1. 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

2. 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

3. 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

4. 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

5. 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)

6. 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

7. 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

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

9. 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

10. 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?

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

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

13. 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

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

15. “Stop and Drop” Analysis
D LE = 0.42 years

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

17. Extended/Continued Benefit
D LE = 3.8 years

18. 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

19. 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

20. Cost-Effectiveness is IncrementalZ
Cost Y X
“Do Nothing”
Effect

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

22. 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

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

24. 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

25. 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