Health Economics: An Introduction to Cost-effectiveness Analysis Subhash Pokhrel Nana Anokye
Why do we need economic evaluation? © 2017 Brunel University London
Patient demand Most goods and services are rationed by price, and people decide how to use their own money But market failures mean that health services are better provided collectively So health interventions are provided at zero or subsidised cost at point of consumption © 2017 Brunel University London
Balancing supply and demand This can cause an imbalance between patients’ demands and the system’s ability to provide So we need other mechanisms to ‘ration’ health care resources © 2017 Brunel University London
Informal rationing mechanisms Klein, Day & Redmayne 1996 Denial Exclusion criteria (e.g. age limit for dialysis) Selection Inclusion criteria (e.g. smoking behaviour and access to surgery) Deflection Cost shifting (e.g. health/social) Deterrence Access barriers (e.g. co-payment) Delay Waiting lists Dilution Reduced service quantity/quality for users Termination Premature cessation of service © 2017 Brunel University London
Formal rationing mechanisms Access by ability to pay Price Prioritise sickest patients Clinical need Prioritise patients with highest expected health gain Clinical benefit Balance health gain against cost Cost effectiveness © 2017 Brunel University London
Opportunity costs If a health service spends more on one thing, it has to do less of something else Opportunity cost = value of the best alternative use of resources © 2017 Brunel University London
The opportunity cost of one course of IVF? One-third of a cochlear implant 11 cataract removals Half a teaching assistant for a year One-thousandth of a Challenger tank 1 heart bypass operation 150 childhood vaccinations 2000 school dinners Source: Morris et al. 2012 © 2017 Brunel University London
Social choice the role of economic evaluation? Economic evaluations should be designed such that conclusions are representative of societal wishes Traditionally, economic evaluation is based on the assumption that society wishes to improve efficiency by finding services that give more health gain per £ Economic evaluations aim to support decision-making: they will not be the sole criteria considered © 2017 Brunel University London
The decision problem Economic evaluations are designed to inform decisions. Distinction from traditional research which is designed to test hypotheses. Need to specify the decision problem that the economic evaluation will address Identify decision maker, the relevant perspective; the relevant comparator interventions and the metrics by which to compare them © 2017 Brunel University London
What is economic evaluation? © 2017 Brunel University London
Economic Evaluation “... the comparative analysis of alternative courses of action in terms of both their costs and consequences.” New programme Current programme Costs value of extra resources used (loss to other patients) Consequences value of health gain for this patient group Drummond, Stoddart & Torrance, 1987 © 2017 Brunel University London
Main types of Economic Evaluation Type of analysis Valuing resources Valuing health outcomes Application Cost minimisation £ - Comparison of interventions with similar clinical effects Cost effectiveness Single indicator of morbidity or mortality Comparison of interventions which differ on one, and only one, measure of effect Cost utility Index of morbidity and mortality (QALY) Comparison of any health care interventions: may trade off health effects Cost benefit Comparison of any health or non-health interventions © 2017 Brunel University London
How to conduct a good economic evaluation Define the decision problem Framing the question Specify who the decision maker is and what perspective they are concerned with Identify which patients should be included Define population at point in pathway Consider subgroups & risk stratification Choose the right interventions and comparators Include all relevant options Current practice, usual care ‘Do nothing’, ‘best supportive care’, placebo? Include all relevant costs and health effects Identify all significant costs and savings Select appropriate measure(s) of outcome P I C O © 2017 Brunel University London
Well-defined study question? Comprehensive description of alternatives? Effectiveness established? Important costs/consequences identified? Costs/consequences measured accurately? Costs/consequences valued credibly? Discounting? Incremental analysis? Treatment of uncertainty? Discussion of other issues? How to conduct a good economic evaluation? Drummond’s criteria The Drummond Checklist © 2017 Brunel University London
How to conduct a good economic evaluation How to conduct a good economic evaluation? Drummond’s criteria The Drummond Checklist Criteria are not sufficient for assessing what is a useful study Criteria are at best a minimal standard for what is an appropriate study to facilitate decision making For each context/decision problem, context specific criteria are key © 2017 Brunel University London
Making choices The use of economic evaluation © 2017 Brunel University London
Trading off benefits, harms and costs ‘Dominated’ more expensive & worse Better but more expensive New treatment Current treatment Effect (QALYs) ‘Dominant’ cheaper & better © 2017 Brunel University London
... but is it cost-effective? No – small health gain/ £ Cost (£) Yes – big health gain/ £ Effect (QALYs) © 2017 Brunel University London
The “Cost per QALY” Incremental Cost Effectiveness Ratio (ICER) Extra cost QALYs gained Extra cost QALYs gained Effect (QALYs) © 2017 Brunel University London
How much can/should we pay for a QALY? Cost-effectiveness threshold (λ) NICE threshold: £20,000 to £30,000 per QALY Effect (QALYs) © 2017 Brunel University London
The decision rule ICER = (C1 – C0) (E1 – E0) < λ INB = (C1 – C0) Intervention (1) cost-effective vs. comparator (0) if: ICER = (C1 – C0) (E1 – E0) < λ Or equivalently … use Incremental Net Benefit (INB) INB = (C1 – C0) (E1 – E0) - > 0 λ © 2017 Brunel University London
NICE approach to EE: Methods Manual (NICE, 2013) 1/2 Element of health technology assessment Reference case Section providing details Defining the decision problem The scope developed by NICE 5.1.4 to 5.1.6 Comparator(s) As listed in the scope developed by NICE 2.2.4 to 2.2.6, 5.1.6, 5.1.14 Perspective on outcomes All direct health effects, whether for patients or, when relevant, carers 5.1.7, 5.1.8 Perspective on costs NHS and PSS 5.1.9 and 5.1.10 Type of economic evaluation Cost–utility analysis with fully incremental analysis 5.1.11 to 5.1.14 Time horizon Long enough to reflect all important differences in costs or outcomes between the technologies being compared 5.1.15 to 5.1.17 Synthesis of evidence on health effects Based on systematic review 5.2 some slides in this deck courtesy of: HERG Short Course
NICE approach to EE: Methods Manual (NICE, 2013) 1/2 Element of health technology assessment Reference case Section providing details Measuring and valuing health effects Health effects should be expressed in QALYs.The EQ-5D is the preferred measure of health-related quality of life in adults. 5.3.1 Source of data for measurement of health-related quality of life Reported directly by patients and/or carers 5.3.3 Source of preference data for valuation of changes in health-related quality of life Representative sample of the UK population 5.3.4 Equity considerations An additional QALY has the same weight regardless of the other characteristics of the individuals receiving the health benefit 5.4.1 Evidence on resource use and costs Costs should relate to NHS and PSS resources and should be valued using the prices relevant to the NHS and PSS 5.5.1 Discounting The same annual rate for both costs and health effects (currently 3.5%) 5.6.1 some slides in this deck courtesy of: HERG Short Course
Introduction to economic evaluation Summary Some form of rationing explicit or implicit is inevitable NICE and some other HTA bodies, are making cost-effectiveness a much more explicit criterion Methods of economic evaluation differ principally in the way effects are measured Cost per QALY is most useful for making decisions within fixed budget at health service level But only CBA can be used to compare health with non-health policies If economic evaluation is to be used to inform decision-making, it needs to be high quality and appropriate © 2017 Brunel University London
Thinking to do a cost-effectiveness analysis? © 2017 Brunel University London
Ask yourself a couple of questions: 1. Do you know what your decision problem is? Population, Intervention, Comparator, Outcomes 2. Do you know you have adequate support? Engage with health economists © 2017 Brunel University London
Health Economists?? © 2017 Brunel University London
Health Economists Core skills Learnt skills Wikipedia definition: “In broad terms, health economists study the functioning of healthcare systems and health-affecting behaviors such as smoking” Core skills Learnt skills Economics; Number crunching; Modelling; econometrics (other name for stats!); study designs; measurement of costs and health outcomes Applied epidemiology; disease and treatment (causes; prognosis; care pathways, etc. etc. But, © 2017 Brunel University London
Engaging with health economists?? Speak to colleagues for a recommendation! Do you need a generalist? Do you need a specialist? Engage early! “We have a grant application going in tomorrow. I wonder whether you would like to collaborate as a health economist? Please provide a paragraph on health economic analysis first thing tomorrow” Seek advice on your design, …yes, right from the beginning! Health economists often have ideas about several important aspects of your study such as RCTs; measuring outcomes; data management, analysis, etc. etc. “Alone we can do so little; together we can do so much” (Helen Keller) © 2017 Brunel University London
Some areas where collaboration with health economists may be useful: Cost analysis Within trial analysis Measuring / Modelling long term outcomes Cost-effectiveness analysis Analysis of existing fiscal data alongside service outcomes data Developing pilots Testing interventions Reviewing your work © 2017 Brunel University London