Insights from Financial Economics to Value Healthcare Investments that Reduce System-Level Risks: Example of Disease...

Area of Science:

• Public Health Economics
• Financial Economics
• Risk Management

Background:

• System-level risks, both systematic and systemic, threaten public health system stability and population health.
• Disease elimination and eradication (DEE) interventions are vital for mitigating these risks.
• Conventional health economic evaluations often neglect benefits during instability, focusing on steady-state assumptions.

Purpose of the Study:

• To explore how financial economics concepts can enhance health economic evaluations.
• To improve the appraisal of programs reducing aggregate system-level risks, using DEE as an example.
• To inform investment decisions by more accurately capturing the value of risk-mitigating interventions.

Main Methods:

• Drawing on asset pricing theory and macroeconomic models of rare disasters.
• Utilizing real options analysis for uncertainty management in long-term projects.
• Applying financial economics principles to discounting practices for intergenerational impacts.

Main Results:

• Recognizing the value of programs that perform well during downturns, offering protection against shocks.
• Applying 'real options' thinking to manage uncertainty and preserve flexibility in high-cost projects.
• Incorporating equity considerations into discount rates for programs with long-term intergenerational effects.

Conclusions:

• Financial economics tools can strengthen health economic evaluations for system-level risk reduction.
• A broader analytical framework incorporating these tools supports better investment decisions.
• Accurate valuation of investments that reduce aggregate system-level risks is crucial for public health resilience.