Efficiency, recourse allocation and economic evaluation.

By Assiss. Prof.

Sahar Ahmed Dewedar Public health Ain-Shams University

Health care domain

Effectiveness. Relates to providing care processes and achieving outcomes as supported by scientific evidence.

Efficiency. Relates to maximizing the quality of a comparable unit of health care delivered or unit of health benefit achieved for a given unit of health care resources used.

Equity. Relates to providing health care of equal quality to those who may differ in personal characteristics other than their clinical condition or preferences for care.

Patient centeredness. Relates to meeting patients' needs and preferences and providing education and support.

Safety. Relates to actual or potential bodily harm.

Timeliness. Relates to obtaining needed care while minimizing delays.

Definitions of Health Care Efficiency

• Defined as two production process for change either to :-

• (1) Maximize health care outputs produced from a fixed set of health care inputs and input quality, holding health care output quality constant

• (2) Minimize health care inputs (related to cost minimization) producing a fixed set of health care outputs where input/output quality also are fixed

Structure of resource allocation

formulae

• Population size

• Adjusted for demography

• Adjusted for additional need factors

• Adjusted for additional cost factors

– Market Forces Factor

– Additional costs of remoteness and reality

Three basic approaches

to allocation

1. Based on relationships between population

characteristics and use of health care

2. Based on actual prevalence of ill-health

3. Based on relationships between population

characteristics and prevalence of ill-health

(predicted prevalence)

Efficiency

• Efficacy vs Effectiveness (Think Perfect Condition vs Reality)

• Technical Efficiency (Think Inputs and Outputs)

• Allocative Efficiency (Think Preferences)

• Efficacy vs Effectiveness (Think Perfect Condition vs Reality)

• Efficiency we associate with costs; power and energy; labor; and operations

• Effectiveness is associated with strategies; organizations; costs, and testing

• Productivity is associated with applications; tools; metrics; and labor

Concepts : efficiency • Efficiency = maximising benefit for

resources used

• Technical = meeting a given objective Efficiency at least cost (resources)

(Think Inputs and Outputs)

• Allocative = producing the pattern of Efficiency output (supply) that matches the pattern of consumer want (demand)

(Think Preferences)

Resource allocation : what’s in a name?

• Economics concerned with choice between competing alternatives

• Based on axiom of scarcity - resources limited relative to wants

• Fundamental ‘economic problem’ is therefore allocation of these scarce resources

• ‘Rationing’ (and priority-setting) just another term for resource allocation

Who pays?

•Health Authority?

•Government?

•Taxpayer?

Who really pays?

• Opportunity cost - if we choose to do one thing, the cost of doing that is the value which would have been obtained from the best alternative choice

• Who pays - the person who does not receive treatment

Economic Evaluation and Efficiency

Each of the techniques is aimed at answering different

questions: technical efficiency, allocative efficiency

• Technical efficiency:

– choice of how to provide health care

– minimize input for a given output

• Allocative efficiency:

– choice of what health care to provide

– maximize benefits subject to given resources

Technical efficiency

• Producing a given level of output at a minimal cost or producing the maximum amount of output for a given cost

• Concerned with efficiency ‘within’ a programme

Examples:

• When providing hernia repair surgery, is it best to provide conventional surgery or laparoscopic surgery?

• When providing rheumatology clinics, is it best to provide a nurse practitioner services or a consultant based service?

Example

• to build a hospital with 100 beds in a region with a catchment population of 10,000

• Data given are – Annual inpatient admission rate =0.2

– Average length of stay (ALOS) = 3 days (variance small as well)

– Inpatient admissions evenly distributed throughout the year

• Does the proposal look “technically efficient”?

Hospital Size Calculations

• Calculate Expected number of inpatient admissions = 10,000 * 0.2 = 2000

• Expected number of bed days required = 2000 X 3 days ALOS = 6000 • Average bed days/year required = 6000/365 = 16.44

• Would you recommend the 100 bed hospital?

– Explain why?

To Improve Technical Efficiency’

Approach ‘A’

• Given a specified amount of output (for example 50 consultations per day), try to minimize the cost of inputs (for example, doctors and nurses) required to achieve the target number of consultations

Formula

Output is unchanged _________________ Input cost reduced

= Cost per unit of output decreased

Approach ‘B’

• Give a specified amount of inputs (for example, doctors and nurses) try to maximize the amount of output (for example, the number of consulations per day)

Formula

Output is increased _________________

Input costs unchanged

= Cost per unit of output decreased

Allocative efficiency

• Programmes compete for the allocation of scarce resources

• Comparison across programmes such as gynaecology, intensive care services, renal services, etc.

Example:

• Should there be an expansion of surgery for rheumatology clinics or renal services?

Egypt antenatal care • Allocation of public resources to Safe

antenatal care results in reduction of Maternal Mortality by 50% between 1990-2000

-- ‘Doing the right things’: allocating resources to places where impact on burden of disease is greatest.

-- ‘Doing the right things right’: bundling of cost-effective interventions in antenatal care.

Is it always efficient to produce only

what consumers want?

• NO: individuals tend to be willing to pay only for goods and services that construe a private gain, that they can ‘capture’ for themselves.

• Government’s role is to pay for public goods and services, those construing positive externalities (eg., Immunization), and subsidies for the poor.

How are Economic Evaluation conducted?

Two approaches:

1. Conducted along side RCT (Randomized Controlled Trial) or non-randomised studies (such as before and after studies)

– Collect primary (new) data

2. Rely on existing (secondary) data or existing studies

– Technology Assessment Reviews (TARs) for NICE

Types of Economic Evaluation

Identification of different types of costs and their subsequent measurement and valuing are similar, the nature of consequences varies

– Cost-minimization Analysis

– Cost-Effectiveness Analysis - 1970s

– Cost-Utility Analysis - 1980s

– Cost Benefit Analysis - 1960s and 1990s

CMA and CEA answer narrower questions, CUA and CBA answer broader questions

Types of Economic Evaluation

• Methods:

– Cost-effectiveness: benefit in natural units (life-years)

– Cost-utility: benefit in utility values (QALY)

– Costs benefit: benefit in monetary value.

How to start improvement

• Evaluation

• Improvement of structure ( equipment)

• Improvement of process ( doing the right things better)

• Improvement of outcome: obtain better results in

• 1- effective services

• 2- costs

• 3- client and employment satisfaction

Group exercise

Choose a health care service and try to

1- inputs and outputs

2- measures of effective service

3- evaluation

4- alternatives

5-Plan of improvement

How to design for an allocation of recourses and economic evaluation ?.....................

Selecting Health Interventions And Estimating

The Number Of Discounted DALYs Gained

• For each disease category, a range of possible interventions needs to be identified, which are the most feasible to implement, the most efficacious in preventing or treating disease, and the most acceptable to the community

• For instance, health education is effective, but its impact on disease burden is not well documented

• Effectiveness of some interventions may be known in a qualitative way (e.g. high or low) but a limited amount of quantitative information exists on the impact of many interventions.

Effectiveness depends on:

• Efficacy of the technology.

• Diagnostic accuracy.

• Compliance of health care providers.

• Compliance of patients.

• Effectiveness (%) = Efficacy (%) X Diagnostic accuracy (%) X health providers compliance (%) X patient compliance (%)

• Coverage (%) = Accessibility (%) X Acceptability (%)

•Impact (%) = Effectiveness (%) X Coverage (%)

The impact intervention could also be measured by using the following manner:

• Efficacy rate X Coverage rate = percent impact (reduction) on incidence rate.

• Efficacy rate X Compliance rate = percent impact on case fatality rates or degree of disablement (D)

Compliance rate refer to how will patients adhere to treatment regimens, as well as the technical skills of health personnel

Community effectiveness

• individual effectiveness measures the reduction in disease or death risk that a complaint individual is compared to a non-complaint. So, it can defined by risk ratio only.

• Community and individual effectiveness are not equivalent, unless the intervention coverage is 100% .

Community effectiveness = individual effectiveness X Coverage

Calculating Number Of Healthy Life Years Or DALYs Gained by certain intervention

• Could be estimated by calculating the percent reduction in the incidence rate, case fatality rate or other relevant variables, resulting from implication of health intervention.

Example

• Assume that an immunization program can achieve a 50% coverage rate within a year, and the incidence of measles without vaccination is approximately 39/1000. Vaccine efficacy is estimated to be 95%.

Can you calculate the new incidence rate ?

• Effectiveness = Coverage X Efficacy of the vaccine. = 95% x 50%

• A 47.5% reduction in the incidence rate can be attained through the program (95% x 50%).

• The new incidence rate would be 39/1000 multiplied by (100%-47.5%). This figure is used to recalculate the DALYs lost per 1000 population with the health intervention using the formulas previously mentioned.

The difference between this recalculated DALYs lost and the original DALYs lost by the disease without the intervention is called the DALYs gained

Cost effectiveness in health

care:

Defined to be the net gain

in health or reduction in

disease burden from a health

intervention in relation to

the cost. Measured in dollars

per disability-adjusted life

years gained

Cost-Effective analysis =

Cost

Effectiveness

Question

• What could be in the numerator and the denominator?

Nominator

• Cost of health care services ( including patient, home care giving…………)

• Non- health care cost ( transportation, travel time…………….)

• Other cost

• Cost of health care intervention ( medication, treatment adverse event……………………..)

Denominator

• Live years gained

• QUALY or HRQOL gained

• Generic health state

• Community preferance

Discounting

• Each case of disease prevented or successfully treated saves the loss of a healthy year of life or DALYs over a period of years depending upon the age of onset and age of death of the disease.

There are two reasons for discounting

disease: • Benefits occurring in the present time have a greater

importance than those, which take place in the future. Because there is a clear social preference for receiving benefits sooner rather than late, the DALYs gained must be adjusted to reflect the social rate of discount, that the relative value of benefits at different times.

• Investment in health sector occur in the present, while benefits may not realized in the future, so without discounting. It will be always be logical to postpone any health intervention because a greater number of benefits can be achieved in the future