Presentation on theme: "Economic evaluation in health care -I"— Presentation transcript:
1 Economic evaluation in health care -I Zahidul QuayyumHealth Economic Research Unit
2 Outline Economic Evaluation Priorities Setting in Health Care Decision problem we faceWhat is economic EvaluationSteps in economic evaluationTypes of Economic EvaluationMeasures and Valuation of Costs: Cost AnalysisMeasures of Health Effects
3 Economic Evaluation and Priority Setting Economic Approach of Level of spendingBack to the concept of opportunity costsThe opportunity costs of committing resources to produce a good or service is the benefits forgone from those same resources not being used in their next best alternativeSpending on health care is worthwhile as long as benefits are greater than opportunity costsRequires information on benefits of all possible uses of nation’s resources!Improving public expenditure management essentially would essentially require cost-effectiveness analysis
4 Decision problem we face in health care The principles of economic evaluationShould a new drug or new surgical procedure be adopted or whether a particular medical procedure/health intervention worth undertaking?Should one form of treatment be expanded (while another is contracted)?After clinical effectiveness has been demonstrated, need to look to the balance of benefits and costs; identification and estimation of the health outcomes or benefits and costs of health care.A specialist hospital requests a license to establish a kidney transplant programme as claims it is cheaper than constant dialysis
5 What is Economic Evaluation Economic Evaluation compare the costs and consequences of two (or more) alternative health care interventions. It is a way of thinking which is backed up by a set of tools, that are designed to improve the value for money from investments in health care and welfare (Fox-Rushby and Cairns, 2005).Concerned with EFFICIENCY not just effectiveness
6 Economic evaluation Intervention A (e.g. current practice) Costs A Effects ATotal costs ATotal effects AIntervention B(e.g. new treatment)Costs B Effects BTotal costs BTotal effects BDifference in costs: Costs B - Costs ADifference in effects: Effects B - Effects ACosts B - Costs A Effects B - Effects AICER:
7 Example 1 Current practice New medication Difference [B-A] Effects (average per patient)25 life-years[Effect A]25.5 life-years[Effect B]+0.5 New medication more effective so implement new medication………….. but what about costs?
8 Example Current practice New medication Difference [B-A] Costs £2000 (average per patient)£2000[Cost A]£4000[Cost B]+£2000Effects25 life-years[Effect A]25.5 life-years [Effect B]+0.5 ICER = £2,000/0.5= £4,000 per life-year It costs an additional £4,000 to obtain 1 additional life year
9 Example -2 Current practice New medication Difference [B-A] Costs (average per patient)£3000[Cost A]£2000[Cost B]-£1000Effects25 life-years[Effect A]25.5 life-years [Effect B]+0.5 New medication dominates
11 Economic Evaluation and Efficiency Each of the techniques is aimed at answering differentquestions: technical efficiency, allocative efficiencyTechnical efficiency:choice of how to provide health careminimize input for a given outputAllocative efficiency:choice of what health care to providemaximize benefits subject to given resources
12 Technical efficiencyProducing a given level of output at a minimal cost or producing the maximum amount of output for a given costConcerned with efficiency ‘within’ a programmeExamples:When providing hernia repair surgery, is it best to provide conventional surgery or laparoscopic surgery?When providing rheumatology clinics, is it best to provide a nurse practitioner services or a consultant based service?
13 Allocative efficiency Programmes compete for the allocation of scarce resourcesComparison across programmes such as gynaecology, intensive care services, renal services, etc.Example:Should there be an expansion of surgery for rheumatology clinics or renal services?
14 Economic evaluation and its application Tool to aid priority setting and resource allocationIs increasingly being usedNational Institute for Health and Clinical Excellence (NICE)Provides recommendations on the use of new and existing medicines and treatments within the NHSRecommendations are based on a review of clinical and economic evidenceScottish Medicine Consortium
15 How are Economic Evaluation conducted? Two approaches:Conducted alongside RCT (Randomized Controlled Trial) or non-randomised studies (such as before and after studies)Collect primary (new) dataRely on existing (secondary) data or existing studiesTechnology Assessment Reviews (TARs) for NICE
16 Types of Economic Evaluation Identification of different types of costs and their subsequent measurement and valuing are similar, the nature of consequences variesCost-minimization AnalysisCost-Effectiveness Analysis sCost-Utility Analysis sCost Benefit Analysis s and 1990sCMA and CEA answer narrower questions, CUA and CBA answer broader questions
17 Types of Economic Evaluation Methods:Cost-effectiveness: benefit in natural units (life-years)Cost-utility: benefit in utility values (QALY)Costs benefit: benefit in monetary valueBased on the notion of opportunity costIncremental cost-effectiveness ratio (ICER)
18 CMA & CEA Concerned with technical efficiency “Given that it is decided that a goal/policy will be pursued, what is the best way of achieving it?”OR“What is the best way of spending a given budget?”involves the comparison of at least two options
19 Cost minimisation analysis (CMA) Not a full form of economic evaluationKnow (or assume) health effects to be equalTwo possibilitiesEvidence suggests there is no difference in outcomesBut uncertainty surrounding the estimatesPrior view that health effects are equalWhat is basis of this view?
20 Cost-effectiveness analysis (CEA) Effects are measured in terms of the most appropriateuni-dimensional natural unitCost per unit effectExamples:Renal failure cost per life savedScreening for Down’s syndrome cost per Down’s syndrome foetus detectedLocation of Long-term care cost per disability day avoided
21 CEA Straightforward to carry out Cannot compare disparate alternatives Narrow, uni-dimensional measure of effectInterventions often produce multiple outcomes
22 Cost-utility analysis (CUA) Effects are multi-dimensionalCombines life years gained with some judgment (or value or preferences) on the quality of those lifeyearsMost popular measure:quality adjusted life years (QALYs)Can address technical efficiency and allocative efficiency within the health care sector
23 Cost Utility AnalysisCUA is a special case of CEA where QALYs are employed as the measure of health statusCUA uses cost per QALY as means of ranking alternativesAlternatives can be close substitutes, as in CEA, but need not beAlternatives need not even be health care measures
24 Cost Utility AnalysisMaynard (1991) ranks seven courses of action by cost per QALY:Home renal dialysis £ Heart transplant £8000Kidney transplant £ Heart bypass £2000Hip replacement £ Stroke prevention £750Anti smoking campaign £250Allan Williams (1985, converted in prices)GP advice to stop smoking £260 Hip replacement £1140CABG for severe angina LMD £1590 Breast Cancer Screening £5340GP control of total serum cholesterol £ 2600Hospital haemodialysis £21500
25 Cost Utility AnalysisCUA have important implications for allocation of resourcesCUA is still generally restricted to efficiency with which health service resources are used; tends to neglect costs borne by others (such as patients)CUA may be used to rank alternatives but it cannot say with certainty whether any option yields positive net benefits, this is because costs and benefits are measured in different terms
27 Measuring Health and Life Types of Health Measures:Mortality: Death averted, Life years gainedMorbidity: prevalence and incidenceDisease Specific Measures: disease profile (chronic respiratory distress questionnaire)Disease indices (Arthritis Impact Measurement Questionnaire- AIMS)Generic health measures: Health Profiles (NHP),WHO Quality of Life(WHOQOL- low & middle income countries)Health Indices: Non-preference based: SF-36, Preference Based: EQD5(international), HUI, QWB index
28 Measures of health effects Some studies use unidimensional measures of health such as lives saved, pain relieved, a condition cured, mobility restoredThe problem with such measures is that they cannot be used to compare changes in health status where more than one aspect of health shows changes – the majority of casesMost popular multidimensional measure of health is QALYs in which two aspects of health – duration of life and quality of life – are combined in a single index
29 Measures of health effects In principle, duration of life is fairly easily quantified although, in practice, estimating life expectancy is not an exact scienceMeasuring quality of life is much more difficult – in theory and practiceMost techniques involve attaching ratings to different states of health between two extremes: 1 = “good health” and 0 = death
30 QALY – Measure for Health Effects in CUA The method employs mobility, physical activity and social activity as criteria; another common method employs disability and distress as criteriaLife expectancy is then multiplied by the quality of life rating to yield QALYs, i.e. adjusting the length of time affected through the health outcome by the utility value (on a scale of 0 to 1)QALYs- Other names Years of Healthy Life (YHL – US), Health Adjusted Person Years (HAPY) , Health Adjusted Life Expectancy (HALE)- Canada
31 Quality Adjusted Life Years (QALY) Perfect Health1.02. With ProgrammeShaded area: Quality Adjusted Life YearsAQALYWeightsBWithoutProgramme0.0DeadDeath 1Death 2
32 Quality Adjusted Life Years (QALY) Perfect healthWithout surgery:0.23 = 0.6 QALYsWith surgery:0.910 = 9 QALYs QALYs gained = 8.4Worst imaginable health
33 QALY league tablesRank procedures based on marginal cost per QALY gainedProcedures with lowest cost per QALY receive higher priorityDisadvantagesAssumptions underlying ratios not consideredIs QALY maximization really the end goal?List based approach: opportunity cost and the margin again ignored
34 QALY – Measure for Health Effects in CUA However, various problems with QALYsThe use of QALYs implicitly assumes that there are no other objectives to health care than health maximizationThere are other aspects people care about – such as information or the process of treatment – which QALYs do not cover
35 QALY – Measure for Health Effects in CUA The QALY weights should be based on preference for the health states - more desirable health sates receive greater weights and will be favored in an analysisThe scale of QALY weights may contain many points, but two points must be on scale- perfect health and death.Life expectancy is multiplied by the quality of life rating to yield QALYs, i.e. adjusting the length of time affected through the health outcome by the utility value (on a scale of 0 to 1), with or without discounting
36 QALY – Measure for Health Effects in CUA To assess the preferences for health states- individual need to be given information on symptoms, physical functioning, ability for work and social activity, and mental and social well being.The scores are based on people’s preference or arbitrary procedure
37 QALY – Measure for Health Effects in CUA Three most widely used techniques to measure directly the preference of individuals for health outcome areScale: Rating Scale – rank the health outcome, Category rating, Visual analogue scale, Ratio scaleStandard Gamble- measuring cardinal preferences: choosing between two alternatives, with probability attached to the statesTime trade offHealth state i for time t (life expectancy of an individual with chronic condition) followed by deathOr. Health from time x<t followed by death.
38 Valuing Health Outcome/Effects Putting money values on benefits (and costs) of health and health careVarious ways of valuing benefits and costs:economists: benefit = net benefits; costs= opportunity costsTime is an important cost in health- often valued by a person’s hourly wage rate- however, this infers the non working time of workers (and all the time of non workers) is valued less or not at allalternative is to apply an average wage to all timeMeasure of Productivity Changes – debate- double counting, often included in QALY or WTP, if equity included in policy objectives, than estimation of productivity costs may introduce unwanted biasness
39 Valuing Health Outcome/Effects There have been attempts to place money values on human life through analysis of:fatal accident compensation awards, andlife insurance coverHowever, estimates vary enormously and are systematically linked to income and wealth
40 Willingness to Pay (WTP) as Valuing Health and Health Care WTP is a technique which can potentially be used to place monetary values on any aspect of health or health care- including the value of human lifeIn WTP, a course of action and its benefits are described and people are asked how much they would be willing to pay for that course of actionA monetary value of benefit is derived; benefits and costs are now directly comparable and (positive or negative) benefits can be calculatedWTP can be used to value close substitutes (as in CEA) and broader alternatives (as in CUA)
41 Economic Evaluation : Case Study The clinical effectiveness and cost-effectiveness of laparoscopic surgery for inguinal hernia repair: A case study of a typical NICE economic evaluation. (Technology Appraisal 83, McCormick, K. et al, September 2004:A systematic review of 37 RCT to study the clinical advantages of laparoscopic repair (compared to open mesh repair)Outcomes of interest, and economic evaluation methods examined:Primary outcomes- persistent painSecondary outcomes- rates of complications and persistent numbness durations of operations, length of hospital stay, time to return to normal activity- QALYCost per QALY, Incremental Cost Effectiveness Ratios
42 Economic Evaluation : Case Study Evidence and findings : Different types of surgery and repair comparedClinical disadvantages: longer operation times and a higher rate of serious complications, especially bladder injuriesThere is no apparent difference in the rate of hernia recurrenceLaparoscopic repair is more costly to the health service: by about £300-£350 per patientLaparoscopic surgery was not cost-effective, with ICER –incremental cost per QALY gain £46000-£606,000 when compared with OPM repair, but cost-effective compared to OFM repairFor unilateral hernias, open mesh repair appears the least cost option but provides fewer quality adjusted life years (QALYs)
43 Economic Evaluation : Cases Study In terms of cost per QALY, open mesh repair is cheaper but the difference is small, less than £10,000 per QALYFor symptomatic bilateral hernias, laparoscopic repair is the more cost effectiveDifferences in operation time (a key cost driver) are reduced and differences in convalescence time increased, both changes which favour laparoscopic repair
44 Economic Evaluation : Cases Study All the results are sensitive to assumptions made about the value placed on persisting pain and numbness, highly dependent on the cost of the open repair comparator, the baseline recurrence rate, hospital policy on use of reusable or disposable consumablesOther issues, for patients: the increased adoption of laparoscopic repair may allow patients to return to usual activities faster; this may reduce the loss of income for some peopleOther issues, for the NHS: increased use of laparoscopic repair would lead to a need for increased training which may be costly; during the training period, laparoscopic repair is likely to have higher costs (and hence be less cost-effective), regional variations may be there for implementing it
45 Summary Easiest CMA Technical efficiency Effects (assumed to be) the sameCEAUni-dimensional outcome measureCUAAllocative efficiency within health sectorMulit-dimensional outcome measure (health only)CBAAllocative efficiencyBroadest outcome measure (£)Difficult/ challenging
Your consent to our cookies if you continue to use this website.