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Click to edit Master subtitle style HEALTH PROGRAMS AND ECONOMIC EVALUATION OF INTERVENTIONS
ECONOMIC EVALUATION Meaning Drummond, the comparative analysis of alternative courses of action in terms of both their costs and consequences. Example: Human testing Experimental group drug being tested Control group placebo/sugar pill
Scarce Resource we do not have the ability of all the people of all the time
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Different people have different objectives we make choices and often the choices are difficult, if not downward unpleasant Make choices among competitive alternatives (it is a matter of life and death) it is important that we approach resources allocation decisions in health care in a clear and systematic way
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Production Process
INPUT PROCESS OUTPUT
Maximize
INPUT
PROCESS OUTPUT
COSTS
EFFECTS/BENEFITS
What is the effect on output of employing different proportions of human capital inputs? Is there a possibility of increasing output through specialization or division of labor? What is the effect on output of increasing the input of some resources while holding other inputs constant? What is the most efficient way of processing inputs to maximize outputs?
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Health resources are used optimally (right quantities, right mix) Health programs are implemented efficiently Health outputs are maximized
Ideally, outputs or outcomes of health intervention (health effects) should outweigh the costs of such intervention To be able to assess this, we should be able to measure the costs involved in an intervention, and compare them with the effects of such. Therefore we have to learn the measurement of costs and their outcomes
COSTS EFFECT S
COSTS
QUALITY
QUALIT Y COSTS
QUALITY
COSTS
Effectiveness can be measured in terms of 1. Surrogate measures examine the clinical effect of a treatment option or its clinical efficacy - blood pressure, cholesterol level, bone mass density or tumor size 2. Intermediate measures include clinical effectiveness, or outcome, measures - heart attack, stroke, hip fracture, remission of cancer or death 3. Final outcomes measures economic effectiveness - disease free days, life years saved, QALY
MEASURING BENEFITS For most medical programs, the 3 major types are as follows: 1. Health 2. Productivity
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Reduction in Future Medical Costs Vaccination now can prevent hospitalization in the future A transplant may mean ten more years of life Many diseases are less costly to treat if care is given early and if treatment is done correctly the first time Better infection control allows to be discharge from the hospital sooner
Examples:
MEASURING COSTS 1. Medical care and administration 2. Follow up and Treatment 3. Time and pain of patient and family 4. Provider Time and Inconvenience
UNDERSTANDING COSTS
COSTS
are what society, government or individuals incur to run a program, or to produce something that they desire, like better health are different from the prices of goods are monetary value of producing a good or services, while prices are usually cost plus markup which is largely driven by market
sacrificing
total cost of
If the total cost of vaccination is P1,000,000.00 and the program was able to vaccinate P10,000 children, then the average cost would be P100.00 per child immunized P1,000,000.00/10,000 Average Costs = P100 per child immunized
be directly
Adjusted charges for hospital care usually estimated by multiplying billed charges by the Medicare cost-to-charge ratio - the actual cost of hospital services is (on average) 60% of billed charges - cost of some services, like drugs and laboratory test 15% of charges - ER and obstetric services, actual costs may be as much as 125% of billed charges
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Cost accounting for CBA uses the same principles as job costing in other industries
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resources (nursing hours, technician time, space, supplies) are estimated from direct observation, and their costs are estimated using prevailing wages, prices, and so on An overhead charge is then applied for administration, utilities, and other central cervices
3. Extrapolation from comparable services is used when charges are not available and cost accounting is too time- consuming
EXAMPLE OF INDIRECT COST Druss et. Al examine economic burden of 5 chronic conditions affecting U.S. population
1. 2.
3. Asthma
5. Diabetes
4. Hypertension
@ the medical care cost to treat these 5 conditions = $62.3B @ the cost of treating co=existing medical conditions $ 207.7 B =
@ adding to the total health costs of $270 B, the estimated $ 36.2 B in lost earnings due to missed work days the total societal costs for persons suffering these 5 conditions to over $306 B
A building worth P10,000,000.00 was erected for a certain health program which will last for ten years. The monthly cost of the building will be computed as follows: P10,000,000.00/10 years/12 months per year = P83,333.33 per month
TERMS .
Relationships among a Firms Costs 1. Total cost includes both explicit and implicit costs 2. Total costs = fixed cost + variable cost 3. Marginal cost = change in total cost per added unit of output 4. Average total cost = total cost / output 5. Average fixed cost = fixed cost/output 6. Average variable cost= variable cost/output 7. Average total cost = average fixed cost + average variable cost
Explicit Costs - Money paid by a firm to purchase productive resources Implicit Costs - The opportunity costs associated use of resources that it owns. These costs do not money payment - wages, interest Total Costs - The costs, both explicit and implicit, resources used by the firm Fixed Costs - Cost that does not vary with output.
- Fixed cost divided by the number of units produced. It always declines as output increases Variable Costs - Costs that vary with the rate of output. Ex. Wages paid to workers and payments for raw materials Average Variable Costs - The total variable cost divided by the number of units produced Average Total Costs - cost divided by the number of units produced. It is sometimes called per unit cost Marginal Costs - The change in total cost required to produce an additional unit output
treatment
- the costs of any testing required to diagnose and monitor the disease - the cost of pharmaceutical products and services used to treat the disease
costs of
treating and managing adverse effects of treatment Example: patients treated with antihypertensive medications frequently experience side effects such as dizziness, impotence and nasal congestion
that
are prevented as a result of successful treatment Example: untreated hypertension results strokes and heart attacks.
Some countries are trying doctors aware of more economical prescription to practices Pharmacist empowered to substitute cheaper equivalents unless the doctor has specifically forbidden substitution on the prescription Consumer rights also play a role in economic in health services The common practice of making specialist care accessible only on referral from another doctor has the potential of reducing the cost of health care Cost sharing can induce the consumer to require the provider to be cost conscious, but it does not work when patients have private insurance to cover their share of the costs Cost sharing can have perverse effects
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MEASURING OUTCOMES
Outcomes are the effects of the health interventions for which the costs were incurred.
Outcomes of Health Interventions
Outcome
Health Intervention
Outcome/Benefit Measure
Improvement of health Renal Dialysis or Coronary Life years gained as a result Artery Bypass Graft of the health intervention Surgery Improvement of quality of life Increased economic output Monetary saving Steroid + B2 Agonist Inhaler (Anti-Asthma Inhalers) Influenza vaccination Expanded program of Immunization Better, more active life
Less work days lost because of better health Less expenses for acute care and hospitalization because illness is prevented
DECISION MAKING Economic evaluations are techniques done to evaluate options which all promise to produce better health
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Comparing Costs with benefits Costs attached to the available options are measured against the health effects or benefits that they will produce Economic evaluation should be done
The comparison in an EE are made in term of cost and consequences. The specific cost to be included in the analysis are determined by
1. 2. 3. 4. 5.
The individual patients Health insurance company Health plan Government agency Society as a whole
Examines: 1. Consequences only 2. Costs only outcome description cost description Cost/ Outcome description
EFFECTIVE EVALUATION
The Primary tasks required to Successfully Conduct Economic Evaluation (EE) To identify To measure To evaluate To compare
1. 2. 3. 4.
@ the most frequently used @ investigate the best way of achieving a single objective by comparing effects and costs @ which possible intervention will best achieve a objective at the least cost @ when given a fixed budget, which intervention maximizes the effectiveness of the expenditures @ This ratio can be simplified by TOTAL COST/TOTAL HEALTH EFFECT given
Options
Use Barangay 35,000 Health Centers Use mobile clinics Use Jollibee stores 45,000 38,670
CEA compares treatment or other forms of health intervention that yield different levels of health benefits outcome is based on a certain clinical measurement costs are calculated in dollars
CEA
To compare a new, more expensive and more effective agent is compared with an older, less expensive, and less effective product, which is the standard of therapy A CEA seeks to find the least costly means of achieving some particular health outcome CEA compares the costs and effectiveness of treatments that achieve the same type of health outcome - to prolong life, reducing blood sugar, helping patients stop smoking
CEA Costs and consequences are compared in CEA by means of an Incremental costeffectiveness ratio. CER = where Cost nt Cost cst Effectiveness nt Effectiveness cst
CER = cost-effectiveness ratio Cost nt = cost of the new treatment Cost cst = cost of the current standard treatment Effectiveness nt = effectiveness of the new treatment Effectiveness cst = effectiveness of the current standard of treatment
ICER FORMULA:
ICER = CB CA EB EA Where CA,B = costs of treatment options A and B EA,B = clinical effectiveness of treatment options A and B When CEA is used in clinical decision making, the usual approach is to define the treatment option being studied (treatment B) and the alternative treatment option it is being compared with (treatment A) If CA > CB and EA < EB, option A is both more costly and less effective. In this case we say that treatment option B dominates If CA < CB and EA > EB,option B is both more costly and less effective. In this case we say that treatment option A dominates In both of these cases, further analysis is unnecessary, the most effective treatment option is also cheaper, and the choice is simple If, however, CB > CA and E B > EA, the choice is not as obvious, and CEA is in order
The gain effectiveness is plotted on the y axis and the net represent value of the Effectiveness total costs on the x axis With each treatment option represented by a point on the graph it is easy to see that the higher the point, the more effective the treatment; the farther to the EB right, the more expensive the treatment Using the, the ICER comparing the 2 treatment options is inverse of the slope of the line between the 2 points A and B. A steeply sloped line indicates a low ICER, EA A or in other words, a substantial improvement in health effects for a relatively small cost As the slope gets flatter, the ICER increases, indicative of higher cost CA interventions relative to their effectiveness
CB
Cost
EFFECTIVENESS Points A through G represent the costs and effects of 7 options for the screening or treatment of disease
The options that form the solid line (ABDFG) represent the economically rational subset of treatment options Points that lie below the line, such point C and E, represent treatment options that are dominated by those that are on the line As the slope of the line gets flatter, the ICER increase, providing a clear depiction of the theoretical construct called the flat-of-the-curve
A COST F D B C E
Example:
Costs and patient outcomes of 2 treatments for colon cancer: surgery alone, which has the current standard of treatment, and surgery followed by 52 weeks of chemotherapy. They stimulated the direct medical costs of surgery to be $6,000 per patient and the direct medical costs of surgery and chemotherapy to be $13,000. The average life expectancy for a patient receiving surgery alone was estimated to be 13.25 years as compared with 15.65 years for a patient treated with both surgery and chemotherapy. Thus, the incremental cost-effective ratio for surgery plus chemotherapy was
Cost-Effective Ratio: costs (net resource effect) effectiveness (net effect on health outcome)
Dollar spent/no. of cures; lives saved (lost) by each intervention; life expectancy
may incorporate:
Beneficial health effects drug efficacy Negative health effects drug toxicity
Ceftriaxon e
96.90 39.45 1923.98 15.32 367.92 2443.58
Benzyl penicillin
28.20 157.80 1923.98 15.32 1385.97 3511.27
Drug cost Admin cost Hospitalization cost Toxicity cost Treatment failure cost Total Cost
Examples of CEA
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CEA relates the cost of 2 or more treatment options to a single, common consequences that differs among options Examples: blood pressure reduction, hip fracture, or increase life expectancy
2. The treatment options may be different treatments for the same conditions Example: kidney dialysis compared with kidney transplantation
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Unrelated treatments with a common effect Example: life-saving treatment for heart disease compared to end stage renal failure
Cost Minimization Analysis (CMA) @ focuses on the costs of different given programs or intervention options @ the effects or the outcomes will be alternative
identical
@ with the assumption that the outcomes of the interventions are measurably identical, the least cost option is chosen
CMA
identify the alternative with the lowest cost among various interventions with equivalent outcomes or consequences outcome = potential cost savings measured in monetary terms
CMA EXAMPLE
Treatment Options
CMA ANALYSIS
Compares the costs of therapies that achieve the same outcomes Example: Ondasetron and granisetron are both used for the prevention of chemotherapy-induced nausea and vomiting If they are equally effective, then the choice between them could be made using a CMA.
COST-UTILITY ANALYSIS (CUA) @ measures the effect of a project in terms of utilities (quality adjusted life) @ costs are expressed in terms of costs per QALY or QALYs per monetary unit @ CEA, CMA, and CUA have costs as numerator and health effects as denominators @ therefore: Costs/Health Effects
How much money do we spend for every unit of health effect we want to get/
assess perceived mental, physical and general functioning over time of the management of chronic diseases better understanding of how patients function from day to day with their illness
improve lives of individuals in need of care outcome is measured in terms of patient preference, willingness to pay or quality of the healthcare expressed in intervention cost/quality-adjusted life year (QALY) gained
Treatment of patients with chronic diseases focusing more on their quality of life than premature death or reduction of hospitalization days
( sense of well being, ability to perform daily activities, emotional state..)
The Value of Life: Jones-Lee Approach Value of Life = (Value of Time) x (Hours used) Risk of death per hour = $ 20 x .117 .000002 = $ 1,170,000
saved
SUCCESSFUL SURGERY 0.90 0.76 0.63 0.80 0.70 0.60 0.50 Discounted Value 0.52 0.41 3.23 QAL expectancy with surgery, 3.23
1.79 (3.23 1.44 discounted years) Probability 40% Expected value 0.72 Less surgical mortality -0.04 (3% of baseline 1.44 years) Expected net QALY gain 0.68 Cost of surgery $30,000 $ 44,000 ($30,000/0.68)
0.00
Example: QALYs
Rate quality of life between 0.0 (death) and good health (1.00) Example 1: living for 3 months confined for tuberculosis treatment was worth only 1.8 months (0.60 x 3 months) of regular time spent at home in good health Example 2: Living more 10 years confined in a hospital being treated for a contagious disease was considered to be worth only 1.6 years of normal life.
@ what value of a Human life? @ techniques values both costs and benefits in money terms and compares them through the criteria: BENEFITS/COSTS @ the ratio shows how many times the cost is earned by its health effect through the monetary benefits of a certain option @ a ratio of 1 means that the option simply had the same monetary benefits compared to the costs attached to the option @ if program ratio is greater than 1, the project is worthwhile
Valuing Benefits what is the value of human life @ the values individuals place on things prices they are willing to pay for them @ Benefits are typically valued using the approach 4 Factors (individuals willingness to pay)
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Useful when funds are limited and budget allocation decisions have to be made
Example of a Cost-Benefit Analysis Assume that we are evaluating a project proposing to vaccinate 2,000 children for measles in a certain distant province. Assume also that the cost per child immunized is P300.00. We know that if we do not immunize these children for measles, there is good chance that they will contract it. Is it cost-beneficial for us to immunize all of them?
90% of unimmunized children will contract measles of those who will contract it, 30% will have complications
of those who develop complications, 30% will have meningoencephalitis, and 70% will have bronchopneumonia
Costs are as follows uncomplicated cases meningo-encephalitis Bronchopneumonia = P500.00/case = P20,000.00/case = P15,000.00/case
ANALYSIS:
Costs of immunizing 2,000 children at P300.00 each = P600,000.00 Cost of not immunizing children:
200 without measles 2,000 children with measles 1,800 1,260 Uncomplicated cases Complicated cases 540 meningoencephalitis 162 bronchopneumonia 378
Costs 1,260 uncomplicated cases 162 meningoencephalitis x P500 x P20,000 = P630,000.00 = P3,240,000.00
x P15,000= P5,670,000.00
TOTAL COST of non-immunization = P9,540,000.00 Cost Benefit Ratio = 9,540,000/600,000 = 15.9 therefore the project is highly beneficial
CBA is about making Choices Example: Knee Injury Life, and the health care system in particular, confronts us with difficult choices every day. Is it worth taking 3 hours, and possibility paying more than P1,000, to go to the ER so that doctors can examine the throbbing knee you injured playing soccer? Since pain makes it difficult to think, it can be helpful to make a list of the pros and cons First you have to enumerate the benefits and cost. Then, you must quantify each benefit and cost accurately as possible, given what is known about the situation.
Knee Injury as an Example of CBA Scenario: I injured my knee playing soccer this afternoon. I called and got an appointment to go orthopedics/sports medicine clinic in ten days, next Thursday. However, it has row begun to hurt a lot and I wonder if I should go to emergency room (ER) right away. CONS (dont go) Visit to ER will cost P50, P100, or more Average = P80 (direct personal cost, ignores cost to insurance) I will have to wait for at least 2, may be 4 hours 3 x P7 =P21 (opportunity cost) My buddies on the team will think I am a wimp willingness to pay = P40 ( willing to pay P40 for crutches just to to look good) Even if the injury is serious, surgery could make it worse Sunk cost = P0 (The issue is treatment today v. Thursday, rather than treatment v. no treatment, so only incremental cost count) TOTAL COST P 141 PROS (go to ER now) Might stop the pain (pills stop pain with certainty, P150 x 1/3 = P50 going to ER just a 1-in3 chance) Could prevent long-term injury. (WTP knee surgery P50,000 x1/2 x.71 = P178 P 50,000, 1/200 chance, discount 7 years @ 5% Will feel stupid if something was wrong and I did not go WTP = P 20 (worried well WTP for regular office visit) I cant get any work done anyway while I sit here 6 hours x P7 = P 42 worrying about it (time has same P value for benefits and costs) TOTAL BENEFITS = P 290
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What is the Costs? evaluates the direct and indirect costs of a particular disease non comparative serve as a baseline information consider descriptive disease parameters (e.g disease prevalence, incidence, mortality, morbidity) outcome = total cost
CI Studies: Examples
Cost of treating asthma, diabetes or hypertension
Applications
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Drug Development
post marketing phase)
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Drug Formulary Decisions Evaluation of clinical treatment Evaluation of pharmaceutical care services Budget Pricing
PATIENT