
 Using Excel and the data provided in Table 3, 4 and 10, calculate the
expected cost of consequences associated with days clients are in probation
but not in treatment. This is done by first reading the data on cost
and probabilities into Excel.
See how data can be read from Internet
Explorer into Excel. Then you need to multiply the probability of
incurring a cost by its amount and sum over all possible consequences.
See how expected costs are calculated
inside Excel. Make sure that all calculations are done using relative cell values and not
by entering the result by hand. Make sure that probability of opposite
events are calculated as one minus the event. Make sure that cell
values in the table are defined relative to marginal values. Check that your answers correspond
roughly with the answers in the table 10 to make sure that formulas lead to
same answers as the reading.
 Using Excel and the data provided in Table 3, 4 and 10 of the reading,
calculate the expected cost of seamless probation and traditional probation
per client per day. These three tables show either the probability or
the cost. The expected cost can be calculated as the sum of
probability of incurring a cost times the dollar amount of the cost.
For seamless and traditional probation, this is done by multiplying
probability of four situations (1. In probation and in treatment, 2. In
probation but not in treatment, 3. Not in probation but in treatment and 4.
Not in probation and not in treatment) by the cost at each of these
situations. The cost at any of these situations is calculated as the
cost of consequences (see previous question) plus cost of program (probation
or treatment).
See how expected costs are calculated
inside Excel. Make sure that all calculations are done using
relative cell values and not by entering the result by hand. The
expected value should be calculated as the probability of combination of
probation and treatment times the cost of that combination. Check
that your answers correspond roughly with the answers in the table to make
sure that formulas lead to same answers as the reading.
 Conduct sensitivity analysis on the
data by making single parameter changes in the decision tree in the
section on seamless probation. Before doing so make sure that the
probability of opposite events are calculated as one minus the probability
of the event.
See a video on how to
do this inside Excel. See
a video on how to conduct
single parameter sensitivity analysis. Report the breakeven points for
the following parameters:

Name of parameter
changed 
Current value 
Value at
breakeven point 
Percent of change
to reach break even point 
1. 
Probability of a probation day 



2 
.Probability of treatment day given probation 



3. 
Probability of technical violation given probation and treatment
day 



4. 
Probability of arrest given probation and treatment day 



5. 
Probability of technical violation given probation day and no
treatment 



6. 
Probability of mental health hospitalization given probation and
treatment days 



7. 
Probability of employment given probation and treatment days 



8 
Cost
of treatment 



9 
Cost
or seamless probation 



10. 
Cost
of arrest 








 Draw a chart showing the sensitivity of conclusions of the analysis to
changes in the probability of arrest. Put on the Xaxis the
probability of arrest. On the Yaxis put the expected cost. Draw
two lines one showing how the expected cost of seamless probation changes
when the probability of arrest in the seamless probation changes from 0 to
1. Draw another line showing how the expected cost for traditional
probation changes when the cost of arrest in the seamless probation
changes from 0 to 1. Note the point when the two lines meet.
This is the point at which the conclusion regarding which program is
preferred is reversed.
 Conduct a multiparameter sensitivity analysis by simultaneously
allowing following changes:
 30% increase in the cost of arrest (from $6,818 up to $8,863),
 Any change in the probability of arrest
in the seamless probation and treatment group (from 0 to 1)
 Any change in the probability of arrest in the traditional
probation and treatment group (from 0 to 1).
Report what parameters need to change to arrive at a breakeven point, where
current conclusions are reversed. See
a video on how to conduct
multiparameter sensitivity analysis. In order to accomplish this
assignment, instruct the Excel program to set the difference between the
expected cost for traditional and seamless probation to zero subject to
several constraints. Include at least the following constraints:
 Cost of arrest <= 8863
 Cost of arrest >= 6818
 Probability of arrest in seamless probation & treatment group
>= 0
 Probability of arrest in seamless probation & treatment group
<= 1
 Probability of arrest in traditional probation & treatment
group >= 0
 Probability of arrest in traditional probation & treatment
group >= 0
Report
if there is a combination of changes in these estimates that would set the
difference of expected value of seamless and traditional probation equal to
zero.
Send your response by email to your instructor. Include both the
question and the answers in your response. Include your contact
information.
Biweekly assignment
Please note that this assignment is not currently assigned to students in
HSCI 730.
 Estimate the daily and per visit cost of a clinic operation. The
purpose of this assignment is to use the steps described here to analyze
cost of operating a clinic. To accomplish this task, use your own
familiarity with the clinic operations to estimate the following:
 Proportion of employees working in the clinic
 Proportion of volunteers to employees within the clinic
 Proportion of patients cared for in the clinic
 Square footage used by the clinic based on your estimate of the
square footage used by the clinic exclusively and the square footage
shared among clinics.
 Number of clients served in the organization and in the clinic in
the last year or last month.
 Panel size of clinicians working in the clinic
 Time between visits per client
Follow these steps to accomplish the cost analysis:
 Select a publicly available operating budget of a health care
organization, preferably one in which you work or one in which you
have a friend who is interested in your help in analyzing their
costs.
 Identify the various clinics within the organization and based
on proportion of employees who work in the clinic allocate the
operating budget to the the cost of the clinic. Divide the
operating budget into personnel and other operating costs.
Increase the personnel expenses of the clinic proportional to the
ratio of volunteers to employees within the clinic.
 Add to the clinic cost the building capital costs.
Estimate this based on your estimated square footage used by the
clinic times market value of medical office space in the zip code of
the clinic. Collect this information from real
estate agents in your community or through Internet.
 If the clinic relies on information systems or medical record
provided by other units of the organization and not part of the
operating budget you have analyzed, add this cost into the total
expense proportional to number of clients served in the clinic.
 Estimate the daily clinic census from the panel size of
clinicians
 Estimate the number of visits of an average client (estimate
this as 1 divided by 1 plus time between visits for an average
client)
 Estimate the total number of visits during the last year by
multiplying the number of visits of the average client by the number
of clients.
 Report the daily cost of operating the clinic and cost per
visit.
 Report which source of data in your analysis needs additional
precision and what steps you can take to collect this information.
Include estimate of how much time would be needed to collect this
information.
 Analyze what are the consequences of purchasing a physician
primary care practice on a tertiary hospital system. Select a
clinic and tertiary clinical service group, preferably settings you
are familiar with or have access to someone who is familiar with
their operations. Estimate the variables needed based on your
knowledge of these organizations and publicly available data.
Follow these steps:
 Create a decision model that as its first decision node has
whether the to purchase or not to purchase the primary care
office. The chance node should indicate the frequency of
visits to the primary care setting, frequency of visits to
specialists and the probability of hospitalization at tertiary
hospital after visit to a specialist.
 Estimate the probabilities for the model and use publicly
available estimates of the cost of clinic visits and hospital
visits. Adjust the cost of hospitalization based on your
estimate of differences in case mix in the tertiary hospital and
the types of patients needing hospitalization in the primary
care setting.
 Report the expected increase in revenues if the office is
purchased.
 Conduct single variable sensitivity analysis to see which
estimate is most likely to affect the expected increase in
revenues. Indicate how much of the additional revenue
comes from direct primary care visits and how much from
subsequent referrals.
 Report on the availability of the data needed to conduct the
analysis. Where would you look for each data item and how
long do you think collection of the data will take.
Synthesis of evidence
regarding cost effectiveness of clinical practices
Read►

Cost
effectiveness of diabetes treatment practices
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Cost
Effectiveness and Resource Allocation is an online journal published by
BioMed Central.
Journal►

Programme
costs in the economic evaluation of health interventions
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Recent articles published on
procedures for conducting cost effectiveness
PubMed►

Econometric estimation of
countryspecific hospital costs
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Costeffectiveness of neonatal
screening for Cystic Fibrosis
using a decision model
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Books on health economics
and medical decision making
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