Differences between an efficiency analysis, a cost-benefit analysis, and a cost-effectiveness analysis
Explain the differences between an efficiency analysis, a cost-benefit analysis, and a cost-effectiveness analysis as well as when a cost-benefit analysis and a cost-effectiveness analysis is most appropriate.
Efficiency Analysis, Cost-Benefit Analysis and Cost-Effectiveness Analysis
Various factors exist that need monitoring and evaluation. Factors such as the effects of living standards, access and level of satisfaction of critical services in life, and the physical and financial resources available are worth analyzing. Efficiency, cost-benefit, and cost-effectiveness analyses are approaches that evaluate the efficiency and ability of interventions to attain desired outcomes. The approaches are crucial to organizations as they can help them examine the value of a program or intervention concerning its cost.
The approaches sound the same, have similar goals, function in a like manner, and are referred to interchangeably. However, despite the commonality, they are distinct techniques with different approaches to the evaluation process. Efficiency analysis intends to understand the process of interpreting inputs into valued outputs (McCutchan, 2020). It seeks to examine the attained output level as per the maximum that an intervention can produce given the inputs, available technology, and system constraints. Alternatively, cost-benefit analysis examines the economic benefits and determines whether they offset the economic costs (Peng & Song, 2018). It determines the best intervention that would produce the greatest benefit to the organization with or without the same objectives and it is measured by monetizing both the costs and benefits. Cost-effectiveness analysis examines the level of costs needed for specific output (McCutchan, 2020). It determines the best alternative intervention that generates the most desired outcome and costs the least as per the outcome level.
Overall, they all have different purposes. A cost-benefit analysis is most appropriate when assessing the benefits of an intervention or program such as labor market earnings, improved health benefits, and reduced social spending. Alternatively, a cost-effectiveness analysis is most appropriate when examining the potential cost outcome of a program. Hence, efficiency analysis, a cost-benefit analysis, and a cost-effectiveness analysis have similar goals but use different techniques to attain them.
McCutchan, P. K. (2020). Cost, cost-effectiveness, and cost-benefit of collaborative assessment and management of suicidality versus enhanced treatment as usual (Order No. 27998373). Available from ProQuest One Academic. (2428132114).
Peng, B., & Song, J. (2018). A case study of preliminary cost-benefit analysis of building levees to mitigate the joint effects of sea level rise and storm surge. Water, 10(2), 169. http://dx.doi.org/10.3390/w10020169