Adapting portfolio theory for the evaluation of multiple investments in health with a multiplicative extension for treatment synergies

Bridges, JFP; Stewart, M; King, MT; Van Gool, K

Adapting portfolio theory for the evaluation of multiple investments in health with a multiplicative extension for treatment synergies

Bridges, JFP Stewart, M King, MT Van Gool, K

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Publication Type:: Journal Article
Citation:: European Journal of Health Economics, 2002, 3 (1), pp. 47 - 53
Issue Date:: 2002-12-01

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Field	Value	Language
dc.contributor.author	Bridges, JFP	en_US
dc.contributor.author	Stewart, M	en_US
dc.contributor.author	King, MT	en_US
dc.contributor.author	Van Gool, K https://orcid.org/0000-0002-1424-9304	en_US
dc.date.issued	2002-12-01	en_US
dc.identifier.citation	European Journal of Health Economics, 2002, 3 (1), pp. 47 - 53	en_US
dc.identifier.issn	1618-7598	en_US
dc.identifier.uri	http://hdl.handle.net/10453/5088
dc.description.abstract	Portfolio theory is central to the analysis of risk in many areas of economics but is seldom used appropriately in health economics. This contribution examines the use of portfolio theory in the context of cost-effectiveness analysis (CEA). A number of modifications are needed to apply portfolio analysis to the economic evaluation of health care interventions. First, the method of reporting the results of a CEA, and consequently some of the underlying assumptions, needs to be modified. Second, portfolio theory needs to be expressed in terms of effects on individuals aggregated to a population. Finally, one needs to allow for the possibility of synergy between the various health interventions. This paper derives a general formula for a portfolio of health care interventions that allows for synergies between interventions where the population effects are aggregated from individual effects. A number of special cases are also derived to highlight the nature of the formulation of the modified portfolio theory. We conclude that, while modified portfolio theory adds a theoretical foundation to health care evaluations, it may not be operational until estimates of the correlation between interventions are available, and the question of uncertainty is resolved in health care evaluation. Also, while a synergy may be present at the individual level, when aggregated over a large population it may not be significant given the standard assumption of constant returns to scale. © Springer-Verlag 2002.	en_US
dc.relation.ispartof	European Journal of Health Economics	en_US
dc.relation.isbasedon	10.1007/s10198-001-0090-5	en_US
dc.subject.classification	Health Policy & Services	en_US
dc.title	Adapting portfolio theory for the evaluation of multiple investments in health with a multiplicative extension for treatment synergies	en_US
dc.type	Journal Article
utslib.citation.volume	1	en_US
utslib.citation.volume	3	en_US
utslib.for	1117 Public Health and Health Services	en_US
utslib.for	1402 Applied Economics	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Strength - CHERE - Centre for Health Economics Research and Evaluation
utslib.copyright.status	closed_access
pubs.issue	1	en_US
pubs.publication-status	Published	en_US
pubs.volume	3	en_US

Abstract:

Portfolio theory is central to the analysis of risk in many areas of economics but is seldom used appropriately in health economics. This contribution examines the use of portfolio theory in the context of cost-effectiveness analysis (CEA). A number of modifications are needed to apply portfolio analysis to the economic evaluation of health care interventions. First, the method of reporting the results of a CEA, and consequently some of the underlying assumptions, needs to be modified. Second, portfolio theory needs to be expressed in terms of effects on individuals aggregated to a population. Finally, one needs to allow for the possibility of synergy between the various health interventions. This paper derives a general formula for a portfolio of health care interventions that allows for synergies between interventions where the population effects are aggregated from individual effects. A number of special cases are also derived to highlight the nature of the formulation of the modified portfolio theory. We conclude that, while modified portfolio theory adds a theoretical foundation to health care evaluations, it may not be operational until estimates of the correlation between interventions are available, and the question of uncertainty is resolved in health care evaluation. Also, while a synergy may be present at the individual level, when aggregated over a large population it may not be significant given the standard assumption of constant returns to scale. © Springer-Verlag 2002.

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http://hdl.handle.net/10453/5088