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Table 1 Glossary of identified definition(s) of central economic terms and main concepts used in the literature and definitions for costing

From: Harmonization issues in unit costing of service use for multi-country, multi-sectoral health economic evaluations: a scoping review

Term

Examples of definition/description(s) used in the literature

Average cost:

-Total resource cost, including all support and overhead costs, divided by the total units of output [25]

-Total cost divided by the number of units of output [26]

Bottom-up costing:

-For cost valuation, in the bottom-up approach, cost components are valued by identifying resource used directly employed for a patient [27]

-The bottom-up approach assesses the amount of each resource that is used to produce an individual service and assigns costs accordingly to generate aggregate costs of a system [28]

-Bottom-up approaches, such as activity-based costing, assess the amount of each resource that is used to produce an individual healthcare service and assigns costs accordingly to generate aggregate costs for a healthcare system [29]

-To value cost items using the bottom-up approach, patient utilization data needs to be multiplied by unit prices, leading to cost estimates for individual patients [3]

Capital cost:

- The cost to purchase the major capital assets required by the programme (for example, equipment, buildings, and land) [26, 30]

-Capital costs are one-time expenses typically incurred to set up a service [3]

Fee:

-A payment made to a professional or public organization for advice or services [2]

-The amount charged for a resource or service [31]

Fixed cost:

-Fixed costs do not vary with the quantity of output in the short run (about 1 year) and vary with time, rather than quantity: e.g. rent, equipment lease payments, some wages and salaries [3]

-Fixed cost is the one that remains stable regardless of the amount of production output and is actually the running cost of the department and the cost of equipment. Fixed cost is determined by staff salaries, capital and maintenance costs [32]

(Bottom up/top down) gross costing:

-In gross costing, cost components are defined at a highly aggregated level [27]

-Bottom up gross costing values the cost component for each individual patient [33]

-Top down gross costing values the cost component per average patient by separating out costs from comprehensive sources [33]

Top-down costing:

-In the top-down approach, cost components are valued by separating out the relevant costs from comprehensive sources [27]

-The top-down approach relies on comprehensive sources, such as annual financial accounts, and divides aggregated costs by the total number of patients [34]

-The step-down method, also known as the top-down method, calculates the unit cost of healthcare services by allocation of the total hospital cost [35]

-Top-down methods work with aggregate expenditures, which reflect monetary flows at the service level rather than the value of resources used. This implicitly accepts prevailing prices or charges as the correct valuation of resource inputs [5]

(Top down/bottom up) micro-costing:

-For cost identification, in microcosting, all cost components are defined at the most detailed level [27]

-A detailed list of each component of a patient’s care is created and costed separately for each facet of a patient’s hospitalization [9]

Bottom-up micro-costing identifies all relevant cost components and values each cost component for all individual patients resulting in the most accurate cost estimates [33]

Top down micro-costing identifies all relevant cost components, but values each component for average patients by separating out costs from comprehensive resources such as annual accounts [33]

Opportunity costs:

-Benefits forgone [3]

- The cost of a unit of a resource is the benefit that would be derived from using it in its best alternative use. [26]

- The opportunity cost of an intervention is what is foregone as a consequence of adopting a new intervention. [36]

- The ‘value of the next-best alternative’ forgone […] or ‘the value of what is given up’ [37]

Overhead/ indirect costs:

-Overhead costs, which consist of employee benefits, administrative staff, and capital costs such as building and equipment operation and maintenance, cannot be directly attributed to patient care, nor are they as responsive to changes in patient volume as variable, direct costs [38]

-Indirect cost components generally concern overheads (general expenses, administration and registration, energy, maintenance, insurance and the personnel costs of non-patient services…) and capital (depreciation of buildings and inventory and interest) [33]

Unit cost:

-The value of all resources (input) used to produce a service, divided by the level of activity (output) it generates [39]

-Standard unit costs are defined as all costs related to the provision of a particular service [40]

Variable cost:

-Variable cost is designated by the activities necessary for each patient’s treatment and it includes the cost of medication, consumables and diagnostic tests [32]

- Costs are often categorised into different types, such as […] fixed and variable costs (reflecting the initial payment for equipment and the additional cost per use of the consumables). [36]

- Those costs which vary with the level of production and are proportional to quantities produced. [41]