Cost-effectiveness analysis in health policy decision making: Direct methods for progressive multi-state processes

Discrete-event simulation (DES) techniques are commonly used for cost-effectiveness analysis (CEA) in health policy decision making. This paper develops direct approaches for conducting CEA under a progressive multi-state framework, with a focus on semi-Markov processes. Analytical expressions are developed for the stationary case, and sensitivity analysis is considered. The advantages of these direct methods over DES are discussed, with most benefit in the case of time-stationary models, and only limited benefits in non-stationary situations. The method is demonstrated on illustrative applications.