Table 1.

Different conceptions of supply-side cost-effectiveness thresholds

	Concept	Theoretical interpretation	Evidence requirement	Data sources	Methods
A	Shadow price of health	Cost per unit of health gain The next best opportunity foregone (measured by the health gain that would be sacrificed) as a result of specific health system investment decisions about specific technologies	Cost-effectiveness of all current and potential programmes of expenditure, accounting for budget impact and the timing of expenditures	Economic evaluations of all individual technologies funded and unfunded	Local league tables. Programme budgeting and marginal analysis
B	Marginal product	Change in health per unit change in expenditure Change in output caused by a single unit change in inputs at the margin, according to a specified production function, typically allowing for diminishing returns Equivalent to the inverse of A with perfect divisibility of treatments, independence, marginal budget impacts, and perfect information	Levels of input (health spending/capital/labour) and output (mortality/life years/QALYs), with exogenous variation across observations	Expenditure and outcomes data with variation at the programme-level for different sites (commissioners or geographies) or individual patients and time points	Linear programming. Estimation of the coefficients of a production function (regression methods or stochastic frontier analysis) relating health spending as an input to health outputs/outcomes
C	Average displacement	Change in health per change in expenditure on average Causal effect on outcomes of previous changes to expenditure equivalent to the net cost of the new technology Equivalent to B if there is a constant marginal product and the health system has allocative efficiency and optimal displacement	Levels of input (health spending/capital/labour) and output (mortality/life years/QALYs), with variation across observations	As for B, plus information on control variables and instruments as necessary	Experimental or quasi-experimental methods to identify causality (e.g. instrumental variable estimator to allow for endogeneity of health care spending)
D	Outcome elasticity	Percentage change in health per 1% change in expenditure Average proportional association between budget changes and health output Equivalent to C in relative terms if assumptions about causal effect are identified	As for C Deriving the absolute average displacement for a given relative displacement requires data on total potential amount of health gain in a given population (burden of mortality and morbidity)	As for B	Linear (or log linear) regression of health outcomes on health spending

QALY quality-adjusted life year