Cost-Effectiveness Analysis ………..while standing on one foot

1. Cost-Effectiveness Analysis ………..while standing on one foot Mendel E. Singer, PhD MPH Associate Professor Dept. of Epidemiology and Biostatistics mendel@case.edu

2. Remember…. • Cost is not the same as charges • Cost is more than just a transfer of money

3. Types of Costs • Medical Costs • Office visit, lab test, hospitalization • Non-Medical Costs • Lost time, Lost wages, lost productivity, transportation

4. Perspective • Perspective • What costs you include depends on the perspective of the analysis. • Patient, Payer, Societal (all costs regardless of who pays) • What is the cost of a Prescription? • Cost to Patient? • Cost to Insurer? • Societal Cost

5. Measuring Cost • Micro-costing: Detail every input • Time-motion studies • Every person involved, how long • Equipment used (aging) • Overhead • Gross Costing • Reimbursement Rates as Proxy • Medicare • Medicaid • 3rd Party Insurer • Specific Institution’s Estimate

6. Differential Timing of Costs • Inflation • Used to adjust old cost estimates to a more recent year • All cost estimates must be from the same year • Bureau of Labor Statistics • Medical Consumer Price Index • Medical Services • Medical Equipment

7. Discounting • Discounting • Would you rather have $100 now or in 20 years? • After adjusting for inflation? • Opportunity Cost – what you could have done with the money • This is necessary to compare costs now to those incurred downstream. • Note: discounting is net of inflation – i.e. after adjusting for inflation

8. What is Clinical Decision Analysis? • Structured methodology for decision making • Map out the different possibilities • Compares 2 or more treatment strategies • Multi-step strategies that model actual practice • Could also use purely for modeling natural history • Really a simulated longitudinal Trial • Treatment for Hepatitis C, get estimates of % progressing to • Cirrhosis, Advanced liver disease, Transplant, Liver cancer • E.g. what would happen if …. • Single measure for comparison • Can do a series of measures

9. Components of Decision Analysis • Define the study population • Identify treatment alternatives • Select outcome measure • Model course of disease • Populate model with data • Mostly from literature • Cost sources • Medicare reimbursement rate, Cost of drugs • Claims data analysis • Analyze • Sensitivity analysis • Uncertainty in the data estimates

10. Problem Definition • Reference Case • 60-year old male • 4 cm abdominal aortic aneurysm • Otherwise, patient is in good health • Surgery vs Watchful Waiting • Time horizon: 1 year • Outcome Measure: Survival • Alive = 1 • Dead = 0

11. Abdominal Aortic Aneurysm Reference Case: 60-year old male, 4 cm aneurysm, good health Strategies: Surgery vs Watchful Waiting Outcome Measure: Survival at 1 year (alive = 1, dead = 0)

12. At each node there is a number in a box indicating the mean (average) outcome. • At all terminal nodes, it first shows the outcome score associated with that result, and then shows the probability of the path ending in that terminal node.

13. What is Cost-Effectiveness Analysis ?

14. Name: Darth Vader, M.D. Interests: Cost-effective health care Specialty: End of Life Care

15. What is Cost-Effectiveness Analysis ? • Based on the decision analytic model • Now track both cost and effectiveness • Cost vs. Effectiveness • What’s a good deal for the money? • Really a simulated longitudinal Trial • Treatment for Hepatitis C • Get estimates of % progressing to: • Cirrhosis, Advanced liver disease

16. DA/CEA:Motivation • Outcomes Research/Quality Assurance • Practice Guidelines • Health Policy • Pharmaceuticals - Justifying new drugs • Providers and Insurers • Identify research priorities • Demonstrate need for large trials

17. Why use DA/CEA? • Complexity of decisions • Many potential complications • Information overload • Structures the decision process • Published studies too narrowly focused • Customizable • Simulate strategies unable to test in practice

18. Impediments to Conducting DA/CEAs • Poor Data • Lack of data • “Wrong” data • Incomplete data • Funding • Poor federal funding • Short-term focus of HMOs, insurers

19. Barriers to Acceptance of Results • Wrong comparator • Missing strategies • Too complex • Wrong population • Timeliness • Strings attached (private funding)

20. Types of Economic Evaluations • Cost-Minimization • Cost only (assumes equal effectiveness) • Cost-Benefit Analysis • Values cost and health in monetary units • Cost-Effectiveness Analysis • Objective measure of effectiveness • Cost-Utility Analysis • Subjective measure of effectiveness • Often the measure is Quality-Adjusted Life Years (QALYs) • Years of life are weighted by a utility score that measures patient preferences for a particular state of health. Huh? 

21. Health State Utilities • Utility – What does the term really mean? • Valuation under uncertainty • Measure of Patient Preference • Scale 0 – 1, where: 1 = Full Health 0 = Death Possible to have negative utility (< death) • True Scale – same meaning across scale

22. Examples 1.000 Full Health 0.998 Well, Aspirin therapy 0.75 Mild Stroke with residua 0.62 Moderate COPD 0.00 Death 2 years of life with moderate COPD: 2 x 0.62 = 1.24 QALYs

23. Incremental Cost-Effectiveness • Never Use Average Cost-effectiveness Ratios • Which do you prefer? • 1 brand new Rolls Royce for $25 ($25 each) • 2 brand new Rolls Royces for $100 ($50 each) • Always use incremental C-E Ratios • (Difference in Cost) / (Difference in Effectiveness) • Possible outcomes • One strategy is dominated (cost , effectiveness ), or • Is the extra effectiveness worth the extra cost?

24. Cost Effectiveness Drug A $ 100 10.00 QALYs Surgery $1,100 10.05 QALYs Incremental Cost-Effectiveness Analysis  Cost  Effective. ICER Drug A ------- ------------ --------- Surgery $1,000 0.05 QALYs $20,000/QALY Is this intervention cost-effective?

25. Example Cost Effectiveness Drug A $ 100 10.00 QALYs Surgery $1,100 10.05 QALYs Incremental Cost-Effectiveness Analysis  Cost  Effective. ICER Drug A ------- ------------ --------- Surgery $1,000 0.05 QALYs $20,000/QALY Is this intervention cost-effective?

26. Standards for Cost-Effectiveness • Common threshold: $50,000 - $100,000/QALY • International studies often use 1 GDP/QALY, though WHO suggests: • <1 GDP is very cost-effective • From 1-3 GDP is cost-effective

27. Closing thoughts • Decision analytic modeling is an objective method for combining all the complex information of long-term management of disease to compare different treatment strategies on both effectiveness and cost. • The models also produce estimates of important long-term clinical outcomes and utilization.

28. Summer Workshop • Comparative and Cost-Effectiveness Research • 2 days of Comparative Effectiveness Research within the context of health Reform, covered from all angles: methods, health policy, impact on payers and providers and patients, ethical/legal/social issues. • 3 days crash course in cost-effectiveness analysis • CME credits • Take as an official course OR pay workshop fee • Tentative dates: May 13-14, 15-17. • CTSC will send info. Or e-mail: mendel@case.edu

29. Questions • Mendel Singer, PhD MPH ….. mendel@case.edu