Health Economics Resoures for Investigators

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Resources for researchers and decision makers who plan to conduct economic evaluations of clinical interventions, health policies, and health care programs

Economic evaluations inform decision makers about the cost and value of new health technologies, clinical interventions, medications, procedures, medical devices, or health policies. Often used tools in health economic evaluation are:

COST ANALYSIS

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Perspective

Cost analysis is used to estimate the quantity of resources used for an intervention, to evaluate change in resource use over time or to compare resource use across interventions. It is the first step in cost-effectiveness, cost-benefit or cost-consequence analyses.

Costs can be analyzed from various perspectives - CHB, payers, patient, government or societal –each possibly leading to different outcomes and recommendations of the evaluation. The societal perspective is recommended in studies aiming to inform state or national public health policy making. The payer’s perspective is recommended when payers have large influence on health policy making (e.g. Medicare or state Medicaid programs). Costs to CHB are important for internal evaluations, but do not include physician fees and external costs and should be used with caution. 

Costing

Micro costing is the recommended way of cost analysis (Gold et al. 1996). The steps to follow are:

  • Each resource expected to change is identified and listed
  • Each resource utilization is expressed in physical units
  • Unit resource costs are presented
  • Resources are values (number of units x unit costs)
  • Total costs are calculated by summing over all resources

Sources

The following sources - databases, reimbursement rates, and population surveys - are often used to price health care resources (the first link includes costs specifically to CHB)

Cost to Children’s Hospital Boston (available through the Alliance Decision Support System)

Medicare rates

Massachusetts All-Payers Claims Database

Consumer Expenditures Survey

The Healthcare Cost and Utilization Project (HCUP)

Pediatric Health Information System (PHIS)

Medicaid claims payment data

Medical Expenditures Panel Survey

The Current Population Survey (CPS)

Drug prices

Inflation/Discount

The consumer-price index (CPI) published by the BLS is commonly used to adjust for medical inflation. On the CPI detailed report, use Table 3 (CPI –U (unadjusted) US average) for indexes for medical care by categories or Table 11 care by geographic region http://www.bls.gov/cpi/home.htm#tables

Discounting

Projected future costs should be discounted to net present value using (1+r) –n  , where r is the discount rate and n is the number of years (time units). The US Panel on Cost-Effectiveness in Health and Medicine recommends using a 3% discount rate in the reference case, and a range of 0% to 7% in sensitivity analyses (Gold et al. 1996).

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COST-EFFECTIVENESS ANALYSIS

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Cost-effectiveness analysis is used to evaluate the incremental costs and effects of new treatment strategies compared to current practice. A formal CEA involves the calculation of an incremental cost-effectiveness ratio (ICER). Cost-utility is a form of CEA where the outcome of effectiveness is quality-adjusted life years (QALYs). Cost-effectiveness analyses include the following steps.

Effectiveness

The recommended measure of effectiveness in CEA is quality-adjusted life years (QALY-s). The advantage of QALYs is that they combine life expectancy and health-related quality of life into a single measure, which allows for comparisons across interventions. Calculation of QALY-s requires measurement of health-related quality of life (HRQL)

Life expectancy is also sometimes used and is easier to measure than QALYs but it ignores the value of interventions on quality of life. Intermediate measures of effectiveness are appropriate in evaluations of interventions that are not expected to have an impact on QALY-s within the analytic time frame.

Health-related quality of life (HRQL)

Health-related quality of life (HRQL) weights (utilities) are used to estimate quality-adjusted life years (QALYs). The following methods are usually used for estimating HRQL:

Direct methods 

Standard gamble

Time trade-off

Visual Analog Scale

Person Trade-Off

(Drummond et al. 2005; Gold et al. 1996)

Indirect methods

EQ-5D SF-6D

Health Utility Index (HUI)

Disease specific surveys: PROQOLID

PedsQL

Preference-based surveys for pediatric populations

Incremental cost-effectiveness ratio (ICER) 

Incremental cost-effectiveness ratio (ICER) is the incremental (additional) costs divided by incremental (additional) effects of new interventions compared to current practice.

Confidence Intervals

Incorporating uncertainty in ICER calculations

Parameter uncertainty should be incorporated into the ICER estimates. The first step is to determine which model parameters are known (fixed) and which are based on estimates and thus, uncertain. Uncertainty in the ICER is incorporated typically using one or more of the following approaches.

  • One-way sensitivity analyses: varying parameters one at a time over a range  of values
  • 2-way and n-way sensitivity analyses: 2 or more parameters are varied over a range  of values
  • Probabilistic analysis: random draws are simultaneously drawn from a pre-specified distribution of the uncertain parameters and ICER is calculated for each draw. The resulting distribution of ICER estimates is used to construct confidence intervals or/and cost-effectiveness acceptability curves

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COMPARATIVE EFFECTIVENESS RESEARCH

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"Comparative effectiveness research is designed to inform health-care decisions by providing evidence on the effectiveness, benefits, and harms of different treatment options. The evidence is generated from research studies that compare drugs, medical devices, tests, surgeries, or ways to deliver health care" (AHRQ 2011). 

Methods

Methods Guide for Effectiveness and Comparative Effectiveness Reviews. AHRQ Publication No. 10(11)-EHC063-EF. Rockville, MD: Agency for Healthcare Research and Quality. August 2011.

CER vs. Cost

There is a lack of consensus whether comparative effectiveness research (CER) should incorporate cost and cost-effectiveness analyses.  Using results from comparative effectiveness research without consideration of costs may lead to recommending health technologies that are effective but very expensive. On the other hand, applying cost-effectiveness criteria may result in recommendations against the use of effective but expensive treatments. Many authors consider cost and cost-effectiveness analyses a part of CER.

Useful references:

Gluck ME. Incorporating Costs into Comparative Effectiveness ResearchAcademyHealth’s 2009. National Health Policy Conference.

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COST-BENEFIT ANALYSIS

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In cost-benefit analysis (CBA) all resources and outcomes are monetized. Cost-benefit analyses should be conducted from a societal perspective when the intent is to inform public health policy makers . However, analysis of costs and revenues can also be useful in providing information about the net cost or cost saving of a new intervention to providers and payers. 

Design & Conduct

Cost benefit analysis typically involves the following steps:

  1. Identifying each alternative, including the status quo (no action)

  2. Identifying consequences of each alternative in physical terms in each period of the time horizon

  3. Estimating  costs and revenues in each period on the basis of the above quantities and the market prices of the inputs and outputs

  4. Converting costs and revenues to the same time period (discounting)

  5. Adding up costs and benefits and calculating net present value: NPV = B – C

Source: Acocella, N.  1994. The Foundation of Economic Policy.CambridgeUniversityPress.

Valuation Methods

Human Capital

Valuation is based on earnings; this approach is easy to implement, but is not based on economic theory as it ignores patient own valuation of life and reduced morbidity. Its flaws become apparent especially among pediatric populations or adult patients who are not working.

Stated Preferences

The method is based on individual stated (hypothetical) willingness to pay to reduce disease associated morbidity or risk of mortality. This method is well grounded in economic theory, but suffers from hypothetical bias, which distorts (usually inflates) actual willingness to pay and consequently the benefits of interventions aimed at reducing morbidity and mortality.

Revealed Preferences

This method is based on wages that people are willing to accept for hazardous jobs with increased risk of mortality and morbidity.

References

Drummond, M. F., M. Schulper, et al. (2005). Methods for the Economic Evaluation of Health Care Programs. New York, Oxford University Press Inc. (Chapter 7)

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DECISION MODELS

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Economic evaluations can become complicated and counterintuitive when many treatment strategies are compared. Each strategy may give rise to a new set of treatment choices, outcomes or adverse events. In such cases it is useful to build a choice model that reflects the decision making process and evaluates all costs, outcomes, and uncertainty associated with all treatment strategies. 

Markov models (Markov chains and Markov processes) are used to model changing and recurring health states and associated costs and outcomes over time.

Useful Reference:

Sonnenberg FA, Beck JR. 1993. Markov models in medical decision making: a practical guide. Medical Decision Making. 1993 Oct-Dec;13(4):322-38.

TreeAge is one of the commonly used softwares for analysis of decision trees and Markov models. The Clinical Research Program has a license and can help with model design and consultation. The TreeAge Pro User’s Manual 2011 is available from TreeAge Inc. The Manual is quite large, so please be patient as it uploads. 

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EVALUATION OF COSTS AND OUTCOMES

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In some cases costs and outcomes are analyzed and presented separately as methodologically, they can not be converted into quality-adjusted life years used in CEA. Examples include:

  • Outcomes are not expected to have an impact on life expectancy or health-related quality of life (e.g., genetic tests for diseases that currently have no cure) 

  • The instruments used to measure health-related quality of life are not sensitive to changes in outcomes: CEA using QALYs may not capture the value of the intervention.

  • Non-health effects of health care interventions are not always captured by HRQL instruments.

Costs per QALY-s are also not always intuitive; instead decision makers may prefer the results of economic evaluations to be presented in the form of a detailed list of costs and outcomes associated with an intervention, which they then can decide how to use and interpret depending on their perspective and priorities.

Useful references:

Mauskopf JA, Paul JE, Grant DM, Stergachis A. 1998. The role of cost-consequence analysis in healthcare decision-making. Pharmacoeconomics. Mar;13(3):277-88

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EVIDENCE SYNTHESIS

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Meta-analysis 

Researchers extracting published articles in preparation for meta-analysis should at minimum record the sample size, point estimate of the cost/effect or cost, and corresponding standard error (or confidence intervals). These parameters are then used to estimate a combined effect used in the economic evaluation.

Useful references:

Sutton A, Abrams K, Jones D. Methods for Meta-Analysis in Medical Research. 2000. John Wiley & Sons.

Petitti D. Meta-Analysis, Decision Analysis, and Cost-Effectiveness Analysis: Methods for Quantitative Synthesis in Medicine. 2000 (2nd edition). Oxford University Press Inc.

IOM (Institute of Medicine). 2011. Finding What Works in Health Care. Standards for Systematic Reviews. Washington, DC: The National Academies Press

Systematic reviews 

Systematic reviews aim to identify, evaluate and summarize the findings of all relevant individual studies, making the available evidence more accessible to decision makers (Centre for Reviews and Dissemination 2008)

Useful references:

Systematic Reviews. CRD’s Guidance for Undertaking Reviews in Health Care

IOM (Institute of Medicine). 2011. Finding What Works in Health Care. Standards for Systematic Reviews. Washington, DC: The National Academies Press

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PUBLISHED GUIDELINES

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U.S.Department of Health and Human Services Food and Drug Administration. 2009. Guidance for Industry Patient-Reported Outcome Measures: Use in Medical Product Development to Support Labeling Claims

WellPoint. 2005. Health Technology Assessment Guidelines. Drug submission guidelines for new products, new indications and new formulations. Version 5.1 West Hills, California.

Academy of Managed care Pharmacy. 2009. The AMCP Format for Formulary Submissions. Version 3.0

Guidelines for the economic evaluation of health technologies: Canada [3rd Edition]. Ottawa: Canadian Agency for Drugs and Technologies in Health; 2006.

National Institute for Health and Clinical Excellence, 2008. Guide to the methods of technology appraisal.

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LINKS and REFERENCES

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Links

The Cochrane Library

http://www.thecochranelibrary.com/view/0/AboutTheCochraneLibrary.html#NHS_EED

The Cochrane Database of Systematic Reviews

http://onlinelibrary.wiley.com/book/10.1002/14651858/titles

The NHS Economic Evaluation Database

http://onlinelibrary.wiley.com/o/cochrane/cochrane_cleed_articles_fs.html

The Cost-Effectiveness Analysis Registry

https://research.tufts-nemc.org/cear4/default.aspx

Centers for Medicare and Medicaid Services

http://www.cms.gov/

Bureau of Labor Statistics

www.bls.gov/

The Current Population Survey (CPS)

www.bls.gov/cps/

The Cost-Effectiveness Analysis Registry

https://research.tufts-nemc.org/cear4/default.aspx

International Society for Pharmacoeconomics and Outcomes Research

http://www.ispor.org/

HealthEconomics.com

http://www.healtheconomics.com/

International Health economics Association (iHEA)

http://www.healtheconomics.org/

Proqolid

http://www.proqolid.org

Pediatric Health Information System (PHIS)

http://www.chca.com/index_no_flash.html

MassachusettsAll-Payer Claims Database

http://www.mass.gov/

Medical Expenditures Panel Survey

http://www.meps.ahrq.gov/mepsweb/

Consumer Expenditures Survey

http://www.bls.gov/cex/

The Healthcare Cost and Utilization Project (HCUP)

http://www.hcup-us.ahrq.gov/overview.jsp

EQ-5D

http://www.euroqol.org/

SF surveys

http://www.qualitymetric.com/

Health Utility Index (HUI)

http://www.healthutilities.com/

Drug prices

http://zenrx.org/

References

Gold MR, Siegel JE, et al. (1996). Cost-effectiveness in Health and Medicine New York, Oxford University Press.

Drummond, M. F., M. Schulper, et al. (2005). Methods for the Economic Evaluation of Health Care Programs. New York, Oxford University Press Inc.

Hirth RA, Chernew ME, et al. (2000). "Willingness to pay for a quality-adjusted life year: in search of a standard." Medical Decision Making 20(3): 332-342.

Solans, M., S. Pane, et al. (2008). "Health-Related Quality of Life Measurement in Children and Adolescents: A Systematic Review of Generic and Disease-Specific Instruments." Value in Health 11(4): 742-764.

Methods Guide for Effectiveness and Comparative Effectiveness Reviews. AHRQ Publication No. 10(11)-EHC063-EF. Rockville, MD: Agency for Healthcare Research and Quality. August 2011.

Solans, M, Pane, S et al. 2008. Health-Related Quality of Life Measurement in Children and Adolescents: A Systematic Review of Generic and Disease-Specific Instruments.Value in Health 11(4), 742-764.

Griebsch I, Coast J, Brown J. 2005. Quality-adjusted life-years lack quality in pediatric care: a critical review of published cost-utility studies in child health. Pediatrics, May, 115(5), e600-14.

Tarride JE, Burke N, Bischof M, et al. 2010. .A review of health utilities across conditions common in pediatric and adult populations. Health Qual Life Outcomes. Jan 27;8:12.

Mauskopf JA, Paul JE, Grant DM, Stergachis A. 1998. The role of cost-consequence analysis in healthcare decision-making. Pharmacoeconomics. Mar;13(3):277-88.

IOM (Institute of Medicine). 2011. Finding What Works in Health Care. Standards for Systematic Reviews. Washington, DC: The National Academies Press

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