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Econ 6038: Lecture Seven Economic Evaluation of healthcare: an introduction Raymond Yeung http://web.hku.hk/ ~rytyeung 7 November 2005 Ask yourself the following questions What are the possible economic logic behind the merge? What are the parameters you need to assess the merging proposal?

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econ 6038 lecture seven economic evaluation of healthcare an introduction

Econ 6038: Lecture SevenEconomic Evaluation of healthcare: an introduction

Raymond Yeung

http://web.hku.hk/~rytyeung

7 November 2005

ask yourself the following questions
Ask yourself the following questions
  • What are the possible economic logic behind the merge?
  • What are the parameters you need to assess the merging proposal?
  • What are similar economic problems in the Chinese medicine sector?
rationale for economic evaluations
Rationale for economic evaluations
  • In daily operation, medical decision making cannot simply base solely on the clinical outcomes because of scarcity of resources
  • Economic consideration enters medical decision making as healthcare providers are endowed with power to allocate resources
  • This situation is more apparent in the UK or other systems where prepaid instead of FFS is the dominate mode of financing
  • Budget holders of the health authority should carefully ensure value for dollar
objectives of this session
Objectives of this session

On completing this lecture, students should

  • Be able to appreciate why economic evaluation is essential in health care
  • Be able to identify three levels of economic evaluation in health
  • Be able to identify pros and cons of these analyses
types of economic evaluations
Types of economic evaluations
  • Cost-of-illness analysis
  • Cost-effectiveness (cost-utility) analysis
  • Cost-benefit analysis
burden of illness
Burden of illness
  • Economic burden to society
  • Burden to health care services
  • Burden to members of community:
    • patients themselves
    • their family
    • others
  • Opportunity cost
cost of illness study coi
Cost-of-illness study (COI)
  • Identify, measure and value impact of an illness or health problem
  • Not a full economic study since it doesn’t consider the benefits of treatment
  • May help us determine priorities and plan services
mr ho had discomfort in his hip can we cost this problem
Mr Ho had discomfort in his hipcan we cost this problem?
  • Telephone survey on back pain by HKPU
  • 12 month prevalence:
    • 44%
    • confirmed by dr: 17%
  • life-time prevalence:
    • 57%
  • females > males; high prevalence
back pain in hk
Back pain in HK
  • 14% saw a private doctor
    • mean 1.3 visits
  • 13% went to a public clinic
    • mean 1.2 visits
  • 0.5% had physiotherapy
  • 1.6% were admitted to hospital
  • 1.3% had surgery
  • Low utilisation - low cost?
very approximate costing
Very approximate costing
  • 3,000,000 adults in HK

1.3 million will have back pain in any one year

236,600 visits to a private doctor

202,800 visits to a public clinic

 6,500 have physiotherapy

 20,800 admitted

 16,900 have surgery

very approx costing
Very approx. costing
  • Private dr. @ $200 = $4.7m
  • Public clinic @$500 = $11m
  • Physio. @$1,000 = $6.5m
  • IP @3,300 = $7m
  • Surgery @ $30,000 = $507m

= $536m a year in HK

(not including lost productivity, disablement, pain & suffering ………..)

can chinese medicine help to address the back pain problem
Can Chinese medicine help to address the back pain problem?
  • Suppose that there is a new approach in acupuncture to looking after patients with backpain and is an alternative to hospital care
  • You want to find out whether it is more ‘economical’ for Hong Kong
effective efficient
Effective/efficient?
  • First - does it help patients i.e. does it produce benefit? Is it effective?
  • Second - is it good value for money i.e. is it efficient?
  • Can it be efficient without being effective?
slide15
How do we measure acupuncture effectiveness in back pain?
    • No. of lives saved?
    • No of complications prevented?
    • Improvement in quality of life?
consult the literature
Consult the literature
  • You discover that acupuncture seems to improve the quality-of-life of people but would involve more outpatient visits
  • So, it seems to be effective but is it efficient?
  • Is this value for money?
what next
What next?
  • Options are to do an economic study

or

  • Find and interpret the results of other peoples economic studies
  • Both need the same types of thinking processes / skills which we will now review
to determine efficiency
To determine efficiency
  • Need information on
    • effectiveness or benefit
    • costs
  • Then, we need to relate the costs to the benefits
which way is more efficient
Which way is more efficient?
  • This is a cost-effectiveness approach i.e. is acupuncture more efficient than the other program?
    • better value for money?
    • do we get more benefit per $?
  • Need to relate the costs of each program to their benefits
cost effectiveness analysis cea
Cost-effectiveness analysis (CEA)
  • Remember the principle of marginal analysis
  • Count how much benefit each program gives
  • Count the costs of each program
  • Calculate cost per unit of benefit
    • Cost incurred / Benefit resulted
    • = Incremental cost-effectiveness ratio (ICER)
    • Suppose the Western medicine mode costs $536m and the Western medicine combined with acupuncture lead to higher total cost, say, $660m (arbitrary)
calculating cost effectiveness
Calculating cost-effectiveness
  • Suppose the Western medicine mode costs $536m and the Western medicine combined with acupuncture leads to higher total cost $660m
  • Suppose the first option can lengthen life expectancies from 80 to 84 and the latter programme can lengthen the survival of patients from 80 to 85
  • Which programme has lower ICER? Which one should you recommend?
technical development of cea in health economics
Technical development of CEA in health economics
  • Due to advancement of statistics (e.g. Markov Chain Monte Carlo, other Bayesian statistical methods), many CEA studies employ simulation techniques that can provide solution to many complex situations
  • Special software has been developed and widely adopted by health economics researchers for CEA e.g. DATA (http://www.treeage.com)
cost utility analysis cua
Cost-utility analysis (CUA)
  • Suppose you find that acupuncture only affect QOL.
  • For this back pain problem, we need QALYs ie. Quality-adjusted life years
  • When QALY is used to measure benefits, the CEA is also called CUA
what is a qaly
What is a QALY?
  • QALY = quality adjusted life year
  • combines survival and quality of life in one measure
  • 10 years at 0.5 quality = 20 years at 0.25 quality = 5 years at quality of 1.0
example of qalys
Example of QALYs
  • Let’s say, on average,
    • A) Current mode plus acupuncture produces QOL of 0.7 (on a QOL scale)
    • B) Current mode (only the Western medicine) only produces 0.5
    • Both programmes result in same incremental survival years (assume 10 years)
calculating qalys
Calculating QALYs
  • A: 1.3m people surviving 10 years, quality 0.7 = 9.1m QALYs
  • B: 1.3m x 10 x 0.5 = 6.5m QALYs
  • CER A: 660m/9.1m = $72 per QALY
  • CER B: 536m/6.5m= $83 per QALY
  • A is more efficient at producing QALYs although it costs more
cost benefit analysis cba
Cost-benefit analysis (CBA)
  • The effectiveness measure is expressed in monetary term ($)
  • CBA can answer the question of whether one programme should be implemented ie. $net benefit = $benefit - $cost > 0
  • Increasingly but not widely adopted in health care because health benefit is often difficult to monetarised, using willingness-to-pay methodology
economic evaluations in hk
Economic evaluations in HK
  • Cost effectiveness of a treatment, drugs or procedure is becoming a criteria for nation-wide adoption in US (such as FDA) or NICE in UK
  • In HK, CEA can by far be a piece of information that aid decision makings in Hospital Authority or Department of Health
  • Due to resource constraint, the interest of adopting EE in their decision is however increasing