Table 2 Summary of the difference between financial costs versus economic costs (adapted from [16])
From: What are economic costs and when should they be used in health economic studies?
| Â | Financial cost | Economic cost |
|---|---|---|
Description | Represent the actual financial outlays for the goods, resources and services that are purchased | Represent the full value of the resources utilized in providing an intervention. Crucially, they are intended to capture the resources’ opportunity cost and they are based on the value of the resources’ next-best alternative use that has been forgone due to them being utilised and not simply the monetary amount paid for them |
Costs included | Inputs purchased and the depreciation in value of capital resources over time | All of the resources (that fall under the perspective) not just those constituting a budgetary line or expenditure |
Valuation | Market prices of purchased goods | Can use the market prices as a proxy. In the cases where there is no market price or it is believed that the market price does not accurately reflect the opportunity cost, a “shadow price" (an estimated or adjusted value of a good or service) can be used. Note that this valuation will depend on the context of the study, the chosen perspective, and the objective (Box 1) |
Purpose | Financial costs have a prominent and justified role for purposes of budgeting and financial planning of health including within budget impact analysis (i.e. assessing the affordability of the intervention) | Economic costs should be used for analyses aimed at assessing the value for money or efficiency of alternative policy options when informing policy decisions i.e. making choices regarding the allocation of scarce healthcare resources (such as within economic evaluations) |