PHI 31 Lecture Notes - Lecture 27: Health Maintenance Organization, Combined Oral Contraceptive Pill
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2) states of the world (mutually exclusive, exhaustive) 3) outcomes (draw the matrix: know the potential options and outcomes) 4) values (ranks of measure of outcome) A + no complications = ,000, a + complications = ,000. B + no complications = ,400, b + complications = ,000. Decision with known risk expected value strategy. Ev (treatment a): (,000 x 0. 9) + (,000 x 0. 1) = + = Ev (treatment b): (,400 x 0. 99) + (,000 x 0. 01) = ,386 + These are costs to the hmo, so a lower expected value is better. Expected value strategy says choose the option with the highest expected value. Treatment a recommended, with higher risk of complications, bc ,300 is lower cost than ,416. Decision was based solely on the bottom line of minimizing cost. Two scenarios in cases of known risk. When effectiveness is low, values dominate probabilities. When effectiveness is moderate, expected values or utilities could go either way.
