordon & Elizabeth G. Eakin & Rosalind R. Spence & Christopher Pyke & John Bashford & Christobel Saunders & Sandra C. Hayes, 2020. "Cost-Effectiveness Analysis from a Randomized Controlled Trial of Tailored Exercise Prescription for Women with Breast Cancer with 8-Year Follow-Up," IJERPH, MDPI, vol. 17(22), pages 1-13, November.
    6. Edmund Jones & David Epstein & Leticia García-Mochón, 2017. "A Procedure for Deriving Formulas to Convert Transition Rates to Probabilities for Multistate Markov Models," Medical Decision Making, , vol. 37(7), pages 779-789, October.
    7. Mehlika Toy & Fatih Onder & Ramazan Idilman & Gokhan Kabacam & Jan Richardus & Mithat Bozdayi & Meral Akdogan & Zarife Kuloglu & Aydan Kansu & Solko Schalm & Cihan Yurdaydin, 2012. "The cost-effectiveness of treating chronic hepatitis B patients in a median endemic and middle income country," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 13(5), pages 663-676, October.
    8. Lartey, Stella T. & Si, Lei & Otahal, Petr & de Graaff, Barbara & Boateng, Godfred O. & Biritwum, Richard Berko & Minicuci, Nadia & Kowal, Paul & Magnussen, Costan G. & Palmer, Andrew J., 2020. "Annual transition probabilities of overweight and obesity in older adults: Evidence from World Health Organization Study on global AGEing and adult health," Social Science & Medicine, Elsevier, vol. 247(C).
    9. Marta O. Soares & Luísa Canto e Castro, 2012. "Continuous Time Simulation and Discretized Models for Cost-Effectiveness Analysis," PharmacoEconomics, Springer, vol. 30(12), pages 1101-1117, December.
    10. Louisa G. Gordon & William Leung & Richard Johns & Bronwen McNoe & Daniel Lindsay & Katharina M. D. Merollini & Thomas M. Elliott & Rachel E. Neale & Catherine M. Olsen & Nirmala Pandeya & David C. Wh, 2022. "Estimated Healthcare Costs of Melanoma and Keratinocyte Skin Cancers in Australia and Aotearoa New Zealand in 2021," IJERPH, MDPI, vol. 19(6), pages 1-14, March.
    11. Marta Soares & Luísa Canto e Castro, 2012. "Continuous Time Simulation and Discretized Models for Cost-Effectiveness Analysis," PharmacoEconomics, Springer, vol. 30(12), pages 1101-1117, December.
    12. Mancy, Rebecca & Prosser, Patrick & Rogers, Simon, 2013. "Discrete and continuous time simulations of spatial ecological processes predict different final population sizes and interspecific competition outcomes," Ecological Modelling, Elsevier, vol. 259(C), pages 50-61.

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