Medical Device Safety: 5 Methods for Safety Cost Estimation

Except for being reliable, each medical device put on the market must also be safe and never operate or fail in a way that can be harmful to the user. An important factor determining the market success or failure of a medical device, as well as if a medical device will cause death or injury, is the cost. Thus, this post presents some of the most used cost-estimation methods directly or indirectly concerned with medical device safety.

1. Loss-Estimation Model

This model is used for estimating the loss in dollars that a medical device manufacturer will have. The expected loss or risk can be calculated by using the following mathematic equation:

where:

• m - the number of accidents.
• α - expected loss per accident.
• θ - predicted or estimated accident rate.
• T - time or another measure during which the accidents happened or could happen.

2. Heinrich Method

 This approach is named after H.W. Heinrich who argued more than half a century ago that for each dollar or insured cost paid for accidents, there were four times more uninsured costs (aka indirect costs) to the organisation. Unfortunately, it is very tricky to state both direct and indirect costs of accidents clearly. However, Heinrich developed the following mathematic approach that could help estimate the indirect cost of an accident:

where:

• C_ia - indirect cost of an accident;
• CLTM - the cost of lost time by management;
• CLD - the cost of lost orders, etc.;
• CMD - the cost of the machine or material damage;
• CLTNI - the cost of lost time on the case by first aid and hospital personnel not compensated by insurance;
• CLTIW - the cost of lost time of injured workers;
• CWM - cost due to weakened morale;
• OCIWNS - the overhead cost for the injured worker while in nonproduction status;
• CEWS - employer cost under welfare and benefit systems;
• CCWE - the cost of continuing wages to employees;
• CLTESW - the cost of lost time of those employees who stop work to watch or are involved;
• CLP - the cost of profit losses on worker’s productivity due to idle machines or equipment.

3. Simonds Method

This method was developed by, and named after, Professor Rollin H. Simonds. It is based on the assumption that the cost of an accident can be divided into the following two categories:

• Insured costs – The estimation of insured costs is easy and straightforward, and it can be done by simply examining accounting records;
• Uninsured costs – Simonds argues that, although it is challenging to estimate the uninsured costs of accidents, it is not impossible, and it can be done by dividing accidents into four groups and using the following formula:

In the formula above, Cui represents the uninsured cost of an accident, Ci is the average uninsured cost due to the ith Class accidents where i = 1,2,3, and 4, and:

• α1 is the total number of working days lost due to Class I accidents which results in temporary total and permanent partial disabilities;
• α2 is the total amount of physician cases because of Class II accidents;
• α3 stands for the total number of first-aid cases due to Class III accidents;
• α4 stands for the total number of noninjury cases due to Class IV accidents.

4. Medical Device Safety Life Cycle Cost Model

The medical device safety life cycle cost model is used to estimate the cost of safety for a medical device over its life cycle. Mathematically, it is defined by:

where:

• MDSC stands for the cost of safety for a medical device over its entire life span;
• R_eim is the reimbursement;
• L_acc is the accident and claim loss;
• C_app represents the cost of the accident prevention program;
• C_ins stands for the cost of insurance;
• C_rec is the cost of recalls.

5. Accident Prevention Program Cost-Estimation Model

This model can be used to estimate the cost of the accident prevention program. Mathematically, it is defined by:

 where:

• C_app is the cost of the accident prevention program;
• RE_eim represents the reduction in reimbursements;
• C_ra shows the recall cost that can be avoided;
• C_aca stands for the cost of accidents and claims which can be avoided;
• S_inp represents the savings in insurance premiums.

 Source:

1. Dhillon, B., “Medical device reliability and associated areas”, Published by CRC Press LLC, 2000.