Health Economics: An Introduction to Costeffectiveness Analysis Subhash Pokhrel, PhD Reader in Health Economics Director, Division of Health Sciences
Why do we need economic evaluation? 2017 2
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 3
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 4
Informal rationing mechanisms Klein, Day & Redmayne 1996 Denial Selection Deflection Deterrence Delay Dilution Termination Exclusion criteria (e.g. age limit for dialysis) Inclusion criteria (e.g. smoking behaviour and access to surgery) Cost shifting (e.g. health/social) Access barriers (e.g. co-payment) Waiting lists Reduced service quantity/quality for users Premature cessation of service 2017 5
Formal rationing mechanisms Price Access by ability to pay Clinical need Prioritise sickest patients Clinical benefit Prioritise patients with highest expected health gain Cost effectiveness Balance health gain against cost 2017 6
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 7
The opportunity cost of one course of IVF? One-third of a cochlear implant 1 heart bypass operation 11 cataract removals 150 childhood vaccinations Half a teaching assistant for a year 2000 school dinners One-thousandth of a Challenger tank Source: Morris et al. 2012 2017 8
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 9
What is economic evaluation? 2017 10
Economic Evaluation... the comparative analysis of alternative courses of action in terms of both their costs and consequences. Drummond, Stoddart & Torrance, 1987 Costs value of extra resources used (loss to other patients) Current programme New programme Consequences value of health gain for this patient group 2017 11
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 12
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 2017 13
How to conduct a good economic evaluation? Drummond s criteria The Drummond Checklist 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? 2017 14
Economic Evaluation in Health Care Cost-effectiveness Identification of resources/costs & outcomes Measurement Valuation Comparison
Sources of Evidence Literature Existing trials New trials Systematic reviews Meta-analyses Indirect comparisons Data-bases and registries Observational studies Expert opinion Patient views etc
Economic evaluation alongside trials Clinical trials can provide much of the evidence required for an economic evaluation Outcomes Clinical outcomes e.g. functioning scores, pain Final outcomes e.g. mortality, life years QOL e.g. disease specific, generic, utility Resource use Hospitalisations Medicines Adverse events
Selecting a Health Outcome Measure Depends on the research question and the type of economic evaluation What measures will capture important benefits? Mortality Clinical measures Disease specific QoL Generic QoL measure Utility measure Considerations based on disease area and interventions
Assumes: What is a QALY? 1 QALY = one year of life in full health >People can trade-off length of life vs quality of life e.g. 1 QALY = 2 years with 50% QoL for one person >Each year of healthy life is of equal value for all e.g. 1 QALY = 6 months of healthy life for two people Public health 25,000 people, 0.01 QALYs per year for 20 years = 5,000 QALYS Heart surgery 5,000 people, 0.1 QALYs per year for 10 years = 5,000 QALYS
Health-related quality of life The Quality Adjusted Life Year 1 Initial QALY loss due to side effects QALYs gained Current treatment New treatment 0 Length of life (years)
Putting the Q in QALY Main types of utility measurement Direct elicitation methods (Time trade-off, Standard gamble, VA) Pre-scored preference assessment instruments (most frequently used) Special form of generic outcome measure Provides a single index utility value (0= death, 1 = full health) Can be used to combines survival with health related QoL to give quality adjusted life years (QALY)
EQ-5D: Dimensions and Levels Five dimensions: Mobility, Self care, Usual activities, Pain/discomfort, Anxiety/depression Three / Five levels each: No problem, Some/moderate problem, Extreme problem/unable No, slight, moderate, severe, extreme 243 / 3125 possible health states
EQ-5D By placing a tick in one box in each group below, please indicate which statements best describe your own health state today. Mobility I have no problems in walking about I have some problems in walking about I am confined to bed Self-Care I have no problems with self-care I have some problems washing or dressing myself I am unable to wash or dress myself Usual Activities (e.g. work, study, housework, family or leisure activities) I have no problems with performing my usual activities I have some problems with performing my usual activities I am unable to perform my usual activities Pain/Discomfort I have no pain or discomfort I have moderate pain or discomfort I have extreme pain or discomfort Anxiety/Depression I am not anxious or depressed I am moderately anxious or depressed I am extremely anxious or depressed
Resources/Costs Which costs are relevant? Cost-effective for whom? Provider s perspective: materials, heating, lightning, supervision, training, bed stays Staff time: Cost of therapy time per face-to face contact, non-face to face time Service user / family perspective: productivity losses, time, travel costs Wider society perspective: effect on other providers and services, benefits
Resource/Cost Estimates Identify event pathways (e.g. control and intervention arms) Measure resources required (staff, equipment, consumables etc) Ascertain unit costs Apply unit costs to the resources used in each pathway
Making choices The use of economic evaluation 2017 26
Trading off benefits, harms and costs Dominated more expensive & worse Current treatment Cost ( ) Better but more expensive New treatment Effect (QALYs) Dominant cheaper & better 2017 27
... but is it cost-effective? Cost ( ) No small health gain/ Yes big health gain/ Effect (QALYs) 2017 28
The Cost per QALY Incremental Cost Effectiveness Ratio (ICER) Cost ( ) ICER = Extra cost QALYs gained Extra cost QALYs gained Effect (QALYs) 2017 29
How much can/should we pay for a QALY? Cost-effectiveness threshold (λ) Cost ( ) Effect (QALYs) NICE threshold: 20,000 to 30,000 per QALY 2017 30
The decision rule Intervention (1) cost-effective vs. comparator (0) if: ICER = (C 1 C 0 ) (E 1 E 0 ) < λ Or equivalently use Incremental Net Benefit (INB) INB = λ (E 1 E 0 ) - (C 1 C 0 ) > 0 2017 31
NICE approach to EE: Methods Manual (NICE, 2013) 1/2 Element of health technology assessment Defining the decision problem Comparator(s) Reference case Section providing details The scope developed by NICE 5.1.4 to 5.1.6 As listed in the scope developed by NICE Perspective on outcomes All direct health effects, whether for patients or, when relevant, carers 2.2.4 to 2.2.6, 5.1.6, 5.1.14 5.1.7, 5.1.8 Perspective on costs NHS and PSS 5.1.9 and 5.1.10 Type of economic Cost utility analysis with fully 5.1.11 to 5.1.14 evaluation incremental analysis Time horizon Synthesis of evidence on health effects Long enough to reflect all important 5.1.15 to 5.1.17 differences in costs or outcomes between the technologies being compared Based on systematic review 5.2 some slides in this deck courtesy of: HERG Short Course 32
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 Source of data for measurement of health-related quality of life Health effects should be expressed in 5.3.1 QALYs.The EQ-5D is the preferred measure of health-related quality of life in adults. Reported directly by patients and/or carers 5.3.3 Source of preference data for valuation of changes in healthrelated quality of life Equity considerations Representative sample of the UK population An additional QALY has the same weight regardless of the other characteristics of the individuals receiving the health benefit 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 Discounting The same annual rate for both costs and health effects (currently 3.5%) 5.3.4 5.4.1 5.5.1 5.6.1 some slides in this deck courtesy of: HERG Short Course 33
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 34
Thinking to do a cost-effectiveness analysis? 2017 35
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 36
Health Economists?? 2017 37
Health Economists Wikipedia definition: In broad terms, health economists study the functioning of healthcare systems and health-affecting behaviours such as smoking But, Core skills Economics; Number crunching; Modelling; econometrics (other name for stats!); study designs; measurement of costs and health outcomes Learnt skills Applied epidemiology; disease and treatment (causes; prognosis; care pathways, etc. etc. ) 2017 38
Engaging with health economists?? Speak to colleagues for a recommendation! Do you need a generalist? Do you need a specialist? Engage early! Avoid this - 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 39
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 40
Next courses 9-11 May 2018 7-9 Nov 2018 herg-admin@brunel.ac.uk 2017 41
Individually tailored internships/placements Visiting researcher 3-6 months placement at Brunel Do short course Allocated supervisor Exit with a tangible outcome Fully developed research protocol Fully developed analysis Manuscript ready for submission to journals 2017 42
Collaborative research at HERG Partner in research proposal that is led by clinicians Inputs from design to execution with regard to health economics Support on other areas related to analysis and critical reviews Senior Health Economist supported by a RA/RF NIHR, RCUK, and other funders 2017 43