Economic evaluation refers to the comparative analysis of alternative courses of action in terms of both their costs and consequences. These courses of actions may involve alternative policies, services, or interventions which are intended to enhance health.
Given the limited availability of resources such as personnel, time, facilities, equipment and knowledge, decisions must be made regarding their allocation. The goal of economic evaluation is to inform these decisions by assessing the value for money of a health intervention, thereby aiding in the optimal allocation of limited healthcare resources.
Attempting to quantify without proper methods can lead to misleading informal evaluations. The true cost of any program extends beyond the finances reflected in its budget, comprising instead the value of benefits forgone from other programs due to resource allocation. This opportunity cost is what economic evaluation aims to assess and compare against the benefits of the program.
The perspective adopted in the analysis is important and can encompass any or all the following: the individual patient, the specific institution, the target group for specific services, the Ministry of Health´s budget, the broader government’s budget context, and the overall economy – a collective view sometimes referred to as the societal perspective.
A systematic analysis is essential to accurately identify relevant alternatives. Although it might be impractical to assess every possible alternative in a study, a significant contribution of economic evaluation lies in reducing the risk of overlooking important alternatives or comparing a new programme against a baseline which is not cost-effective.
Employing systematic methodologies heightens clarity and accountability in decision processes. Economic evaluation necessitates that the scientific judgments needed for evidence interpretation are made clear, facilitating scrutiny and exploration of the impacts of varying plausible perspectives. By making scientific and social value judgments explicit, it fosters greater accountability for societal choices made on behalf of others.
The identification of the various types of costs and their measurement in monetary values is a common aspect across most economic evaluations. However, the nature of the consequences resulting from the examined alternatives can vary significantly. Let´s consider five fundamental types of economic evaluation and how their outcomes are articulated:

• Cost-effectiveness analysis: This method evaluates two or multiple courses of action in terms of their relative costs and outcomes, where the outcomes are measured in a single natural unit (e.g., life-years gained, disease case averted, points of blood pressure reduction).
• Cost-utility analysis: It is a form of cost-effectiveness analysis that evaluates two or multiple courses of action in terms of their relative costs and outcomes, where outcomes are expressed through a generic measure of the health status that accounts for both mortality and morbidity impacts (e.g., QALYs: quality-adjusted life-years and DALYs: disability-adjusted life-years).
• Cost-benefit analysis: This analysis evaluates two or more alternatives based on their relative costs and outcomes, where both the costs and outcomes are expressed in monetary terms.
• Cost-minimisation analysis: This analysis compares the costs of two or more alternatives which are all assumed to have equivalent health effects.
  Cost-consequence analysis: This evaluation compares two or more options in terms of their relative costs and outcomes, where the outcomes are not summarised in a single measure, thus allowing for multiple outcomes to be reported.

The distinction in outcome expressions for economic evaluations arises from differing economic underpinnings. Cost-benefit analysis is traditionally rooted in a welfarist framework, where health outcomes are appraised based on the extent of their contribution to overall societal welfare, determined by individual preferences (willingness to pay). In contrast, cost-effectiveness and cost-utility analysis are grounded in an extra- welfarist framework, where the objective is maximizing contributions to societal health, quantified as the sum of individual health status.

Besides decision-analytic modelling, clinical studies – both randomized controlled trials (RCT) and non-RCT – serve as methods for conducting economic evaluation. Rather than being competing alternatives, clinical studies and decision models can complement each other. Clinical studies focus on measuring different effects of intervention on relevant costs and outcomes, while models can utilize these measurements and provide a structured platform for the necessary assumptions and judgment in decision making.

Trials typically examine a limited subset of all relevant options, often requiring effectiveness data from multiple studies. Meta-analysis and other evidence synthesis methods are needed to integrate this data, but decision models create a framework to combine it with additional evidence related to clinical risk and resource utilization, alongside health-related quality of life (HRQoL) metrics.
Moreover, models provide a means of structuring the relationships between clinical variables and how their magnitudes change over time. Many clinical studies measure effects in terms of clinically relevant end points that are only indirectly related to the ultimate measures of health central to most economic evaluations, such as changes in life expectancy. Decision analysis facilitates the connection between these intermediate end points and ultimate outcomes. Finally, decision models play a pivotal role in linking trial observations with anticipated long-term costs and effects.

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References
Drummond, Michael F., et al. Methods for the economic evaluation of health care programmes. Oxford University Press, 2015.