Health Interventions:Evaluation of Cost Effectiveness

Dr Sanjay Dixit M.D. Ph.D Diploma in Health System

Management(U.S.A.)MGM Medical College Indore

Health care interventions. Health system with similar

level of Health expenditure per capita show wide variations in population health outcomes

Some system devote resources to expensive interventions with small effect on population health

Health Care Interventions Low cost interventions with

potentially greater benefit are not fully implemented

Information on both costs and effectiveness are essential for making evidence-based decisions about competing health care interventions

Health Care Interventions 20 years ago Health Care intervention

were centered exclusively on

Clinical Effectiveness and

not on Cost Effectiveness. Intervening years have seen an ever

increasing strain on health resources. Therefore need of Economic

Evaluation of health Interventions

Health Interventions…

•Clinical

•Behavioral

•Environmental

•Systems

What is problem ? How much problem can be

prevented?

How much problem intervention

can prevented ?

Benefits compare to costs ?

What is cost of intervention

How benefit to cost can compare

What are Gain compare to present status?

Key QuestionDecision makers

Ask ?

Why Do Cost Effectiveness?

• Understand trade-offs between costs and benefits

• Inform decision makers

Cost effectiveness Analysis..

It is a Technique for identifying the most effective use of limited resource

It compares alternative interventions/procedure/program using cost and a common effectiveness out come(Lives saved/cases prevented/additional days of activity/extent of sight restored/ Heart attacks avoided).

Cost effectiveness Analysis

These are combined ( cost per heart attack avoided) such that the relative cost effectiveness can be assessed

Used to assess the comparative impacts of expenditure on different health interventions.

Cost Effectiveness Analysis A study evaluating whether

hypertension screening,Nutrition Counseling,Medication,or by pass surgery would provide the most additional years of life for each Ruppes spent is a Cost effectiveness study

Cost Effectiveness Analysis Cost Effectiveness of

interventions such as DOTS for tuberculosis is highly cost-effective

Liver transplant for alcoholic cirrhosis is highly cost-ineffective

Cost Effectiveness Analysis… It also helps to choose

between medical and non medical approaches for protecting health such as better emergency medical services versus better highway design

Cost Effectiveness: What is it?

Cost Effectiveness =What you payWhat you get

Burden of illness

Deaths (mortality)

Frequency (incidence, prevalence)

Severity (disability, quality of life)

Hospitalizations

Burden of Illness

HEALTH IMPACT

ECONOMIC IMPACT

Cost of illness

Cost of Illness• Direct (medical and non-medical)

costs

• Indirect (productivity/Travel Expenses/Loss of time) costs

• Loss of Quality of Life

• Intangible costs (grief, pain, suffering)

Burden of Illness

Cost of Illness

HEALTH IMPACT

ECONOMICIMPACT

Can an Intervention Work?

• Interventions -- public health programs, policies, clinical care

• Efficacy

Can an intervention work in ideal settings?

Effectiveness/Efficiency Effectiveness Relate input and output to out come..Are the outputs produced

actually having desired impact

Efficiency Indicates how inputs are used to

produced the outputs

Burden of Illness

Cost of Illness

Net Benefit

Intervention

Effectiveness

HEALTH IMPACT

ECONOMICIMPACT

Cost of Intervention?

Net Cost (or Saving) = Cost of program

+ (Cost of care with a program – Cost of care

without a program)

Burden of Illness

Cost of Illness

Net Benefit

Cost ofProgram

Difference in Cost of Care

Net Cost

Intervention

Effectiveness

HEALTH IMPACT

ECONOMICIMPACT

How Do BenefitsCompare to Costs?

• Combine benefits, harms, and costs

• Cost effectiveness, cost utility, cost benefit

Does an Intervention Work?

• Effectiveness Does it work in real-world settings?

• Net Benefit = Benefits - Harms

Measuring Effectiveness

• Natural health units– Lives saved, cases prevented, life years

saved

• Conversion to common units– Quality-adjusted life years (QALY’s)

• Conversion to Rupees

Quality of Life Adjustment Factors 

Duration Health Status Adjustment

Reference State Perfect Health 1.00 3 months home confinement,TB 0.68 3 months home confinement contagious ds. 0.65 3 months depression 0.44 8 years kidney transplant 0.58 8 years mastectomy for breast cancer 0.48 life home dialysis 0.40 life hospital confinement contagious ds 0.16 Reference State Dead 0.00

Burden of Illness

Cost of Illness

Net Benefit

Cost ofProgram

Difference in Cost of Care

Net Cost

Intervention

Effectiveness

CostEffectiveness

HEALTH IMPACT

ECONOMICIMPACT

Steps in Cost-Effectiveness Analysis….

Step 1

Define the Program * Define Precisely problems to be analyzed, Its

focus,process,and limits * Develop Alternative approaches to the program Treatment

v/s Immunization, Refinement1 Age of Vaccination, Means of delivery

Step 2 Compute net cost (Four Parts) * Compute gross Program cost Screening 1Cost of Screening, 2Follow

up of +ve cases3,Treatment of person who otherwise might gone untreated

* Compute monetary savings ( Cost of Avoided treatment) * Discount costs and saving to the present value (5 to 15 %) * Compute the net cost( Gross costs less savings)

Steps in Cost Effectiveness Analysis…. Step 3 Compute the net health effects

Live saved, Complications averted, Cases of illness prevented

( in terms of additional years of healthy life).

- Add Additional years with full health - Additional years of disease( A year

restricted to home may be valued 80% of complete health

-

Steps in Cost Effectiveness Analysis….

Improvements in health( not extension of life) like owns symptoms/restrictions of being home bound may be relieved

- Negative effects (Inconveniences and morbidity) restricted activities/person has to visit the physicians office/Asthma relief

Step 4 Apply a decision rule based on Net Cost and net health effect

Net Effects Net Cost Positive Net Cost Zero or Negative

Positive Case 1 C.E.= Net Cost-Net Health Effects Case 2 Program economically Valuable Select most efficient program for Should generally be implemented Improving the health inexpensive and highly effective ( lowest Ratio ) Provision of safe water Measure of efficiency Immunization, iodization of salt  Zero Case 3 Program benefit offset by morbidity Case 4 C.E. = Net Cost-Net Health Effects or and inconvenience. Program generally Select most efficient programNegative should not be implemented for containing costs( Highest ratio) Cost money worsening the life

Steps in Cost Effectiveness analysis… Step 5. Perform Sensitivity Analysis. It will be necessary to make number of

assumptions and to estimate the value of various parameters.

Sensitivity Analysis can be used to test how robust the results are to these imprecise measurements

It is process used to predict exactly the future discount rate

Years------ 1- 2 

3 4 5 Total

Costs 100 80 75 25 20 300

Discounted costs (5%)

100 76 68 22 16  

Benefits 10 50 75 80 85 300

Discounted Benefits(5%)

10 48 68 69 70  

 

DISCOUNTED COST/ BENEFIT

Sensitivity Analysis…. Opinion differ about the value of year

with impaired health relative to perfect health

Medical experts are uncertain about the value of various preventive measure.

Professional assessment are constantly updated with research

Its difficult to predict future discount rate

Sensitivity Analysis…. In sensitivity analysis areas of uncertainty are

varied and the effect on result is noted Uncertain factors are to be examined and their

effect on decision rule are studied

If final decision is not affected by making different assumptions about uncertain quantities-by choosing High and Low estimates, than intervention may be applied

If the decision would drastically altered by different estimates, than we should be cautious for making the recommendations

Step I Define the Program Hypothetical Influenza

Inoculation Program Vaccinations would be

administered to 100,000persons aged 65years and older over next year in existing clinics and health centers

Step II Compute Net Costs

Inoculations (100,000X$3) = $300,000Treatment of Reaction(50X$300)=+$15000(Plus) _________ Gross Program cost $315,000 Saving due to People not $–50,000 (Minus)

getting influenza ____________ (1,000x$50)

Net Program COST = $265,000

Step 3 Compute net Health Effects Type of effect Healthy Years____________________________________________

1 Additional healthy Life( 10X6.9) 67.92 Health Improvement for those Spared +40.0(Plus)Morbidity of influenza(1000X.04) ___________ Gross Health Effect 107.9

Negative effect of Adverse reaction -4.5 (Minus) (50X.09) _____________ Net Health Effect 103.4

Step IV Apply Decision Rule

Case 1 Situation definite health gains are achieved

but at net positive cost Net Cost divided by net health gain $265000/103.4 health years=$2563

per healthy years This ratio helps decision makers to

determine whether to implement the program or not

Step 5 Perform Sensitivity analysis If expert think that only 800

cases of influenza will be prevented

The cost effectiveness ratio will be increased

Decision makers will decide whether its affordable Cost or Not to save life and provide healthy life years

Policy Implications of Economic Evaluations

Type of Analysis Denominator Policy Level

Cost Effectiveness Natural Health Units (Life years saved, cases prevented)

Specific Health Program

Cost Utility Common Health Units (Quality-adjusted life year)

Across health programs

Cost Benefit Rupees (all converted to Rupees)

Across Sectors

SERVICE Prevent.Burden

CostEffect.

Total

Immunize children 5 5 10Adults tobacco counseling 5 5 10Adolescent tobaccocounseling

4 5 9

Pneumococcal Immunization 4 5 9Vision screening 65+ 5 4 9Influenza immunization 4 4 8Pap smears 5 3 8Chlamydia Screening 3 5 8Colorectal cancer screening 5 3 8Lipid Screening 5 3 8Hypertension screening 5 3 8

Preliminary List of Services Scoring 8 or Higher

When to undertake the C.E.A. Formal C.E.A. analysis will be most

useful when 1. Large amount of resources(Rs in

Millions/Billions) are involved 2. Responsibilities for decisions are

fragmented 3. The Goals and Objectives of

different groups are at odd or unclear

When to undertake the C.E.A... 4.Alternate course of actions

are radically different 5.The technology and risks

underlying each alternatives are well understood

6. A long time frame is involved(eg Strategy versus management)

Use of Cost Effectiveness Analysis for Decision/Policy Makers Cost-effectiveness analysis as one

tool decision-makers can use to assess and potentially improve the performance of their health system.

It indicates which intervention provide the highest “value of money” and help them choose the interventions and programme which maximize health for available resources.

Challenges of CEA. Resource allocation decision affecting

the entire health sector must take into account Priority of sick,reducing social inequalities in health or well being of future generation.

Fails to identify existing misallocation of resources by focusing on evaluation of new technologies or strategies

Challenges of CEA.. The result of many CEA studies are

context- specific ,they cannot be used in other population

There are difficulties of generalizing context specific CEA studies

Overall effectiveness of a given clinical intervention is often not known

References Economics for Health Sector Analysis Concept and

causes Mead Over The World Bank Washington D.C. Health Economics Fundamentals and Flow of funds

Thomas E .Geten John Wiley & Sons (1997) Health Economics Theories,Insight Rexford E

Sanrerre Revised Edition Dryden press Drden (2000) Development of WHO Guidelines on Generalized cost

effectiveness analysis Christopher et.al Health Economics 9:235-251 (2000)

Methods of Economic Evaluation of Health Care programmeDrummondMF et.a Second Edition Oxford University Press(1997)

Health interventions assessment WHO –CHOICE website

THANK YOU

Cost Utility Analysis Life years saved are not

homogenous Medical intervention is

associated with significant number of life saved but a reduced quality of life.

Another analysis “ Utility Analysis”has been frequently used in recent years.

Cost Utility Analysis Cost Utility analysis compares

interventions(Procedure, test or method) using costs and health out come that is adjusted for quality of life as rated as assessed by the recipient-the patients

( For example Quality- Adjusted Life Years or QALYs . The ‘Common Currency’commonly used is QALYs,

Cost Utility….. A procedure with a 0.5 Quality

of life outcome(QOL) or Quality adjusted life year (QALY) costing Rs 4000 equals in C-U analysis as Rs 8000 with QOL result of 0.25

Quality of Life adjustment Factors… It adjust number of life years gained by

an index between 0.00 (Death) and 1.00 ( Good Health)

Respondents indicated that living for three months confined to hospital for tuberculosis treatment was worth only 1.8months ( 0.60 x 3 months)

Some people consider some illness to be worse than death , such additional years lived in such misery may has negative value

Method to construct index for measuring utility First Method:Asks people who

have same condition to assess the quality of their lives

Second Method:Describes the condition to a group of people who do not have the condition and ask them to gauge the quality of life or utility

Cost Utility….. Quality adjusted life years QALYs

for each Health state and treatment was assessed by ‘Self Reported description’

Five dimensions are assessed Mobility,Self Care,Performance of usual activity, Pain/Discomfort,and Anxiety/Depression

Cost Utility… Each having three possible

responses No problem/some difficulties/moderate problem/unable /Extreme problem

Each combination has an associated utility value derived with a scale indexed between 0 ( dead) and 1 ( Full Health)

Cost utility analysis The difficulty in using utility

analysis lies in developing appropriate index for measuring the Utility

Economic Issues-- Time Horizon

Time frame should be long enough to capture all harms, benefits and costs regardless of when they occur, usually a lifetime

Contrast with short term analyses which often capture many of the costs but fewer of the benefits

Economic Issues--Perspective

Whose point of view -- patient, medical care system, employers, society

Cost Perspective

Societal Payer Employer Patient

Direct Medical Y Y Y Out of pocket

Direct Non-Medical(e.g., transportation,day care)

Y N N Y

Indirect (e.g.,Productivity)

Y (if not in denominator)

N Y Y (if not indenominator)

Intangible (e.g.,grief, pain, suffering)

Y (if not in denominator)

N N Y (if not indenominator)

Examples of cost included in typical Cost effectiveness analysis based on perspective of analysis

Cost Benefit Analysis Cost Benefit Analysis (CBA) measures

both cost and benefits in monetary values.An intervention is commonly adopted if the monetary benefits exceed the cost, resulting in net benefit.

Important tool is the benefit -to-costs ratio

Total Monetary cost of benefit or outcome divided by the total monetary cost of obtaining them

Cost –minimization Analysis The simplest from of economic evaluation

where the procedure or programmer identified that cost the least.

If there is no significant difference in the benefit of two interventions,the preferred intervention will be the one that is least costly

If there is no significant difference in the cost of two interventions,the preferred intervention will be one that is most effective