International Telecommunication Union
Measuring Economic
Benefits of E-Health:
Theory and Practice
Masatsugu Tsuji
Professor of Economics
OSIPP, Osaka University
Workshop on Standardization in E-health
Geneva, 23-25 May 2003
Methods of Measuring Economic
Benefits
ITU-T
o
Revealed preference method
Travel cost method (Evaluation I)
2. Replacement cost method
(Evaluation II)
3. Hedonic method
1.
o
Stated preference method
1.
23-25 May 2003
Contingent valuation method (CVM)
WTP approach (Evaluation III)
Workshop on Standardization in E-health
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ITU-T
Evaluation I:
Teleradiology (D2D)
Local clinic
University hospital
ISDN 128kbps
Traditional method
(once a week)
Salary: US$ 750
Traveling costs:
US$ 130
Total costs:
US$ 44,000
23-25 May 2003
Telemedicine
Initial costs: US$ 7,500
Monthly fees: US$ 500
fees per picture: US$ 20
Telephone bills (year):
US$ 3,150
Total costs:
US$ 32,000
Workshop on Standardization in E-health
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Evaluation II:
Replacement Method (1)
ITU-T
How much of hospitalization costs can be
saved by E-health
Hospitalization costs
per elderly patient
Estimation of logistic curves
CATV and ISDN
Estimation of the number of
tele-home-care systems
Hospital Costs-Savings
23-25 May 2003
Workshop on Standardization in E-health
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Evaluation II: Replacement Cost
Method (2)
ITU-T
US$ billion
Estimation Result
%
10
8
40
CATV
ISDN
ratio
6
4
30
2
0
20
10
0
23-25 May 2003
2000
0
2005 2010 2015 2020
20 2025 2030 2035 2040 2045 2050
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Evaluation III:
CVM Approach (1)
ITU-T
o
Benefits should include::
1. Less anxiety in day-to-day life
2. Enhanced consciousness
towards health
3. Stabilization of illness
4. Decrease in medical expenses, etc.
WTP: Willingness to pay
23-25 May 2003
Workshop on Standardization in E-health
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Concept of WTP
ITU-T
price
Benefit to consumer
(Consumer’s surplus)
Demand function
p
quantity
q
23-25 May 2003
Workshop on Standardization in E-health
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List of Questionnaire
ITU-T
yes: \7,500?
yes: How much?
yes: \6,500
no: \6,500?
no: \5,500
\5,500?
yes: \4,500
yes: \4,500?
no: \3,500?
No: \3,500
no: \2,500
23-25 May 2003
Workshop on Standardization in E-health
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Estimation of WTP
Probability of acceptance =
1- 1/(1 + exp (-a-ßlogWTP))
ITU-T
1.2
Function
1.0
.8
.6
.4
.2
.0
0
2000
4000
6000
8000
10000
X
Plot of User Defined Function
23-25 May 2003
Workshop on Standardization in E-health
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Estimation of WTP
ITU-T
23-25 May 2003
No. of WTP (per
users user/month
WTP (6 years)
Kamaishi
City
384
4,519 yen
102,900,000 yen
US$38.66
US$857,500
Katsurao
Village
926
1,640
99,360,000
US$13.67
US$828,000
Nishiaizu
Town
518
3,177
107,700,000
US$26.48
US$897,500
Sangawa
Town
551
2,955
106,520,000
US$24.53
US$887,700
Workshop on Standardization in E-health
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Economic Assessment
of Projects (1)
ITU-T
Kamaishi
Total Benefits (6 years)
Total costs (6 years)
Initial investment
Salaries & others
B/C ratio
No. of users, devices
WTP
B/C ratio with subsidies
23-25 May 2003
(yen)
102,900,000
95,782,869
38, 970,000
10,419,600
1.07
211
348
Katurao (yen)
99,360,000
184,172,706
111,415,500
13,343,325
0.54
330
926
4,519
1,640
1.87
1.42
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Economic Assessment
of Projects (2)
ITU-T
Nishiaizu
Total Benefits (6 years)
107,700,000
Total costs (6 years)
184,170,869
136,720,000
980,000
0.58
Initial investment
Salaries & others
B/C ratio
No. of users, devices
WTP
B/C ratio with subsidies
23-25 May 2003
(yen)
400
518
Sangawa
(yen)
106,500,000
174,330,000
133,459,500
7,500,000
0.61
224
551
3,177
2,955
2.31
2.60
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