Multi-Year Cost-Effectiveness Models Spread Year-One Startup Costs Across Ongoing Health Gains
Scoring modeled county care teams across startup and ongoing years using cost per healthy year and net value.
Launching a county Community Health Worker team requires upfront spending on staff hiring, training, and data tools in Year 1. Ongoing operating costs then settle into a lower annual rate in Years 2 through 5. Multi-year cost-effectiveness models compare those startup and ongoing costs against cumulative patient health gains.
Across an assumed 5-year, 750-client-per-year California CHW program, our modeled analysis shows that direct operations produce ~200 healthy life-years at ~$36,100 per QALY and create +$12.80M in net value at the standard $100,000 benchmark.[1] Judging the team on Year 1 alone raises the unit cost to ~$48,200 per QALY because $325,000 in startup costs lands before ongoing costs drop to ~$35,100.[2] Even with full startup included ($7,550,000 total, or ~$37,700 per QALY), the 5-year model clears the strict $50,000 benchmark (+$2.46M net value).[3]
Table 1. Cost per QALY & Net Value Across 4 Accounting Horizons
Comparing Year 1 launch, Years 2-5 ongoing care, 5-year operating totals, and 5-year full startup totals across analytic perspectives.
| Cost & Value Measure |
Phase 1: Launch
Year 1 Startup & Ramp
|
Phase 2: Steady State
Years 2 to 5 Ongoing Care
|
5-Yr Operating
Direct Operating Total
|
5-Yr Full Cost
Total Cost With Startup
|
|---|---|---|---|---|
| Assumed Program Cost Input | $1,930,000Yr 1 | $1,405,000 / yrYrs 2-5 | $7,225,0005-yr operating | $7,550,0005-yr w/ startup |
| Health Gain (QALYs)* | 40.04 QALYsYr 1 | 40.04 QALYs / yrYrs 2-5 | 200.20 QALYs5-yr total | 200.20 QALYs5-yr total |
| Cost per Healthy Year Gained* | $48,202 / QALYYr 1 | $35,090 / QALYYrs 2-5 | $36,089 / QALYoperating | $37,712 / QALYw/ startup |
| Net Value at $50,000 / QALY* | +$72,021Yr 1 net | +$597,021 / yr | +$2,785,1065-yr operating | +$2,460,1065-yr w/ startup |
| Net Value at $100,000 / QALY* | +$2,074,043Yr 1 net | +$2,599,043 / yr | +$12,795,2135-yr operating | +$12,470,2135-yr w/ startup |
| Net Value at $150,000 / QALY* | +$4,076,064Yr 1 net | +$4,601,064 / yr | +$22,805,3195-yr operating | +$22,480,3195-yr w/ startup |
Table 1 Notes & * Modeled Estimates
Expand notes
Table 1 Notes & * Modeled Estimates. Rows marked with * apply published fee rates or trial parameters to observed baseline data. Open the notes below for full formulas and data sources.
Column Scope. Year 1 Startup & Ramp. Program Operator. Years 2 to 5 Ongoing Care. Program Operator. Direct Operating Total. Program & Societal. Total Cost With Startup. Program & Societal.
Two-Ruler Benchmark Summary. Mode A 5-Year Cohort Horizons (~$36,100 Operating vs. ~$37,700 With Startup). Ruler 1: Cost per Healthy Year (ICER = ΔC / ΔE): ~$36,100 Oper. | ~$37,700 Total. Dividing 5-year assumed operating cost ($7,225,000) by ~200 QALYs gives ~$36,100/QALY, while dividing full cost with startup ($7,550,000) by ~200 QALYs gives ~$37,700/QALY. Both sit well below the ICER $50,000/QALY benchmark. Ruler 2: 5-Year Net Dollar Value (NMB = λ·ΔE − ΔC): +$12.80M at λ = $100K/QALY. Valuing ~200 QALYs in dollars (NMB = λ·ΔE − ΔC) gives a positive net gain at every U.S. benchmark: +$2.79M at λ = $50K, +$12.80M at λ = $100K, and +$22.81M at λ = $150K (+$12.47M at $100K with startup).
Method & Data Audit (TooEarlyToSay.com): Statewide CHW Reimbursement Analysis →
Visual Comparison: Cost per Healthy Year Gained (QALY) vs. $50,000 Strict Benchmark
Separate horizontal bars (non-stacked) showing Table 1 cost per healthy year gained across all 4 accounting horizons against the strict $50,000/QALY U.S. value benchmark.
Table 1 takeaway: Year 1 startup and ramp costs $48,202/QALY (just under the strict $50,000/QALY line), while Years 2 to 5 ongoing care ($35,090/QALY), 5-year direct operating ($36,089/QALY), and 5-year total cost with startup ($37,712/QALY) all sit well below $50,000/QALY.
Table 2. Benchmark Math, Cost-Saving Terms & Policy Rules
Why analysts pair Net Dollar Value with cost per healthy year and separate cost-effective from cost-saving.
| Decision Choice | Year 1 Startup & Ramp | Years 2 to 5 Ongoing Care | Direct Operating Total | Total Cost With Startup |
|---|---|---|---|---|
| Where the Return Shows Up | The county agency pays Year 1 training bills as patient health gains start. | Ongoing county operating costs drop while annual patient QALY gains hold steady. | Patients gain 200 healthy life-years over 5 years against direct operating outlays. | Five-year net value stays positive after spreading Year 1 startup across all 5 years. |
| How Cost Ratios and Net Value Behave | Year 1 cost sits near $50K, giving ~$72,000 net value. | Cutting unit cost to $1,800 saves $525,000/yr and lowers cost per QALY by ~$13,100. | Five-year operating net value scales from +$2.79M ($50K) to +$22.81M ($150K). | Adding $325,000 startup lifts the 5-year ratio from ~$36,100 to ~$37,700/QALY. |
| Cost-Effective vs. Cost-Saving | A gross cost of ~$48,200/QALY (added cost with positive health gain) is cost-effective, not cost-saving. | The term "dominant" (cost-saving) applies only when a program both lowers net spending and improves health. | Counting modeled bed offsets (~$1.82M/yr) saves ~$418,000/yr net (cost-saving). | In the IMPaCT RCT, hospital savings returned $2.47 per $1 spent. |
| Budget Tradeoff | Judging a team only on Year 1 costs over-weights one-time training. | Setting ongoing contracts at ~$35,100/QALY keeps costs on track. | Using only a $50K benchmark omits $10.01M in value at the $100K standard. | Spreading $325,000 startup over 5 years adds just ~$1,600/QALY to the 5-year ratio. |
| Recommended Policy Rule | Score Pilots Over a 3-to-5-Year Contract. Spread Year 1 training over a multi-year contract. | Report Both Gross Cost and Net Bed Savings. Show gross cost per QALY ($35.1K-$37.7K) beside net bed savings (-$418K/yr). | Rank County Programs by Net Value at $100K. Use 5-year net value to rank programs. | Compare Both Operating and Full-Startup Ledgers. Report both ~$36,100/QALY (operating) and ~$37,700/QALY (with $325K startup). |
Table 2 Notes: Exact 5-Year Horizon Math & Trial Benchmarks
Expand notes
• Exact 5-Year Horizon Arithmetic: Under the illustrative cohort assumptions (750 clients/yr, +0.0275/yr weighted lift over 2 years at 3.0% discount), each cohort year yields 40.0404252 QALYs/yr (200.202126 QALYs over 5 years, displayed as 40.04 and 200.20). Dividing $1,930,000 (Year 1: 750 × $2,500 + $55,000 amortized startup) by 40.0404252 gives $48,202/QALY; dividing $1,405,000/yr (Years 2 to 5: 750 × $1,800 + $55,000 startup) by 40.0404252 gives $35,090/QALY. Over 5 years, dividing $7,225,000 (operating excluding $325,000 total startup) by 200.202126 gives $36,089/QALY, and dividing $7,550,000 ($1,930,000 + 4 × $1,405,000, or $7,225,000 + $325,000 startup) by 200.202126 gives $37,712/QALY.
• Hospital Offset & Trial Context: In the IMPaCT randomized trial (Kangovi et al., 2020, Health Affairs) and CDC Community Health Worker Evidence Base, acute-care savings offset program outlays ($2.47 returned per $1 in IMPaCT). Applying an illustrative $1,823,330/yr hospital bed offset against $1,405,000/yr ongoing cost yields a net saving of -$418,330/yr (dominant).
• Extended Cell Context. Cost-Effective vs. Cost-Saving (Total Cost With Startup). In the IMPaCT RCT (Kangovi et al., 2020), hospital savings returned $2.47 per $1 spent. · Recommended Policy Rule (Year 1 Startup & Ramp). Spread Year 1 training ($2,500/client + startup) over a multi-year contract. · Recommended Policy Rule (Direct Operating Total). Use 5-year net value (+$12.80M operating, +$12.47M w/ startup) to rank programs.
Compare 5-Year Net Value Across U.S. Benchmarks
Comparing modeled 5-year net value (operating and full startup) across three U.S. health value benchmarks.
Even at the strictest $50,000 benchmark, both the operating (~$36,100/QALY) and full-startup (~$37,700/QALY) ledgers give positive net value.
At the standard U.S. benchmark, the assumed 10-CHW team creates +$12.80 million in modeled 5-year operating net value (+$12.47M with startup).
At the upper benchmark for high-need chronic care, modeled 5-year operating net value reaches +$22.81 million (+$22.48M with startup).
Scenario Math & Startup Amortization Across Benchmarks
Expand scenario notes
• Net Value Formula (NMB = λ·ΔE − ΔC): Over 5 years, the illustrative 10-CHW scenario produces 200.202126 unrounded QALYs (5 × 40.0404252 QALYs/yr, displayed as 200.20) against $7,225,000 in direct operating bills ($7,550,000 with $325,000 total startup). Table 1 costs are gross outlays before Medi-Cal SPA 22-0001 billing or hospital bed offsets.
• Unrounded 5-Year Benchmark Math: Computing 5-year NMB from unrounded QALYs (200.202126) and rounding to the nearest dollar gives: at λ = $50,000/QALY, $10,010,106.30 minus $7,225,000 = +$2,785,106 operating (minus $7,550,000 = +$2,460,106 with startup); at λ = $100,000/QALY, $20,020,212.60 minus $7,225,000 = +$12,795,213 operating (+$12,470,213 with startup); at λ = $150,000/QALY, $30,030,318.90 minus $7,225,000 = +$22,805,319 operating (+$22,480,319 with startup).
• Nearest-Dollar Rounding Rule Across Horizons: Each Table 1 cell is computed from unrounded QALYs (40.0404252/yr; 200.202126 over 5 years) and rounded independently to the nearest dollar. Because of nearest-dollar rounding, summing the rounded Year 1 cell and four rounded Years 2 to 5 cells (+$72,021 + 4 × $597,021 = +$2,460,105 at $50K; +$2,074,043 + 4 × $2,599,043 = +$12,470,215 at $100K; +$4,076,064 + 4 × $4,601,064 = +$22,480,320 at $150K) differs by $1 to $2 from the unrounded 5-year full-startup totals (+$2,460,106; +$12,470,213; +$22,480,319).
Why Net Dollar Value Pairs with the Cost Ratio in County Budgets
When analysts report a cost ratio (~$36,100 per QALY operating, or ~$37,700 per QALY with startup), two practical questions arise from county leaders. First, how do we know whether ~$36,100 to ~$37,700 per QALY is a good value? Second, how do we compare a small team with a low ratio against a larger program with a slightly higher ratio? Value benchmarks ($50,000, $100,000, and $150,000 per QALY) answer the first question. Net Dollar Value (healthy years times benchmark value, minus program cost) answers the second.
Valuing health gains in dollars at the $100,000 per QALY benchmark and subtracting program bills shows that an assumed 10-CHW team creates +$12.80 million in operating net value over 5 years (+$12.47M with startup, and +$2.46M to +$2.79M even at the strict $50,000 benchmark). Pairing Year 1 startup tables with 5-year cumulative ledgers shows county boards that the program stays high-value across every U.S. threshold.
Data Sources, Model Inputs, Notes & Endnotes
(Numbered endnotes [1]–[6], state data sources & math rules)
Expand details
Case Study Focus: Resource Funding & Economic Value · ICER, NMB & Thresholds (Mode A CEA Horizons)
Numbered Endnotes & Main Sources
- [1]California 5-Year CHW Value Scenario (Mode A): California DHCS SPA 22-0001 illustrative cohort scenario. Serving an assumed 750 clients per year over 5 years gives 200.20 discounted QALYs (40.04 QALYs/yr). Direct operating cost is $7,225,000 ($36,089/QALY), or $7,550,000 with $325,000 in startup ($37,712/QALY).
- [2]Startup vs. Ongoing Years (Mode A): In this illustrative scenario, Year 1 cost per healthy year is $48,202/QALY ($1,930,000 for 40.04 QALYs: $2,500/client + $55,000 amortized startup). It drops to $35,090/QALY in Years 2 to 5 ($1,405,000/yr for 40.04 QALYs/yr: $1,800/client + $55,000 startup).
- [3]Net Value & Hospital Offset Benchmarks: ICER Valuation Benchmarks. Five-year operating net value is +$2.79M at $50K/QALY, +$12.80M at $100K/QALY, and +$22.81M at $150K/QALY (+$2.46M, +$12.47M, and +$22.48M with full startup). In the IMPaCT CHW RCT (Kangovi et al., 2020), acute-care savings yielded $2.47 per $1 invested.
- [4]Sanders et al. (2016) Second Panel on Cost-Effectiveness in Health and Medicine
- [5]Neumann, Cohen & Weinstein (2014), "Updating Cost-Effectiveness: The Curious Resilience of the $50,000-per-QALY Threshold," NEJM
- [6]CDC Community Health Worker Evidence Base
Mode Classification (Mode A Cost-Effectiveness Model on Illustrative Cohort Assumptions): Program cost inputs ($2,500/client Year 1, $1,800/client ongoing, $55,000/yr amortized startup plus $50,000 Year 1 onboarding = $325,000 total startup; $1,930,000 Yr 1, $1,405,000/yr Yrs 2-5, $7,225,000 5-yr operating, $7,550,000 5-yr with startup), QALYs (40.0404252/yr, 200.202126 5-yr), hospital bed offset ($1,823,330/yr), ICERs ($48,202 Yr 1, $35,090 Yrs 2-5, $36,089 operating, $37,712 with startup), and net values are illustrative Mode A closed-form scenario calculations.
Average vs. Incremental Scenario Comparison: Comparing the illustrative 10-CHW scenario ($7,550,000 with startup for 200.20 QALYs) against usual care gives an average ratio of $37,712/QALY ($36,089 operating). Compared against an illustrative smaller 5-to-6 CHW scenario ($3,115,606 for 112.11 QALYs = $27,790/QALY), the incremental step-up adds +$4,434,394 for +88.09 QALYs (ICER = $50,339/QALY), following the incremental framework in Sanders et al. (2016) Second Panel on Cost-Effectiveness in Health and Medicine.
Primary References & Data Sources: See Institute for Clinical and Economic Review (ICER) Value Assessment Framework ($50K-$150K/QALY) and Neumann, Cohen & Weinstein (2014), "Updating Cost-Effectiveness: The Curious Resilience of the $50,000-per-QALY Threshold," NEJM. We also use California DHCS SPA 22-0001 and the CDC Community Health Worker Evidence Base.
Companion Method & Code Guides (TooEarlyToSay.com)
- Why Flat Medi-Cal Rates Underfund Community Health Care. Across 58 California counties and 9,039 census tracts, a flat $31.74 Medi-Cal fee schedule covers 3.2% to 8.9% of modeled field community health worker costs.
Common Questions & Method Notes
- What is the difference between a "cost-effective" program and a "dominant (cost-saving)" program?
- A program is cost-effective when it improves health (ΔE > 0) at an added cost (ΔC > 0) whose ratio (ICER = ΔC / ΔE) stays below the value benchmark (such as ~$36,100 to ~$37,700/QALY vs. $100,000/QALY). A program is dominant (cost-saving) only when it both improves health (ΔE > 0) and cuts net spending (ΔC < 0).
- Why do analysts report Net Monetary Benefit (NMB) alongside the ICER?
- Because the ICER is a ratio (ΔC / ΔE), it does not show total program scale, and a negative ratio can mean either a cost-saving plan (ΔC < 0, ΔE > 0) or a worse plan (ΔC > 0, ΔE < 0). Net value (λ·ΔE − ΔC) is linear, additive, and clear across all cases.
- How much does Year 1 startup training change the 5-year cost per QALY?
- In Year 1 alone, startup and ramp-up costs raise the ratio to ~$48,200 per QALY ($1,930,000 for ~40 QALYs). Spread across the full 5-year horizon (~200 QALYs), adding $325,000 in startup moves the ratio from ~$36,100/QALY ($7,225,000 operating) to ~$37,700/QALY ($7,550,000 total), well below the $50,000/QALY benchmark.