Marginal cost is the extra cost of providing an additional unit of care, and this extra cost can be measured in whatever terms may be most relevant for the situation. For example, marginal costs may be calculated in terms of each additional patient or of each additional year of follow-up.

Table 1 illustrates an example of marginal costs for a situation in which surgery on one patient costs £12,000, and each year of follow-up costs £4,000 as presented in . In this case, the cost in year 1 is the sum of the cost of surgery and one year of medical follow-up, the cost in year 2 is the sum of the cost of surgery and two years of follow-up, and so on. In this example, marginal costs are constant from year 2 onwards, reflecting the fact that surgery costs occur only in year 1, while follow-up costs occur each following year.

Table 1. Marginal cost