Cost Analysis in Program Evaluation–a Conceptual Approach

Over the last 15 years, the importance of evaluating prevention programs from an economic perspective has been recognized by policymakers and researchers.  The importance of demonstrating that evidence-based prevention programming is cost-effective has been a challenge to the field as there are no standard approaches to apply to costs and cost analyses.  Prevention programming, unlike clinical interventions, is more complex for a number of reasons including the variation in the content, structure, and delivery strategies that constitute prevention programming, and also that in many cases the outcomes of the program may be months or years out. This presentation is motivated by the recognition that the prevention community has quickly jumped ahead to more complicated economic evaluation strategies, such as cost-effectiveness and cost-benefit evaluations, while paying little attention to their essential basis, which is the cost assessment. Due to the lack of standardized cost assessment instruments, current economic evaluations of prevention programs are commonly challenged by a lack of guidance for capturing all relevant cost elements. In addition, economic evaluations are oftentimes conducted after the implementation of a program has been initiated and consequently program costs are estimated with unknown precision. Importantly, the precision of cost evaluations and more complex economic evaluations depends heavily upon how comprehensively all the cost elements have been considered. In addition, due to the various methods for collecting cost data and developing cost estimates, the comparison of estimates produced by different studies or research teams of similar services or programs is challenged. The approach presented here attempts to address this bias by relying on a conceptual model that integrates cost analyses with program evaluation.

It is proposed that evaluation activities conducted during a process or implementation evaluation can guide a cost evaluation by comprehensively delineating what kind of inputs and outputs are characteristic of a particular program or service. In other words, viewing cost elements from a resource or ingredient perspective, a program is described with respect to the type and amount of resources used in delivering the program, the number and characteristics of people receiving services, as well as the intensity or “dosage” of services provided. Generally speaking, cost elements are identified in three different domains, including direct services, management and administration, and indirect or overhead costs. The presentation will conclude with recommendations for data sources of cost elements in the three domains, appropriate summary measures for program costs, as well as guidelines for examining cost variation through sensitivity analyses.