A Cost-Benefit Analysis of Net Based Nursing Education by Niklas Hanes and Sofia Lundberg, Centre for Regional Science at Umeå University (CERUM), Sweden.

Cost-benefit analysis – a short description  Are resources within a project used efficiently for the society as a whole – compared to an alternative case?  The objective function in a cost-benefit analysis is citizen welfare.  In a cost-benefit analysis all direct and indirect effects on citizen welfare should be estimated in monetary values.  Costs are defined as the alternative values (costs), i.e. the value of the resources in an alternative use.

Introduction to the case study  The case study is a cost-benefit analysis of a net based nursing programme provided by Umeå University and Academy North, a consortium of 13 municipalities in the Northern part of Sweden.  The case study has a regional perspective since the nursing programme was initiated due to a lack of nurses in the inland of the northern part of Sweden.  The national government, Academy North, Umeå University, and one county council have financed the programme.  The municipality of Lycksele is the “host municipality”  The Nursing programme started in 2002 and students graduated in Although the programme was initiated as a single occasion, the programme is now on its second round (start 2005 and exam in 2008).  The empirical analysis is based on a survey distributed to all students one year after the exam.

Introduction to the case study  31 students were enrolled in the nursing programme  The net based nursing programme attracted a ”new” student group –the students were older compared to the on campus nursing students –they had a different family situation –they stated that the net based education alternative was a necessary condition for them in order to proceed the programme.  This is in line with a national policy that higher education should be more accessible and attract new student groups, e.g. potential students in sparsely populated areas.

Benefits associated with the nursing programme  The main benefit is the value of production, i.e. the work done by the nurses between the exam and the retirement.  The value of the future production is approximated by using the current wages (obtained through the survey)  Valuation of future production is highly uncertain, for example: –Will they continue the work as nurses? –Future labour market conditions, productivity changes and wage structures? –Retirement age? –etc.  Productivity growth is not considered in the analysis. We have simply assumed that productivity growth for nurses is similar to the productivity growth that would have been observed in the alternative case.

Costs associated with the nursing programme  Production losses – the value of production in the alternative case is estimated using information on occupation and wages before the individual starts the Nursing programme.  Resources associated with teachers, goods and services, inventories, buildings. These resources are assumed to have an alternative use and their value in the alternative use are approximated by the values entered in the accounts (calculated by the Department of Nursing at Umeå University).  Per student costs are about twice as high compared to the on campus nursing programme.

Total costs (calculations by the Department of Nursing)

Discount rate  Costs and benefits arise in different time periods. In order to compare monetary values in different time periods, they need to be discounted to the same point in time.  The discount rate should reflect the individual´s time preference discount rate. A positive discount rate implies that individuals prefer consumption today compared to consumption in the future.

The impact on earnings of different discount rates

Some assumptions in the analysis  In the alternative case, the nursing programme is not provided elsewhere, i.e. the alternative case is based on the assumption that the students had continued in their former occupation.  Production values are considered up to the date of retirement.  Labour market behaviour is assumed to be identical between the two cases, for example: –Labour supply (working hours) –Time of retirement  The calculations are initially based on a discount rate of two percent.

Regional – National analysis  Two analyses are presented: one regional and one national.  In the regional CBA, only funding from the region is considered. Furthermore, individuals outside the region are not included in the analysis (the regional decision maker).  In the national analysis, all costs are considered and production values are included regardless of place of residence (the national policy maker).

Results of the cost-benefit analysis (net present value)

Some comments …..  At a low disocunt rate, two percent, the nursing programme is worthwhile  At a rate of four percent, the national analysis gives a negative result  Note that results are sensitive to the choice of discount rate  Note that the only benfit considered in the analysis is the higher production value.  Individuals benefit from the possibility to stay in the region, this is not necessarily captured by the wage. However, if we believe in compensating wage differentials between regions, these effects may be captured.  Value of health care provided in sparsely populated areas? Measured in the wage?  One problem is that wages in the public sector may be a bad measure of the ”true” value of the nurses. Our calculations are likely to be a lower bound. The actual value is higher.

Sensitivity analysis - what factors may change the results?  Some examples: –Student performance –Education quality – affects productivity and the value of future production –Migration of labour force affects the regional analysis –Discount rate

National and regional analysis?  The incentive structure may differ between stakeholders  For example: –In a regional perspective, out-migration of labour force causes lower production values. –As long as the labour force is migrating within the country, a cost-benefit analysis at the national level is indifferent between migration decisions by individuals. –The example of migration points out that the incentives for national and regional government to fund the project may differ.

Some questions  What are the main incentives for the students to choose e-learning?  What are the incentives for governments (national, regional and local) and universities to provide e-learning?  Worthwhile for the society – worthwhile for the university? –The fact that a project that is beneficial from the society point of view does not necessarily mean that a department or university find it beneficial to provide; costs at the department or university level may outweigh the revenues. Thus, although a project is beneficial in the context of a CBA, costs and revenues at the department level may constitute restrictions.

Appendix A: Wages and time to retirement (after exam from nursing programme)

Appendix B: Wages and time to retirement for the alternative case

Appendix C: Production increases and production losses