How to Perform a Cost-Effectiveness Analysis David J. Cohen, M.D., M.Sc. Director of Cardiovascular Research Saint-Luke’s Mid America Heart Institute Professor of Medicine University of Missouri-Kansas City

Everything I learned at HSPH… in 10 minutes or less David J. Cohen, M.D., M.Sc. Director of Cardiovascular Research Saint-Luke’s Mid America Heart Institute Professor of Medicine University of Missouri-Kansas City

Disclosures Grant Support/Drugs Grant Support/Devices Daiichi-Sankyo - Eli Lilly Astra-Zeneca - Merck Grant Support/Devices Edwards Lifesciences - Abbott Vascular Medtronic - Boston Scientific Biomet Consulting/Advisory Boards Medtronic - Astra-Zeneca Edwards Lifesciences DJC: 2/16

Cost-Effectiveness: Key Considerations Cost-effective is not the same as cost-saving Treatments that increase overall cost may still be cost-effective if the benefit is “worth the cost” Cost-Effective vs. Cost Saving

Cost-Effectiveness Analysis Goal Allocate health investments/expenditures so as to maximize the aggregate health benefits to society, subject to the constraint of a fixed health care budget General Approach Costs and net health benefits measured in natural units Costs-- dollars Health Benefits-- lives saved, life-years gained, complications prevented C/E ratio = DCost/DEffectiveness (vs. best alternative)

CE ratio: the numerator Direct costs: costs associated with the labor, equipment, and supplies necessary to provide clinical strategy Indirect costs (“overhead”): rent, depreciation, maintenance, etc. Induced costs: downstream costs incurred or avoided due to an up-front clinical strategy Productivity costs: patient/family time spent on receiving/providing care

Measurement of Net Health Benefits Quality-Adjusted Life Year (QALY)-- metric for combining quality and duration of life into a single measure of health effectiveness CABG Good Health Quality-adjusted life expectancy = (1.0 x 3 yrs) + (0.7 x 3 yrs) + (0.9 x 5 yrs) + (0.3 x 1 yrs) = 9.9 QALYs Mild Angina Stroke Severe Angina

“Low value” Thousands per “Intermediate value” QALY “High value” Anderson JL et al. JACC doi: 10.1016/j.jacc.2014.03.016

Cost-Effectiveness: Key Considerations Cost-effectiveness can vary substantially according to the analytic perspective Need to think critically about your audience before embarking on any economic anlaysis Importance of Perspective

Cost-Effectiveness Depends on Perspective Principles of Economic Evaluation Cost-Effectiveness Depends on Perspective A 40 y.o. man is admitted to St. Elsewhere Hospital with unstable angina. Cardiac cath demonstrates a high-grade LAD lesion treated successfully with PTCA. He spends 1 day in the CCU, 2 days in a cardiac step-down unit and is discharged home on hospital day 4. Several weeks later, he receives a hospital bill for $19,000, which his HMO covers in full. Question: How much did the hospitalization cost?

Potential Perspectives for Economic Analysis Patient HMO/Third-Party Payer Hospital Society

Cost-Effectiveness: Key Considerations The time horizon of the analysis should be appropriate for the intervention and population being evaluated Time Horizon

MADIT II: In-trial cost-effectiveness Impact of Time Horizon 1 yr 2 yrs 3.5 yrs >3.5 yrs ΔC $30K $35K $39K ? ΔE 0.005 LY 0.04 LY 0.17 LY ΔC ΔE  $880K $235K P=0.007 Zwanziger J et al. JACC 2006;47:2310-8

Hypothetical Clinical Trial Results (5 yrs) 5-year survival: 77% vs. 59% (NNT ~6) What is the life-expectancy gain? Survival Years

“Stop and Drop” Analysis D LE = 0.42 years

No Further Benefit (“Parallel” Survival Curves) 1 D LE = 1.6 years 0.8 0.6 0.4 0.2 10 20 30

Extended/Continued Benefit D LE = 3.8 years

MADIT-2: Modeled Life Expectancy Survival ICER ($/LY) Time (yrs) ICER ($/LY gained) Life expectancy after ICD projected for up to 12 yrs Used 3 alternative models of long-term survival ICD1– continued benefit (HR = 0.68) ICD2- gradual loss of efficacy (HR =1 at 12 yrs) ICD 3- accelerated loss of efficacy (HR = 1.4 at 12 yrs) Survival ICD1 ICD3 ICER = $78,000/LY ICD2 Time (yrs) Zwanziger J et al. JACC 2006;47:2310-8

Cost-Effectiveness: Key Considerations All cost-effectiveness is “incremental” (i.e., comparative) Need to consider all clinically relevant strategies (different from regulatory standard) Incremental Cost-Effectiveness

Cost-Effectiveness is Incremental Z Cost Y X “Do Nothing” Effect

Cost-Effectiveness is Incremental Avg. cost-effectiveness Z Costz Effectz Cost Y X “Do Nothing” Effect

Incremental EffectivenessZ Cost-Effectiveness is Incremental Incremental cost-effectiveness can be very sensitive to the choice of comparison group Implication excluding a relevant alternative can distort the incremental cost-effectiveness ratios Avg. cost-effectiveness Z Costz Effectz D Cost Incremental CostZ Y Incremental EffectivenessZ X D Effect

Final Thoughts- 1 Cost-effectiveness analysis is not about saving money. It is technique for optimizing outcomes in the face of limited resources

Final Thoughts- 2 The main value of cost-effectiveness analyses often lies less in the main results than in the construction of a model, which forces the analyst to be explicit about his or her assumptions– a process that often leads to important insights regarding key issues for future research

Final Thoughts- 3 CEA is an aid to decision making, not a complete procedure for making resource allocation decisions in health and medicine, because it cannot incorporate all the values relevant to such decisions (Gold M, et al) Budget impact Equity (who wins/who loses) Future opportunities