Are you sure your improvements are cost-effective?

1. Are you sure your improvements are cost-effective? Edward Broughton, PhD, MPH, PT University Research Co. April 11, 2014 ebroughton@urc-chs.com

2. Your decision….

3. Objectives • What cost-effectiveness analysis is • How to do cost-effectiveness analysis (CEA) • What essential information is required to do a CEA • How to interpret and communicate the results of a CEA effectively • What are the limitations for CEA for decision-making

4. What would you pay? • A medical error following splinting a fractured distal radius can cause pain in the 5th digit for a mean of 10 hours • There is an effective improvement intervention which averts the error • What is it worth to you to avoid the pain? • What is your willingness to pay?

5. What would you pay? • Imagine you have a choice between having this pain constantly for 10 hours or paying money to avoid the pain • How much are you willing to pay? • 10 cents?...... € 100,000? • € 1? …….. € 10,000 • € 10?……. € 1,000? etc. • Please write down your answer This is your willingness to pay (WTP)

6. What is economic analysis? • Comparative analysis of two or more courses of action in terms of the costs and consequences of an intervention • Different types of analyses: • Cost-minimization • Cost-effectiveness • Cost-utility • Cost-benefit

7. What is cost-effectiveness analysis? • A way to measure efficiency of an intervention in which costs are related to a single common effect • Cost-effectiveness = costs ÷ effects • Cost-effectiveness ANALYSIS is the cost-effectiveness of one intervention relative to a baseline / comparison

8. But we need to know: • Whose perspective? • What time-frame? • What units of effectiveness?

9. Our improvement intervention example • Training and coaching program that prevents errors that lead to adverse event (pain) • Before intervention, 50% risk of pain. After intervention, 10% risk of pain • Cost of improvement intervention = € 100 / patient • Cost of treating adverse event = € 8 / patient (average) but ineffective Is intervention cost-effective?

10. Important details: • Whose perspective? = Health system (NHS) • What time-frame? = 1 year • What units of effectiveness? = adverse event averted or hour of pain avoided or DALY averted or QALY gained

11. Cost of improvement intervention • What are the costs above and beyond what would happen without the improvement intervention? • Staff time costs should be included even if staff were not paid more • Any other costs we should consider? • Assume a cost of € 100 per patient (divided among all patients who benefit)

12. Decision tree

13. Calculations Incremental cost effectiveness ratio = difference in costs difference in effects ICER = [(0.1 x 100) + (0.9 x 100)] – [(0.5 x 8) + ( 0.5 x 0)]. [( 0.1 x 0 ) + ( 0.9 x 10 )] – [( 0.5 x 0 ) + ( 0.5 x 10 )] ICER = € 24.00 / hr of pain relief

14. Table of results All data are per recipient of strategy

15. Cost effectiveness plane Higher cost Willingness-to-pay threshold € 24 Less effective More effective 1 hr pain relief Lower cost

16. Cost effectiveness plane Higher cost Willingness-to-pay threshold € 24 Less effective More effective Hr of pain relief Lower cost

17. If we now include the economic consequences of the improvement intervention ….. Taking the societal perspective: • Can people work with the pain caused by the error? • Assuming no work, calculate lost income / productivity • Assume income / productivity = € 50 / hour • Assume no difference in the cost of treatment ( € 8 ) • We now need to redo the calculation

18. CEA calculation Incremental cost effectiveness ratio = difference in costs difference in effects ICER = [(0.1 x 100) + (0.9 x(-500))] – [(0.5 x 8) + ( 0.5 x(-500)]. [( 0.1 x 0 ) + ( 0.9 x 10 )] – [( 0.5 x 0 ) + ( 0.5 x 10 )] ICER = – € 48.50 / hr of pain relief

19. Table of results All data are per recipient of strategy

20. Cost effectiveness plane Higher cost Willingness-to-pay threshold € 24 Less effective More effective -€ 48.5 Lower cost

21. Cost effectiveness plane Higher cost Willingness-to-pay threshold € 24 Less effective More effective -€ 48.5 Lower cost

22. Why it’s tricky to do CEAs of improvement interventions? • Often “effectiveness” is a process indicator rather than a clinical outcome (eg: compliance with standard of care) • Difficult to transform into a clinical outcome • Often improvement has many different effects • Need to use modeling to convert to DALYs, QALYs etc. • Need to guess how long improvement is going to last

23. Clarifying the question • What are you comparing your intervention to? • Doing nothing • Another intervention • Several other interventions • What point of view / perspective are you taking? • Recipient of the intervention • One or several of the funders • Everyone (societal) • Why are you doing the CEA? • Who is your audience? • What is the information going to be used for?

24. Calculating DALYs and WTP • Global burden of disease: 2004 Update • http://www.who.int/healthinfo/global_burden_disease/GBD2004_DisabilityWeights.pdf?ua=1 • DALYs for AE = 10/(365 x 24) x 0.132 = 0.001142 • WHO says cost effective if > 3 x GDPPC / DALY • For UK, ~ € 100 (NHS says ~ € 40)

25. Community of Practice for CEA of Healthcare Improvement Please contact me: Edward Broughton ebroughton@urc-chs.com