Cost-effectiveness analysis, in various forms, is viewed as a tool to help establish broad public health priorities, drug formularies and product protocols. In general, such analysis isn't intended to be used by physicians to make decisions about the care of individual patients.
In common usage, cost-effectiveness is a measure of what types of medical care give the "most bang for the buck." All of healthcare economics sometimes is referred to as "cost-effectiveness analysis," although there's a specific definition for the term.
Here are a few of the field's terms:
In healthcare economics, cost-effectiveness analysis compares the total stream of costs of a product or procedure to a non-dollar outcome, such as years of life saved or headaches averted.
Cost-benefit analysis works essentially the same way, except it uses outcomes that have been converted to a dollar value. Many people consider it both difficult and unethical to make such conversions.
Cost-utility uses outcomes adjusted to reflect the quality of life produced. Because of this, cost-utility isn't applicable when intermediate outcomes are used.