International Telecommunication Union

Workshop on Standardization in E-healthGeneva, 23-25 May 2003

Measuring Economic Measuring Economic Benefits of E-Health: Benefits of E-Health: Theory and Practice Theory and Practice

Masatsugu TsujiProfessor of Economics

OSIPP, Osaka University

223-25 May 2003 Workshop on Standardization in E-health

ITU-T

Methods of Measuring Economic Benefits

o Revealed preference method

1. Travel cost method (Evaluation I) 2. Replacement cost method

(Evaluation II) 3. Hedonic method

o Stated preference method 1. Contingent valuation method

(CVM) WTP approach (Evaluation III)

323-25 May 2003 Workshop on Standardization in E-health

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

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

423-25 May 2003 Workshop on Standardization in E-health

ITU-T

Evaluation II:Replacement Method (1)

How much of hospitalization costs can be saved by E-health

Estimation of logistic curves

CATV and ISDN

Hospital Costs-Savings

Hospitalization costs per elderly patient

Estimation of the number of tele-home-care systems

523-25 May 2003 Workshop on Standardization in E-health

ITU-T

Evaluation II: Replacement Cost Method (2)

ratio

0

10

20

30

40

US$ billion

0

2

4

6

8

10％

20000 2005 2010 2015202020 2025 2030 2035 2040 2045 2050

Estimation Result CATVISDN

623-25 May 2003 Workshop on Standardization in E-health

ITU-T

Evaluation III: CVM Approach (1)

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

723-25 May 2003 Workshop on Standardization in E-health

ITU-TConcept of WTP

p

q

Demand function

quantity

price

Benefit to consumer

(Consumer’s surplus)

823-25 May 2003 Workshop on Standardization in E-health

ITU-T

List of Questionnaire

yes: How much? yes: \7,500? 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

923-25 May 2003 Workshop on Standardization in E-health

ITU-T

Estimation of WTP

Plot of User Defined FunctionX

.2

.4

.6

.8

1.0

1.2

.02000 4000 6000 8000 100000

Function

Probability of acceptance =1- 1/(1 + exp (-α-βlogWTP))

1023-25 May 2003 Workshop on Standardization in E-health

ITU-T

Estimation of WTP

No. of users

WTP (peruser/month

WTP (6 years)

KamaishiCity

384 4,519 yenUS$38.66

102,900,000 yen US$857,500

KatsuraoVillage

926 1,640US$13.67

99,360,000 US$828,000

NishiaizuTown

518 3,177US$26.48

107,700,000 US$897,500

SangawaTown

551 2,955US$24.53

106,520,000US$887,700

1123-25 May 2003 Workshop on Standardization in E-health

ITU-T

Economic Assessment of Projects (1)

Kamaishi (yen)

Katurao (yen)

Total Benefits (6 years) 102,900,000 99,360,000Total costs (6 years)

Initial investment

Salaries & others

95,782,869 38, 970,000 10,419,600

184,172,706111,415,500 13,343,325

B/C ratio 1.07 0.54No. of users, devices

211 348 330 　　　 926

WTP 4,519 1,640B/C ratio with subsidies

1.87 1.42

1223-25 May 2003 Workshop on Standardization in E-health

ITU-T

Economic Assessment of Projects (2)

Nishiaizu (yen)

Sangawa (yen)

Total Benefits (6 years) 107,700,000

106,500,000

Total costs (6 years)

Initial investment

Salaries & others

184,170,869 136,720,000 980,000

174,330,000133,459,500 7,500,000

B/C ratio 0.58 0.61No. of users, devices

400 518 224 　　　 551

WTP 3,177 2,955B/C ratio with subsidies

2.31 2.60