International Telecommunication Union Workshop on Standardization in E-health Geneva, May 2003 Measuring Economic Benefits of E-Health: Theory and Practice Masatsugu Tsuji Professor of Economics OSIPP, Osaka University

ITU-T May 2003 Workshop on Standardization in E-health Methods of Measuring Economic Benefits o Revealed preference method 1. Travel cost method (Evaluation I) 2. Replacement cost method (Evaluation II) 3. Hedonic method o Stated preference method 1. Contingent valuation method (CVM) WTP approach (Evaluation III)

ITU-T May 2003 Workshop on Standardization in E-health Evaluation I: Teleradiology (D2D) Local clinic University hospital ISDN 128kbps Traditional method (once a week) Salary: US$ 750 Traveling costs: US$ 130 Total costs: US$ 44,000 Telemedicine Initial costs: US$ 7,500 Monthly fees: US$ 500 fees per picture: US$ 20 Telephone bills (year): US$ 3,150 Total costs: US$ 32,000

ITU-T May 2003 Workshop on Standardization in E-health Evaluation II: Replacement Method (1) How much of hospitalization costs can be saved by E-health Estimation of logistic curves CATV and ISDN Hospital Costs-Savings Hospitalization costs per elderly patient Estimation of the number of tele-home-care systems

ITU-T May 2003 Workshop on Standardization in E-health Evaluation II: Replacement Cost Method (2) ratio US$ billion Estimation Result CATV ISDN

ITU-T May 2003 Workshop on Standardization in E-health Evaluation III: CVM Approach (1) o Benefits should include: 1. Less anxiety in day-to-day life 2. Enhanced consciousness towards health 3. Stabilization of illness 4. Decrease in medical expenses, etc. WTP: Willingness to pay

ITU-T May 2003 Workshop on Standardization in E-health Concept of WTP p q Demand function quantity price Benefit to consumer (Consumers surplus)

ITU-T May 2003 Workshop on Standardization in E-health List of Questionnaire yes: How much? yes: \7,500? yes: \6,500 no: \6,500? no: \5,500 \5,500? yes: \4,500 yes: \4,500? no: \3,500? No: \3,500 no: \2,500

ITU-T May 2003 Workshop on Standardization in E-health Estimation of WTP Probability of acceptance = 1- 1/(1 + exp (-α-βlogWTP))

ITU-T May 2003 Workshop on Standardization in E-health Estimation of WTP No. of users WTP (per user/month WTP (6 years) Kamaishi City 384 4,519 yen US$ ,900,000 yen US$857,500 Katsurao Village 926 1,640 US$ ,360,000 US$828,000 Nishiaizu Town 518 3,177 US$ ,700,000 US$897,500 Sangawa Town 551 2,955 US$ ,520,000 US$887,700

ITU-T May 2003 Workshop on Standardization in E-health Economic Assessment of Projects (1) Kamaishi (yen) Katurao (yen) Total Benefits (6 years) 102,900,000 99,360,000 Total costs (6 years) Initial investment Salaries & others 95,782,869 38, 970,000 10,419, ,172, ,415,500 13,343,325 B/C ratio No. of users, devices WTP4,5191,640 B/C ratio with subsidies

ITU-T May 2003 Workshop on Standardization in E-health Economic Assessment of Projects (2) Nishiaizu (yen) Sangawa (yen) Total Benefits (6 years) 107,700, ,500,000 Total costs (6 years) Initial investment Salaries & others 184,170, ,720, , ,330, ,459,500 7,500,000 B/C ratio No. of users, devices WTP3,1772,955 B/C ratio with subsidies