During cost-effectiveness analyses, a summary measure representing the economic value of an intervention relative to an alternative intervention is calculated. That summary measure is the incremental cost-effectiveness ratio (ICER). The ICER is the ratio of expected additional total cost (also called the incremental cost) of one intervention to its expected additional effect (also called incremental effect), all with respect to an alternative intervention.
The ICER is calculated as follows:
The ICER can then be used to estimate quality-adjusted life years associated with the proposed intervention.
(This ICER is not to be confused with the Institute for Clinical and Economic Review, a health technology assessment organisation in the US whose name is frequently abbreviated to ICER.)