Appropriate discount rate in NPV method

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Appropriate discount rate in NPV method

Postby rlmulder » Tue Sep 23, 2014 11:21 am

Hi to you all,

I am currently in a very interesting thesis internship at the university medical centre Groningen (the Netherlands). My job is to compare two radiotherapy treatments in the treatment of cancer. The first, photon therapy, is cheaper but damages healthy tissue substantially more compared to the second, proton therapy. Now is my proposal to compare both treatments by discounting initial/ongoing treatment costs to the present.

We want to approach this problem from a societal perspective, in this case insurance companies represent society more or less since they reimburse health care treatment costs in the Netherlands. So the main question is: which therapy is most beneficial to society. We have a lot of ideas about how to quantify these costs so I will not go in detail there.

My main issue is the following: how do I determine my discount rate? Are there discount rates for public projects? Should I take an average of insurance company discount rates? In my opinion the hospital's discount rate is not appropriate since they are not profit seeking and we don't want to assess the profitability of the hospital but from a societal perspective. Are there other ways to determine a discount rate in such a special case? I would very much like to hear what you think of this dilemma and how you would approach it. All remarks are welcome, thanks in advance!

Kind regards,

Rutger Mulder
Posts: 1
Joined: Tue Sep 23, 2014 11:05 am

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