Local Level Economic Evaluation: What is it? What is its value? Is it Sustainable?

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In Australia, local health services with allocated budgets manage public hospital services for defined geographical areas. The authors were embedded in a local health service for around 2 years and undertook a range of local level economic evaluations for which three decision contexts were defined: intervention development, post-implementation and prioritisation. Despite difficulties in estimating opportunity costs and in the relevance of portfolio-based prioritisation approaches, economic evaluation added value to local decision-making. Development-focused (ex ante) economic evaluations used expert elicitation and calibration methods to synthesise published evidence with local health systems data to evaluate interventions to prevent hospital acquired complications. The use of economic evaluation facilitated the implementation of interventions with additional resource requirements. Decision analytic models were used alongside the implementation of larger scale, more complex service interventions to estimate counterfactual patient pathways, costs and outcomes, providing a transparent alternative to the statistical analyses of intervention effects, which were subject to high risk of bias. Economic evaluations of more established services had less impact due to data limitations and lesser executive interest. Prioritisation-focused economic evaluations compared costs, outcomes and processes of care for defined patient populations across alternative local health services to identify, understand and quantify the effects of unwarranted variation to inform priority areas for improvement within individual local health services. The sustained use of local level economic evaluation could be supported by embedding health economists in local continuous improvement units, perhaps with an initial focus on supporting the development and evaluation of prioritised new service interventions. Shared resources and critical mass are important, which could be facilitated through groups of embedded economists with joint appointments between different local health services and the same academic institution.

Original languageEnglish
Pages (from-to)273-281
Number of pages9
JournalApplied Health Economics and Health Policy
Issue number3
Early online date18 Nov 2023
Publication statusPublished - May 2024


  • Health economics
  • Health care delivery
  • Local health areas
  • Australia


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