**5.2 Cost benefit analysis**

Cost benefit analysis in health is complex as it has to consider not only financial aspects (incremental cost), but also the benefits in quality life that society would expect to be given to the patient (incremental benefit). **Figure 25** shows how the analysis of economic aspects is based on the two axes of increased cost and increased benefit. This gives rise to the four quadrants with their respective consideration for a decision. Decisions in the upper left quadrant and lower right quadrant are straight-forward as they can be made on a financial basis. Decisions in the other two quadrants must include a consideration of a combination of financial and patient benefit. As these carry a societal aspect that may be difficult to quantify, patient benefit is assessed in financial terms in health economics.

The approach adopted is to determine the impact to the quality of life of the patient (e.g. hip replacement gives mobility) and how it is maintained over time. This methodology is termed the Quality Adjusted Life Year, and the aggregate of the benefit over the baseline over time is determined (**Figure 26**). A notional cost is assigned to achieve a QALY (e.g. £30,000 per QALY). This allows the cost–benefit analysis to be made on an economic basis and a decision made.

However, studies do not show telehealth provides significant impact on quality of life, thus there is little change in incremental benefit and analysis concentrates on incremental cost, or cost-effectiveness.
