A: It may be best to start by defining the basic components of those analyses: costs, effectiveness, and benefits. Costs are the monetary value of resources consumed or otherwise lost as a consequence of an illness or disorder. Direct costs are those incurred to provide treatment and include things like time, transportation, materials, equipment and overhead costs. Indirect costs are resources lost due to the disorder or illness such as time that could have been used in other activities in absence of the disorder and the cost of lost employment. Effectiveness refers to the clinical outcome changes in clients' behaviors, thoughts, feelings or health, and can be things like reduced partner violence or years of life saved. Benefits are outcomes measured in monetary units or that can be converted to monetary units and can include things like increased income from gainful employment, money saved from fewer days of treatment, and money saved from reduction of work absences.

It may now be easier to understand how the analyses differ. A cost analysis is a description of the type and amount of resources used to produce a program and can be important for deciding how to allocate funds and for understanding the relationships between costs and outcomes. A cost-effectiveness analysis involves the relationship between program costs and patient outcome where costs are measured in dollars spent and outcomes are measured by changes in the patient such as one drug-free month. A cost-benefit analysis is the measurement of both costs and outcomes in monetary terms and can help people see whether program expenditures are greater than, equal to, or less than program benefits.

A: One reason is that we need a better understanding of how costs and outcomes are related. As competition for funding becomes more intense and program costs and outcomes come under greater scrutiny, program managers need to provide evidence that their programs are good investments.

These kinds of analyses may also help your fundraising because potential contributors may be impressed that you know where funds are going and how much it takes to run each part of the program, and having information about the cost-effectiveness of your program assures donors that their contributions will have the maximum impact possible. Any critics will have a harder time dismissing funding requests as excessive when you're able to show the true cost and value of providing services.

A: In order to tabulate and determine the resources used to deliver an intervention or service, you must first measure the amount of each resource used for each component of the intervention. For example, delivering a session requires one hour of counselor time. The second step is obtaining data on the unit cost of each resource. Let's say that the cost of one hour of counselor time is $40. In the third step, you multiply the amount of each resource used by the cost per unit of that resource. If the example program includes 12 hours of sessions, then the cost of one counselor for all 12 hours is $480. Finally, you sum the costs of each resource to calculate the total cost of delivering all components combined. The costs of resources shared by several or all components of the intervention should be distributed over those components.

A: When measuring effectiveness, treatment effects on tangible and easily recognized areas of health functioning are usually most persuasive and useful. One can use the formula (C1-C2)/(E1-E2) for looking at individual clients (amount of money spent on treatment per graduating student in a dropout prevention program) or for comparing different treatments (the average cost per graduating student in a mentoring program versus an after-school sports program). The cost-effectiveness of each strategy would be determined by dividing the cost for each strategy by its effectiveness (the percentage increase in the number of students graduating). The result is the cost for each percent increase in the number of students graduating.

Strategy	Costs	Effectiveness	C/E Ratio
Mentoring	$80,000	10	$8,000
After-School Sports	$65,000	5	$13,000

A: For a cost-benefit analysis, the measurement of both costs and outcomes should be in monetary terms. When measuring benefits, it's important to spend time identifying domains to evaluate that follow directly from the aims and treatment goals of your program. Going back to the example of dropout prevention programs, you would calculate the cost-benefit for each program by determining the program costs and the benefit of interest, which could be an estimate of future earning increases of participants who stayed in school. You could then subtract the benefits from the costs to get the net benefit for each strategy, and a cost-benefit ratio can also be computed by dividing the dollar value of benefits by the costs. The higher that ratio, the more efficient the program is in economic terms.

Strategy	Costs	Benefits	Net Benefits	C/B Ratio
Mentoring	$80,000	$95,000	$15,000	1.188
After-School Sports	$65,000	$75,000	$10,000	1.154

A: People may be resistant to cost-inclusive analyses for a variety of reasons such as a fear that looking at the cost will overshadow the benefits they see from the programs. Also, identifying and measuring costs and benefits can be difficult to measure. Direct costs are relatively easy to account for, but indirect costs are often more difficult to calculate, and placing a dollar value on benefits can be difficult as well. Determining the scope of cost research is also an issue, and an important point to consider is whether you'll include only those benefits and costs that accrue to the population within the area for which you're doing the analysis, or if you'll expand your scope to include other areas. As you perform your cost research, you may be tempted to hide any messiness in the program, but you have to clearly define all relevant issues, assumptions, and concerns.

A: Ask the following questions:
ï How will you use the results?
ï What resources do you have?
ï How difficult is it to place a value on the costs and benefits?

A cost-benefit analysis enables you to compare strategies that do not have the same outcomes or to compare strategies across different areas of expenditure, and it will typically require more resources because of the time and methodological expertise required. A cost-effectiveness analysis is useful for comparing strategies that are trying to achieve the same objective, and often the more intangible the benefit, the more useful a cost-effectiveness analysis to decision makers. That type of analysis can help them decide whether a cost is justifiable when compared with other uses of the same funds.

A: First, analyze costs and monetary outcomes (benefits) as you would any other variable: at the most detailed and specific level available, with attention to reliability and validity, and with descriptive and inferential outcome variables. Second, answer questions about cost research by translating them into questions about outcome research. Third, consider a variety of cost-inclusive analyses, performed from a variety of perspectives. You also need to be aware that cost indices should not be the only analyses used to make decisions about funding, and you can't assume a particular ratio of cost to benefit or effectiveness will hold true no matter the size of the initial investment.