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1 Are you sure your improvements are cost-effective? Edward Broughton, PhD, MPH, PT University Research Co. April 11, 2014

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Presentation on theme: "1 Are you sure your improvements are cost-effective? Edward Broughton, PhD, MPH, PT University Research Co. April 11, 2014"— Presentation transcript:

1 1 Are you sure your improvements are cost-effective? Edward Broughton, PhD, MPH, PT University Research Co. April 11, 2014

2 USAID Applying Science to Strengthen and Improve Systems Your decision…. 2

3 USAID Applying Science to Strengthen and Improve Systems Objectives What cost-effectiveness analysis is How to do cost-effectiveness analysis (CEA) What essential information is required to do a CEA How to interpret and communicate the results of a CEA effectively What are the limitations for CEA for decision-making

4 USAID Applying Science to Strengthen and Improve Systems What would you pay? A medical error following splinting a fractured distal radius can cause pain in the 5 th digit for a mean of 10 hours There is an effective improvement intervention which averts the error What is it worth to you to avoid the pain? What is your willingness to pay?

5 USAID Applying Science to Strengthen and Improve Systems What would you pay? Imagine you have a choice between having this pain constantly for 10 hours or paying money to avoid the pain How much are you willing to pay? 10 cents? € 100,000? € 1? …….. € 10,000 € 10?……. € 1,000? etc. Please write down your answer This is your willingness to pay (WTP)

6 USAID Applying Science to Strengthen and Improve Systems What is economic analysis? Comparative analysis of two or more courses of action in terms of the costs and consequences of an intervention Different types of analyses: –Cost-minimization –Cost-effectiveness –Cost-utility –Cost-benefit

7 USAID Applying Science to Strengthen and Improve Systems What is cost-effectiveness analysis? A way to measure efficiency of an intervention in which costs are related to a single common effect Cost-effectiveness = costs ÷ effects Cost-effectiveness ANALYSIS is the cost-effectiveness of one intervention relative to a baseline / comparison

8 USAID Applying Science to Strengthen and Improve Systems But we need to know: Whose perspective? What time-frame? What units of effectiveness? 8

9 USAID Applying Science to Strengthen and Improve Systems Our improvement intervention example Training and coaching program that prevents errors that lead to adverse event (pain) Before intervention, 50% risk of pain. After intervention, 10% risk of pain Cost of improvement intervention = € 100 / patient Cost of treating adverse event = € 8 / patient (average) but ineffective Is intervention cost-effective? 9

10 USAID Applying Science to Strengthen and Improve Systems Important details: Whose perspective? = Health system (NHS) What time-frame? = 1 year What units of effectiveness? = adverse event averted or hour of pain avoided or DALY averted or QALY gained 10

11 USAID Applying Science to Strengthen and Improve Systems Cost of improvement intervention What are the costs above and beyond what would happen without the improvement intervention? Staff time costs should be included even if staff were not paid more Any other costs we should consider? Assume a cost of € 100 per patient (divided among all patients who benefit) 11

12 USAID Applying Science to Strengthen and Improve Systems Decision tree 12

13 USAID Applying Science to Strengthen and Improve Systems Calculations 13 Incremental cost effectiveness ratio = difference in costs difference in effects ICER = [(0.1 x 100) + (0.9 x 100)] – [(0.5 x 8) + ( 0.5 x 0)]. [( 0.1 x 0 ) + ( 0.9 x 10 )] – [( 0.5 x 0 ) + ( 0.5 x 10 )] ICER = € / hr of pain relief

14 USAID Applying Science to Strengthen and Improve Systems Table of results StrategyCostIncremental cost EffectIncremental effect Inc. cost- effectiveness ratio Improve- ment hours of pain avoided 4 hours of pain avoided € 24 / hour of pain avoided Business- as-usual 45 hours of pain avoided All data are per recipient of strategy

15 USAID Applying Science to Strengthen and Improve Systems Cost effectiveness plane 15 Higher cost Lower cost More effective Less effective Willingness-to-pay threshold € 24 1 hr pain relief

16 USAID Applying Science to Strengthen and Improve Systems Cost effectiveness plane 16 Higher cost Lower cost More effective Less effective Willingness-to-pay threshold € 24 Hr of pain relief

17 USAID Applying Science to Strengthen and Improve Systems If we now include the economic consequences of the improvement intervention ….. Taking the societal perspective: Can people work with the pain caused by the error? Assuming no work, calculate lost income / productivity Assume income / productivity = € 50 / hour Assume no difference in the cost of treatment ( € 8 ) We now need to redo the calculation

18 USAID Applying Science to Strengthen and Improve Systems CEA calculation 18 Incremental cost effectiveness ratio = difference in costs difference in effects ICER = [(0.1 x 100) + (0.9 x(-500))] – [(0.5 x 8) + ( 0.5 x(-500)]. [( 0.1 x 0 ) + ( 0.9 x 10 )] – [( 0.5 x 0 ) + ( 0.5 x 10 )] ICER = – € / hr of pain relief

19 USAID Applying Science to Strengthen and Improve Systems Table of results StrategyCostIncremental cost EffectIncremental effect Inc. cost- effectiveness ratio Improve- ment – 440–1949 hours of pain avoided 4 hours of pain avoided – € 48.5 / hour of pain avoided Business- as-usual – 2465 hours of pain avoided All data are per recipient of strategy

20 USAID Applying Science to Strengthen and Improve Systems Cost effectiveness plane 20 Higher cost Lower cost More effective Less effective Willingness-to-pay threshold € 24 -€ 48.5

21 USAID Applying Science to Strengthen and Improve Systems Cost effectiveness plane 21 Higher cost Lower cost More effective Less effective Willingness-to-pay threshold € 24 -€ 48.5

22 USAID Applying Science to Strengthen and Improve Systems Why it’s tricky to do CEAs of improvement interventions? Often “effectiveness” is a process indicator rather than a clinical outcome (eg: compliance with standard of care) Difficult to transform into a clinical outcome Often improvement has many different effects Need to use modeling to convert to DALYs, QALYs etc. Need to guess how long improvement is going to last

23 USAID Applying Science to Strengthen and Improve Systems Clarifying the question What are you comparing your intervention to? –Doing nothing –Another intervention –Several other interventions What point of view / perspective are you taking? –Recipient of the intervention –One or several of the funders –Everyone (societal) Why are you doing the CEA? –Who is your audience? –What is the information going to be used for?

24 USAID Applying Science to Strengthen and Improve Systems Calculating DALYs and WTP Global burden of disease: 2004 Update sease/GBD2004_DisabilityWeights.pdf?ua=1http://www.who.int/healthinfo/global_burden_di sease/GBD2004_DisabilityWeights.pdf?ua=1 DALYs for AE = 10/(365 x 24) x = WHO says cost effective if > 3 x GDPPC / DALY For UK, ~ € 100 (NHS says ~ € 40) 24

25 USAID Applying Science to Strengthen and Improve Systems Community of Practice for CEA of Healthcare Improvement Please contact me: Edward Broughton 25


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