1. Health Economics Workshop: Costing exercise
Monisha Sharma, PhD
International Clinical Research Center (ICRC)
University of Washington

2. Goals of costing exercise:
To familiarize yourself with using excel costing tools
To practice placing intervention costs into appropriate categories, annualizing, and discounting costs.
To think about how to adapt costs collected from an RCT to estimate intervention costs.

3. Inflating costs to current value
You are looking for the yearly cost of administering ART in Kenya.
You find an estimate in the literature of $350 per year, but this is in 2014 dollars.
Your cost analysis is in 2015 dollars
Need to account for inflation.
How do you adjust the ART cost for use in your analysis?
Adjust for inflation using the consumer price index (CPI)
Current cost ($) = (base year cost) * (Current CPI) / (Base year CPI)

4. Consumer price index (CPI) table (ie GDP deflator): Kenya
Year
CPI
2015
153.7
2014
140.8 …
2011
113.1
2010
102.1
2009
100
Obtain CPIs online from World Bank (online)
Obtain 2014 and Kenya to US exchange rates (also from World Bank)
Year
Exchange rate
2015
92.0
2014
87.7

5. Convert to 2015 US dollars using 2015 exchange rate (94.0)
Converting 2014 costs to 2015
Convert $350 US dollars to Kenyan Schillings using 2014 Kenyan to US exchange rate: 87.7
Current cost ($) = (base year cost) * (Current CPI) / (Base year CPI)
2014 CPI = CPI =
2014 ART cost= 350*87.7
=30,765 KSH
2015 ART Cost = 30,765 x (153.7/ 140.8)
= 33,507 KSH
Inflation-adjustment factor
Convert to 2015 US dollars using 2015 exchange rate (94.0)
=33,507/94
=$356 (2015 dollars)
$350 in 2014 in Kenya=$356 in 2015

6. Costing exercise: Instructions
You are conducting a microcosting of an HIV testing intervention run as an RCT in Kenya.
Results will be used for a cost-effectiveness analysis
Fill in the Excel spreadsheet provided to generate estimates of the total cost of the intervention if it were implemented by the Kenya Ministry of Health
The sheets are linked and will populate the summary sheet automatically.
Some boxes have formulas already written in (eg anniuty factor) and will fill in automatically.

7. Costing exercise: Instructions cont’d
Boxes in blue can be filled in with words (description of items included in costing)
Boxes in yellow can be filled in with numbers
Boxes in green populate automatically and should not be altered
Assumptions:
Vehicles have 5 years of useful life
Furniture has 10 years of useful life
Discount rate: 3%
Costs are in 2015 US dollars

8. COSTING EXERCISE

9. Start up costs: Staff hiring
Interview HR and managers (and others involved in hiring)
Ask about time and money spent advertising positions, interviewing, shortlisting, and offering positions.
Assess time spent by each staff member
How would this process be different in government intervention? Would staff structure be different?
Interviewing
Panel interviews
Time costs (Kenyan Shillings)
Position
Time for interviews
(hours)
Staff responsible
# positions
field coordinator HR
Upper management
total cost
cost/position hired
Health advisors 28
HR, field coordinator, senior nurse 12
290,326
$34,838
$20,709
$84,580
$7,048 7
HR, upper management 1
7,258
$8,709
$5,177
$21,145
data manager
HR, field coordinator, upper management
office assistant
HR, field coordinator, upper management, accountant
$7,258

10. Start up costs: Staff training
How many staff were trained? Assess time costs of staff responsible for training
Supplies
Per diem
External speakers
Remove research costs
Training on human subjects, research practices
TRAINING
(assuming 5 years of useful life)
Time costs: Kenyan shillings
Position
Training type
Staff responsible
# days
# hours
# new staff trained
Employee salaries
Project manager
field coordinator
Employee cost
total cost
Health Advisor
In office 10 80 12
744,000
$44,239
$69,124
$411,428
$524,792
In field
senior health advisor 1 8
$41,142
Observation 4 32
$164,571
Field coordinator
senior admin
1,464,000
$99,539
$67,465
$167,004
Office assistant 5 40
1,044,000
$49,769
$24,055
$73,824

11. My actual costing sheets

12. My actual costing sheets

13. Thank You!