Faculty of Medicine Health Economics and Policies (31505391)Economic Evaluation By HatimJaber MD MPH JBCM PhD 1 + 3- 04 - 2019
Course Content 31505391 Post Midterm • Week 9Measurement and evaluation in health care. Goods, Market Failures, and Cost-Benefit Analysis. • Week 10Economic evaluation. Economics and efficiency cost analysis and cost effectiveness. • Week 11 Economic effects of Bad habits including smoking and alcohol consumption • Week 12 Quality Improvements in healthcare delivery Methods to improve health care delivery. 15-4 11:00 am GUEST LECTURE 17-4 8:00 am GUEST LECTURE • Week 13 Human resources in Healthcare delivery. • Week 14 Health Markets and Regulation and Economic regulation of health markets. • Week 15-16 Final assessment (Exams.) //-5-2019
Week 10 • Role of economic evaluations in health care. • Types of economic evaluations and their uses. • Components of a complete economic evaluation. • Cost-effectiveness analysis? • What other factors are important when determining whether to fund a new intervention, aside from “cost-effectiveness? • Financial analysis and economic appraisal • Costs and the cost-effectiveness threshold • Beyond cost-effectiveness: Priority setting • Efficacy versus effectiveness • Equity is more than efficiency • Financial versus economic analyses • Cost-benefit analysis • Cost-utility analysis
Yes Evaluation GOALS & OBJECTIVES Assessment of health need No Monitoring PLANNING CYCLE Establish goals &objectives Implementation of programme Assessment of resources Time frame Select the best alternative Establishment of priorities Design alternative programme Action plan
EVALUATION It is a systematic way of: - learning from experience and -using the lessons learnt to: improve current activities and promote better planning by careful selection of alternatives for future action
In the health field, economic evaluationsare used to: • analyze how efficiently resources have been allocated and • how resources should be allocated to ultimately maximize welfare. • Economic evaluation is therefore an effort to : • analyze inputs (resources) and outputs (changes in health outcomes) • and help decision makers assess whether a certain level of output is worth the amount of resources expended to produce it
The force behind evaluation is to make sure that resources are used in the right directionand in the highest possible efficiency to provide high quality care. • The components of high quality care are: • Efficiency : The relation of the actual impact of a service or program to its actual production cost. • Effectiveness: The relation of the actual impact of a service or programto its full potential impact in an ideal situation. • Adequacy: The relation of available services to the needs of the population. • Scientific-technical quality: The level of application to health care of the currently available medical knowledge and technology.
Evaluation can focus on: Processes Services Projects Conditions Programs • Projects normally consist of a set of activities undertaken to achieve specific objectives within a given budget and time period. • Programs are organized sets of projects or services concerned with a particular sector or geographic region • Services are based on a permanent structure, and, have the goal of becoming, national in coverage, e.g. Health services, whereas programmes are usually limited in time or area. • Processes are organizational operations of a continuous and supporting nature (e.g. personnel procedures, administrative support for projects, distribution systems, information systems, management operations). • Conditions are particular characteristics or states of being of persons or things (e.g. disease, nutritional status, literacy, income level).
Health Care EvaluationElements • Context:What, when , where, and who…. • Process:How care is organized and delivered…….. • Content:Program elements to be provided and why ……… • Output: How many times did ………. • Outcome:Did the………. • Impact:How high? How far? Where?
Economic Evaluation • Cost-effectiveness, not cost (or resource) impact • “... the comparative analysis of alternative courses of action in terms of both their costs and consequences.” • Drummond, Stoddard & Torrance, 1987 • Costs • Value of extra resources used (loss to other patients) Current Treatment • Consequences/ • Outcome • Value of health gain for this patient group New Treatment
TOOLSUSED IN ECONOMICANALYSIS Relationships between Economic Variables Graphical Representation of Relationships TheDirection of the Relationships Economic Variables
ECONOMICEVALUATION • Economic evaluation is the comparative analysis of alternative courses of action in terms of both their costs and consequences in order to assist policy decisions • Economic evaluation is not “choosing the cheapest” • “The search of efficient practice is not merely about reducing costs.
Consequences A Consequences B • Characteristics… • Economic evaluation has 2 characteristics • inputs and outputs (costs andconsequences) • choice between at least 2 alternatives • Costs A • Costs B Programme A • Choice Comparator B
Why Economic Evaluation? Scarcity → choice → value of benefits (opportunity cost) → efficiency Economic evaluation = measuring value of alternative course of action (opportunity cost again) Opportunity cost forces identification of relevant alternatives Assessment of ‘value’ makes explicit importance of viewpoints – an alternative that seems unattractive from one point of view may seem more attractive from another (cost to one is benefit to another) Measurement enables uncertainties surrounding orders of magnitude to be assessed
Decision makers responsible for allocating resources and implementing public health programs and interventionsneed to understand the relationship between resources used and health outcomesachieved by the program or intervention. One analytical tool available to decision makers is economic evaluation. In an economic evaluation, analytic techniques are applied to identify, measure, value, and compare the costs and consequences of two or more alternative programs or interventions.
Steps in EconomicEvaluation Deciding Upon theStudy Question Assessmentof CostsandHealth Effects Adjustmentof timing Adjustment foruncertainity Making adecision
Costanalysis • Cost analysis is a resource tool for financial management in hospital or department. • It is an economic evaluation technique that involvesthe systematic collection, categorization, and analysis of program or intervention costs, and cost ofillness.
When to Use CostAnalysis? Cost analysis can be used as anevaluationmethodwhen: • -Only one program is beingassessed, • -Information about program effectivenessis not available, • orthe interventions being assessed and compared are equally effective.
Objectives of CostAnalysis • To assess the efficiency and effectivenessof function and theircost implication. • To improve the policy relevance and utility through assessment, planning and avoidance of wastefulexpenditure in thehospital. • To allowresearchers to achieve cost minimizationfor the programs under consideration.
Purposes of CostAnalysis • A tool for planning and costprojection • To assess the efficiency ofa • programme • To assess thepriorities • Accountability • To assessequity
Principles of CostAnalysis • Make explicit the analyticperspective • Describe the anticipatedbenefits • Specify the components ofcosts • Discount to adjust fordifferential timing • Perform a sensitivityanalysis • Calculate measurement ofefficiency
Identify and define theproblem Defining thealternatives Defining theaudience Define the perspective 5.Define timeframe Determine the time frameandanalytichorizon Choose a format/methodology
Apply principles of costanalysis Describe studyoutcomes Development of costinventory Preparation of costsummary
Total cost(TC) • The total cost of a program or an intervention is derived by adding all the costsincurred in producing a given level of output. • It includes the cost of all the personnel, the supplies, and the equipment that were identified in the costinventory. • TC = Quantity of resource 1 X value of that resource 1 +....+ • Quantity of resource n X value of thatresource • n
Average cost(AC) • The average cost is the cost per unit of output (e.g., cost per patient treated or cost per child immunized). • AC is computed by dividing the total cost by the number of participants or other relevant intervention units. The formula is • AC = TC / Q ; Q= Units ofoutput
Marginal cost(MC) The marginal cost is the resource cost associated with producing one additional or one less unit within the sameintervention/program MC = Change in total costs/change in quantityproduced Or MC = (TC' -TC) / (Q'Q) TC' = Total costs a higher output level TC = Total costs at lower output level Q' = Higher level of output Q = Lower level ofoutput
Few definitions in Health Costs • Fixed costs • Cost that are does not change with the volume of out put • Rent , Security , Janitorial • Variable costs • Cost that are directly related volume of output and vary significantly • Drugs, Supplies , food • Semi-variable costs • Cost that does not change immediately with volume but change after some time • Staff cost • Total cost of production • Fixed cost + Variable cost + semi variable cost
Cost-of-illness analysis Cost- consequenceAnalysis Cost-benefit Analysis(CBA) Cost- minimization Analysis Cost- effectiveness Analysis(CEA) Cost-utility Analysis(CUA)
ECONOMIC EVALUATION Economists usually distinguish several types of economic evaluation, differing in how consequences are measured: Cost-minimisation analysis (CMA). Cost-effectiveness analysis (CEA). Cost-benefit analysis ( CBA) Cost-utility analysis (CUA). 4 Main-TYPES OFECONOMIC EVALUATION
Different Types of Economic Analysis • Cost-Utility Analysis: • cost-effectiveness using a utility measure e.g. QALY (preferred by NICE) Gold Standard. Cost per QALY • Cost-Effectiveness Analysis: • cost-effectiveness using a ‘real’ outcome measure such as ‘lives saved’ or ‘hospital admissions prevented’ – costs per unit of health outcome (comparing interventions) • Cost-Consequences Analysis: • describes costs of alternative interventions, and reports a profile of outcomes/effects for each intervention (eg health effects and non-health effects), but doesn’t combine them into a single unit of effect. (Leaves a lot to decision-maker; non-transparent; etc.) • Cost-Benefit Analysis: • Where all costs and consequences are expressed as money (less common in health economics) • Cost-Minimisation Analysis • Where equal efficacy (etc) can be demonstrated – only costs are assessed.
1. Cost-minimization is a tool used in pharmacoeconomics and is applied when comparing multiple drugs of equal efficacy and equal tolerability , the effectiveness of the comparators in question must be proven to be equivalent. If efficacy and tolerability is demonstrated, however, then a simple comparison of "cost/course of treatment" can be enough for the purpose of comparing two or more therapeutically equivalent treatment alternatives.
When conducting a cost-minimization study, the author needs to measure all costs (resource expenditures) inherent to the delivery of the therapeutic intervention and that are relevant to the pharmacoeconomic perspective. • It is used to compare costs of alternative therapies that have: identical clinical effectiveness (including adverse reactions, complications and duration of therapy), BUT Different costs . • Choose the least cost alternative among equivalent or equally effective alternatives
Cost-minimisation analysis (CMA). • Cost minimization analysis is a specific type of analysis in which the outcomes of the two or more healthcare interventions are assumed equal. • Therefore economic evaluation is based solely on comparative costs and result is least costalternative
Cost–benefit analysis (CBA) • 2. Cost–benefit analysis (CBA), sometimes called benefit–cost analysis (BCA), is a systematic process for calculating and comparing benefits and costs of an action. • CBA has two purposes: • 1. To determine the justification/feasibility, • 2. To provide a basis for comparing actions. It involves comparing the total expected cost of each option against the total expected benefits, to see whether the benefits outweigh the costs, and by how much.
Cost benefit analysis • This is more expanded version than cost effectiveness analysis. • Here the monetary values of benefits of a project are compared with monetary costs of the project. It enables comparisons between projects and is vital in decision-making. • Project cost Vs Project outcomes Source : Jones, .I.R. (1998): Costing Health Services
Cost–benefit analysis (CBA) • In CBA, benefits and costs are expressed in money terms, and are adjusted for the time value of money, so that all flows of benefits and flows of costs over time are expressed on a common basis in terms of their "net present value.“ • Example , when deciding how to allocate the limited funding, policy makers might have to choose between implementing : • screening program for tuberculosis infection or • a job-training program for the unemployed.
Cost–benefit analysis (CBA) When do we use CBA? The prominent features differentiateCBA from other forms of economic evaluation are: • CBA adopts a broad community perspective(thus it includes all costs and all benefits), and • CBA measures the outcomes in monetary terms. • CBA is the appropriate form of economic evaluation to assess the economic efficiency(maximum amount of output [e.g., persons screened, cases prevented, or cases treated] is produced from the given level of inputs) .
Cost–benefit analysis (CBA) • CBA It is a particularly helpful tool for the following purposes: • ---A. DecidingWhether To Implement a Specific Program: • For example, research indicates that a vaccine protects against human papillomavirus (HPV). (HPV is the virus that is responsible for the majority of cervical cancer cases.) • --CBAmight indicate that, even if the price of the vaccine is relatively high, the savings from : • the averted HPV infection, • the resulting cervical cancer treatment, and • the averted productivity losses outweigh the costs of vaccination and • generate a net gain in community welfare. • This provides an additional argument for public decision makers to support an HPV vaccination program that can prevent thousands of deaths.
Cost–benefit analysis (CBA) • CBA It is a particularly helpful tool for the following purposes: B. Choosing Among Competing Options: • health policy makers might have to choose between : • funding a program of free Pap smear testing for women at high risk of infection and • HPV vaccination program. • The results of a CBA might indicate that the net gain in community welfare equals : • $521 million for Pap smear testing and • $987 million for HPV vaccination programs. • The evident preferable alternative would be the HPV vaccination program.
Cost–benefit analysis (CBA) • CBA It is a particularly helpful tool for the following purposes: C- Choosing and Setting Priorities from a Group of Potential Programs • The benefit maximization rule can also guide decisions on allocating a fixed resources among a group of potential programs. • The combination of programs that has the largest net gain in community benefit is the preferred choice.
Cost–benefit analysis (CBA) • CBA It is a particularly helpful tool for the following purposes: D. What are costs and benefits? Benefits are the economic values of desirable consequences of economic policies and decisions. Together with costs they reflect the changes in individual and social welfare that result from implementing alternative programs.
Benefits Cost–benefit analysis (CBA) • DirectBenefits • IndirectBenefits • Intangible Benefits • Benefits (B) > Costs (C) or NetBenefits (NB) = B -C >O.
Benefits Benefits are generally classified as direct, indirect, and indescribable: • Direct benefits are the values of desirable health and non-health outcomes directly related to the implementation of proposed interventions that can be estimated from data. • Indirect benefits are the averted costs and savings resulting from the interventions but not related directly to them. • Indescribable benefits include the values of positive outcomes (e.g., reductions in health risk, pain, and suffering), which cannot be estimated from data.
BENEFITS ??????? • A vaccination program against an infectious disease protects the vaccinated from catching the infection and provides additional "herd immunity" for the population, including unvaccinated persons. • These are the program benefits: • The savings associated with prevented illness cases among those actually vaccinated would be classified as a direct benefit. • The savings resulting from lower morbidity among unvaccinated persons due to herd immunity would be an indirect benefit. • The reduced risks of catching the infection for those vaccinated and the peace of mind resulting from that risk reduction would be indescribable benefits
Cost–benefit analysis (CBA) • Cost-benefit analysis is a practical way of assessing the desirability of projects, where it is important to take a long view (looking at the repercussion in the future as well as inthe near future and a wide view in the sense of allowing side effects of many decisions) Le. it implies the enumeration and evaluation of all the relevant cost andbenefits. • -Prest andTerkey