Cost Standardization: Price Year, Currency, and Purchasing Power

Definition and scope

The explicit conversion of monetary estimates to a common valuation year and currency using justified inflation and exchange or purchasing-power conventions, without confusing price changes with resource-use changes. The target population, use, and analysis remain protocol decisions; this card explains the choices and their consequences rather than approving a study.

Operational specification

Record each estimate's original resource definition, perspective, country, currency, price year, collection period, unit, and valuation method. Select an appropriate official price index and conversion source for the intended use. Inflation within a currency and conversion between currencies are separate operations; international purchasing-power comparisons answer a different question from a financial currency conversion.

Analysis and diagnostics

Bring costs to the chosen common price year under a documented index ratio, then apply the chosen currency-conversion convention consistently. Preserve original amounts and factors for reproduction. Check that index bases, annual versus monthly dates, nominal versus real amounts, and per-episode versus per-person units agree. Revaluation cannot transport a care pathway or resource mix by itself.

When NOT to use and common errors

Do not apply inflation twice to a fee schedule already updated to the target year, combine nominal future costs with inconsistent discounting, treat PPP as an exchange rate for an actual payment, or imply that converted foreign costs become local resource costs.

Worked example and implementation boundary

A synthetic cost of 100 in an original price year uses an index of 110 versus original index 100. Convert only for inflation; no currency conversion is involved. The target-year cost is 110 in the same currency. Currency conversion, if required, is a separately documented step. The code performs that explicitly stated calculation with synthetic inputs. It is not a complete fitted analysis and does not demonstrate the identification assumptions, estimate sampling uncertainty, or certify application in another population.

Data-source and reporting requirements

Preserve the provenance, dates, units, and observation rule for each input. Claims capture services and transactions under observable benefits; absence of a record is not proof that an event or resource use did not occur. EHR and registry measurements depend on the collection process and may miss care outside the system. Linked sources add reconciliation and selection questions. Primary collection can improve a missing domain but still requires valid measurement and follow-up. Report which of these limitations affects the stated use, which evidence supports the chosen inputs, and what remains uncertain.

Worked example

Scenario

A synthetic cost of 100 in an original price year uses an index of 110 versus original index 100. Convert only for inflation; no currency conversion is involved.

Dataset

Synthetic inputs with units defined in the scenario; no patient data.

Steps

Result

The target-year cost is 110 in the same currency. Currency conversion, if required, is a separately documented step.

Trade-offs

Code example

original_cost = 100
target_index = 110
original_index = 100
result = original_cost*target_index/original_index
assert abs(result - 110.0) < 1e-9
print(result)

original_cost <- 100
target_index <- 110
original_index <- 100
result <- original_cost*target_index/original_index
stopifnot(abs(result - 110.0) < 1e-9)
print(result)

Citations

1. [1]Husereau D, et al. Consolidated Health Economic Evaluation Reporting Standards (CHEERS) 2022 Explanation and Elaboration: A Report of the ISPOR CHEERS II Good Practices Task Force. Value in Health. 2022.