HECO U4 - Eco Evaluation

Embed Size (px)

Citation preview

  • 8/4/2019 HECO U4 - Eco Evaluation

    1/80

    Click to edit Master subtitle style

    Healthcare Economics

    ECONOMIC EVALUATION OF HEALTH PROGRAMS ANDINTERVENTIONS

  • 8/4/2019 HECO U4 - Eco Evaluation

    2/80

    ECONOMIC EVALUATION

    Meaning

    Drummond, the comparative analysis of alternative courses ofaction in terms of both their costs and consequences.

    Example:

    Human testing

    Experimental group drug being tested

    Control group placebo/sugar pill

  • 8/4/2019 HECO U4 - Eco Evaluation

    3/80

    IMPORTANCE Of ECONOMIC EVALUATION

    1. Scarce Resource we do not have the ability to satisfy the desireof all the people of all the time

    2. Different people have different objectives we make choices andoften the choices are difficult, if not downward unpleasant

    3. Make choices among competitive alternatives (it is a matter of life anddeath) it is important that we approach resources allocationdecisions in health care in a clear and systematic way

  • 8/4/2019 HECO U4 - Eco Evaluation

    4/80

    Production Process

    INPUT PROCESS OUTPUT

    Objectives:Use efficientlyUse in

    optimalCombinations

    Efficiency inProcessinginputs

    Maximize

  • 8/4/2019 HECO U4 - Eco Evaluation

    5/80

    Process Flow of Basic Vaccination Programs

    INPUT

    VaccinesSyringes

    ManpowerOther logisticFinancing

    PROCESS

    TrainingInformation

    DisseminationImplementationMonitoring

    OUTPUT

    # of childrenImmunized

    GeographicRegionCovered

    COSTSEFFECTS/BENEFITS

  • 8/4/2019 HECO U4 - Eco Evaluation

    6/80

    Questions Frequently Ask1. What is the effect on output of employing different proportions of

    human capital inputs?

    2. Is there a possibility of increasing output through specialization ordivision of labor?

    3. What is the effect on output of increasing the input of some resourceswhile holding other inputs constant?

    4. What is the most efficient way of processing inputs to maximizeoutputs?

  • 8/4/2019 HECO U4 - Eco Evaluation

    7/80

    Way of Assessing Health Programs whether

    1. Health resources are used optimally

    (right quantities, right mix)2. Health programs are implemented

    efficiently

    3. Health outputs are maximized

  • 8/4/2019 HECO U4 - Eco Evaluation

    8/80

    Measuring Costs and Outcomes

    n Ideally, outputs or outcomes ofhealth intervention (healtheffects) should outweigh thecosts of such intervention

    n To be able to assess this, weshould be able to measure thecosts involved in anintervention, and comparethem with the effects of such.

    n Therefore we have to learn the

    measurement of costs andtheir outcomes

    COSTS

    EFFECTS

  • 8/4/2019 HECO U4 - Eco Evaluation

    9/80

    Measuring Costs and OutcomesUndue Emphasis on Quality; Cost Advantage Suffers

    QUALITY

    COSTS

  • 8/4/2019 HECO U4 - Eco Evaluation

    10/80

    Measuring Costs and OutcomesQuality Suffers; too much Emphasis on Costs Savings

    QUALIT

    Y

    COSTS

  • 8/4/2019 HECO U4 - Eco Evaluation

    11/80

    Measuring Costs and OutcomesQuality and Costs Balance; Patients Receive Value

    QUALITYCOSTS

  • 8/4/2019 HECO U4 - Eco Evaluation

    12/80

    Effectiveness can be measured in terms of

    1. Surrogate measures examine the clinical effect of a treatmentoption or its clinical efficacy - blood pressure, cholesterol level,bone mass density or tumor size

    2. Intermediate measures include clinical effectiveness, oroutcome, measures - heart attack, stroke, hip fracture, remissionof cancer or death

    3. Final outcomes measures economic effectiveness - diseasefree days, life years saved, QALY

  • 8/4/2019 HECO U4 - Eco Evaluation

    13/80

    MEASURING BENEFITS

    For most medical programs, the 3 major types are as follows:

    1. Health

    2. Productivity

    3. Reduction in Future Medical Costs

    Examples:

    Vaccination now can prevent hospitalization in the future

    A transplant may mean ten more years of lifeMany diseases are less costly to treat if care is given early and if

    treatment is done correctly the first time

    Better infection control allows to be discharge from the hospitalsooner

  • 8/4/2019 HECO U4 - Eco Evaluation

    14/80

    MEASURING COSTS

    1. Medical care and administration

    2. Follow up and Treatment3. Time and pain of patient and family

    4. Provider Time and Inconvenience

  • 8/4/2019 HECO U4 - Eco Evaluation

    15/80

    UNDERSTANDING COSTS

    COSTSare what society, government or individuals incur to run a

    program, or to produce something that they desire, like better healthare different from the prices of goods

    are monetary value of producing a good or services, while pricesare usually cost plus markup which is largely driven by market

  • 8/4/2019 HECO U4 - Eco Evaluation

    16/80

    DIFFERENT KINDS OF COSTS

    1. According to the Behavior of Costs

    A. Total Cost is the measure of all the costs entailedin producing a given level output

    B. Marginal Cost is the measure of the resourcesassociated with a small incremental change in output

    C. Opportunity Cost is the cost of sacrificing

    other outputs/outcomes in favor of a chosen program

  • 8/4/2019 HECO U4 - Eco Evaluation

    17/80

    DIFFERENT KINDS OF COSTS

    D. Average Cost is the measure of the total cost ofproduction associated with each unit of output

    Total Cost/Quantity of OutputExample:

    If the total cost of vaccination is P1,000,000.00 and theprogram was able to vaccinate P10,000 children, then the averagecost would be P100.00 per child immunized

    P1,000,000.00/10,000Average Costs = P100 per child immunized

  • 8/4/2019 HECO U4 - Eco Evaluation

    18/80

    DIFFERENT KINDS OF COSTS

    2. According to the relationship of costs to the product or serviceproduced

    A. Direct Costs These are costs that can be directlyattributed to a specific output or product.

    B. Indirect Costs These costs are incurred assacrifice for being in an ill health, or in performing a health-producing activity.

    C. Intangible Costs These are costs attached toentities that we cannot touch and feel.

  • 8/4/2019 HECO U4 - Eco Evaluation

    19/80

    3 Methods To Determine The Direct Costs of Medical care

    1. Adjusted charges for hospital care usually estimated by multiplyingbilled charges by the Medicare cost-to-charge ratio

    - the actual cost of hospital services is (on average) 60% of billedcharges

    - cost of some services, like drugs and laboratory test 15% ofcharges

    - ER and obstetric services, actual costs may be as much as 125%of billed charges

    2. Cost accounting for CBA uses the same principles as job costing inother industries

    - resources (nursing hours, technician time, space, supplies) areestimated from direct observation, and their costs are estimatedusing prevailing wages, prices, and so on

    - An overhead charge is then applied for administration, utilities, andother central cervices

    3. Extrapolation from comparable services is used when charges are notavailable and cost accounting is too time- consuming

  • 8/4/2019 HECO U4 - Eco Evaluation

    20/80

    EXAMPLE OF INDIRECT COST

    Druss et. Al examine economic burden of 5 chronic conditions affectingU.S. population

    1. Mood disorders 3. Asthma 5. Diabetes

    2. Heart disease 4. Hypertension

    @ the medical care cost to treat these 5 conditions =$62.3B

    @ the cost of treating co=existing medical conditions =$ 207.7 B

    @ adding to the total health costs of $270 B, theestimated $ 36.2 B in lost earnings due to missed work daysthe total societal costs for persons suffering these 5

    conditions to over $306 B

  • 8/4/2019 HECO U4 - Eco Evaluation

    21/80

    DIFFERENT KINDS OF COSTS

    3. According to the frequency of incurring Costs

    A. Capital Costs These are costs for item with a life

    expectancy of more than a year.These costs are divided by theirtotal usable life span.

    Example:

    A building worth P10,000,000.00 was erected for a certainhealth program which will last for ten years. The monthly cost

    of the building will be computed as follows:P10,000,000.00/10 years/12 months per year =

    P83,333.33 per month

  • 8/4/2019 HECO U4 - Eco Evaluation

    22/80

    DIFFERENT KINDS OF COSTS

    B. Recurrent Costs These are costs necessarily incurred eachyear or each month

    Examples:

    salaries and wages of personnel; medical supplies, drugs,electricity, etc are all incurred, commonly, on a monthly basis

    TOTAL COSTS = Capital and Recurrent Costs

  • 8/4/2019 HECO U4 - Eco Evaluation

    23/80

    Relationships among a Firms Costs1. Total cost includes both explicit and implicit costs

    2. Total costs = fixed cost + variable cost

    3. Marginal cost = change in total cost per added unit of output

    4. Average total cost = total cost / output

    5. Average fixed cost = fixed cost/output

    6. Average variable cost= variable cost/output7. Average total cost = average fixed cost + average variablecost

    TERMS .

  • 8/4/2019 HECO U4 - Eco Evaluation

    24/80

    Explicit Costs - Money paid by a firm to purchase the services ofproductive resources

    Implicit Costs - The opportunity costs associated with a firmsuse of resources that it owns. These costs do not involve a directmoney payment - wages, interest

    Total Costs - The costs, both explicit and implicit, of all theresources used by the firm

    Fixed Costs - Cost that does not vary with output.

  • 8/4/2019 HECO U4 - Eco Evaluation

    25/80

    Average Fixed Costs - Fixed cost divided bythe number of units produced. It always

    declines as output increasesVariable Costs - Costs that vary with the rate

    of output. Ex. Wages paid to workers andpayments for raw materialsAverage Variable Costs - The total variable

    cost divided by the number of units producedAverage Total Costs - cost divided by thenumber of units produced. It is sometimes calledper unit costMarginal Costs - The change in total costrequired to produce an additional unit output

  • 8/4/2019 HECO U4 - Eco Evaluation

    26/80

    3 Basic Elements determine the Total Cost of Therapy

    1. Production costs - are the cost of producing the treatmentExample: The production costs of treating hypertension

    - include the costs of physician office visits to initiate and monitortherapy

    - the costs of any testing required to diagnose and monitor the disease

    - the cost of pharmaceutical products and services used to treat the disease

  • 8/4/2019 HECO U4 - Eco Evaluation

    27/80

    2. Induced resource losses - are those costs oftreating and managing adverse effects of treatment

    Example: patients treated with antihypertensive

    medications frequently experience side effects such asdizziness, impotence and nasal congestion

    3. Induced resource savings - are costs thatare prevented as a result of successful treatment

    Example: untreated hypertension results strokes and

    heart attacks.

  • 8/4/2019 HECO U4 - Eco Evaluation

    28/80

    Factors Affecting Health Cost

    1. Growth in the aging population2. Abundance of specialized providers

    3. Surplus of hospital beds

    4. Inadequate financing of services

    5. Passive role of consumers6. Increase in number of lawsuits

  • 8/4/2019 HECO U4 - Eco Evaluation

    29/80

    Encouraging Cost Awareness

    1. Some countries are trying doctors aware of more economicalprescription to practices

    2. Pharmacist empowered to substitute cheaper equivalents unless

    the doctor has specifically forbidden substitution on the prescription

    3. Consumer rights also play a role in economic in health services

    4. The common practice of making specialist care accessible only onreferral from another doctor has the potential of reducing the cost ofhealth care

    5. Cost sharing can induce the consumer to require the provider to becost conscious, but it does not work when patients have privateinsurance to cover their share of the costs

    6. Cost sharing can have perverse effects

  • 8/4/2019 HECO U4 - Eco Evaluation

    30/80

    MEASURING OUTCOMES

    Outcomes are the effects of the health interventions for whichthe costs were incurred.

    Outcome Health Intervention Outcome/Benefit Measure

    Improvement of healthRenal Dialysis or Coronary

    Artery Bypass GraftSurgery

    Life years gained as a result

    of the health intervention

    Improvement ofquality of life

    Steroid + B2 AgonistInhaler (Anti-AsthmaInhalers)

    Better, more active life

    Increased economic

    output

    Influenza vaccination Less work days lost

    because of better health

    Monetary saving Expanded program ofImmunization

    Less expenses for acutecare and hospitalizationbecause illness isprevented

    Outcomes of Health Interventions

  • 8/4/2019 HECO U4 - Eco Evaluation

    31/80

  • 8/4/2019 HECO U4 - Eco Evaluation

    32/80

    The comparison in an EE are made in term of cost and consequences.The specific cost to be included in the analysis are determined by

    1. The individual patients

    2. Health insurance company3. Health plan

    4. Government agency

    5. Society as a whole

  • 8/4/2019 HECO U4 - Eco Evaluation

    33/80

    EFFECTIVEEVALUATION

    Cost Analysis/Effectiveness

    Or BenefitAnalysis

    Examines:

    1. Consequences outcome

    only description

    2. Costs only cost

    description

    Cost/Outcomedescription

    ECONOMICEVALUATIONTECHNIQUES

    1. CMA2. CEA3. CBA4. CUA

    Are there two or morealternative?

    Sample Economic Evaluation Process

  • 8/4/2019 HECO U4 - Eco Evaluation

    34/80

    The Primary tasks required to Successfully Conduct Economic Evaluation(EE)

    1.

    To identify2. To measure

    3. To evaluate

    4. To compare RELEVANTCOSTS

    &CONSEQUENCES

  • 8/4/2019 HECO U4 - Eco Evaluation

    35/80

    TYPES OF ECONOMIC EVALUATION

    1. COST EFFECTIVE ANALYSIS (CEA)

    @ the most frequently used

    @ investigate the best way of achieving a singleobjective by comparing effects and costs

    @ which possible intervention will best achieve a givenobjective at the least cost

    @ when given a fixed budget, which intervention

    maximizes the effectiveness of the expenditures@ This ratio can be simplified by

    TOTAL COST/TOTAL HEALTH EFFECT

    Remember that it is a ratio that comparescosts per health effect

  • 8/4/2019 HECO U4 - Eco Evaluation

    36/80

    Options Number of Immunized

    Children

    Total Costs ofthe project

    Costseffectiveness

    Use BarangayHealth Centers

    35,000 P3,500,000.00 P98.59/childimmunized

    Use mobileclinics

    45,000 P5,750,000 P127.77/childimmunized

    Use Jollibeestores

    38,670 P3,750,000 P96.97/childimmunized

    Example: Evaluating options in undertaking an Immunization Drive

  • 8/4/2019 HECO U4 - Eco Evaluation

    37/80

    compares treatment or otherforms of health intervention thatyield different levels of healthbenefitsoutcome is based on a certainclinical measurementcosts are calculated in dollars

    CEA

  • 8/4/2019 HECO U4 - Eco Evaluation

    38/80

    To compare a new, more expensive and more effective agent is compared with anolder, less expensive, and less effective product, which is the standard of therapy

    A CEA seeks to find the least costly means of achieving some particular healthoutcome

    CEA compares the costs and effectiveness of treatments that achieve the same

    type of health outcome - to prolong life, reducing blood sugar, helping patients stopsmoking

    CEA

  • 8/4/2019 HECO U4 - Eco Evaluation

    39/80

    Costs and consequences are compared in CEA by means of an Incremental cost-

    effectiveness ratio.CER = Cost nt Cost cst

    Effectiveness nt Effectiveness cst

    where CER = cost-effectiveness ratio

    Cost nt = cost of the new treatment

    Cost cst = cost of the current standard treatment

    Effectiveness nt = effectiveness of the new treatment

    Effectiveness cst = effectiveness of the current standard oftreatment

    CEA

    ICER FORMULA:

  • 8/4/2019 HECO U4 - Eco Evaluation

    40/80

    ICER FORMULA:

    ICER = CB CA

    EB EA

    Where CA,B = costs of treatment options A and B

    EA,B = clinical effectiveness of treatment options A and B

    When CEA is used in clinical decision making, the usual approach is to define thetreatment option being studied (treatment B) and the alternative treatment option itis being compared with (treatment A)

    If CA > CB and EA < EB, option A is both more costly and less effective. Inthis case we say that treatment option B dominates

    If CA < CB and EA > EB,option B is both more costly and less effective. Inthis case we say that treatment option A dominates

    In both of these cases, further analysis is unnecessary, the most effective

    treatment option is also cheaper, and the choice is simple

    If, however, CB > CA and E B > EA, the choice is not as obvious, and CEA isin order

  • 8/4/2019 HECO U4 - Eco Evaluation

    41/80

    Incremental Cost-Effectiveness ComparingTwo Treatment Options

    n The gain effectiveness is plotted on the y -axis and the net represent value of thetotal costs on the x axis

    n With each treatment option representedby a point on the graph it is easy to seethat the higher the point, the moreeffective the treatment; the farther to the

    right, the more expensive the treatmentn Using the, the ICER comparing the 2

    treatment options is inverse of the slope ofthe line between the 2 points A and B. Asteeply sloped line indicates a low ICER,or in other words, a substantialimprovement in health effects for arelatively small cost

    n As the slope gets flatter, the ICERincreases, indicative of higher costinterventions relative to their effectiveness

    Effectiveness

    Cost

    B

    A

    CA CB

    EB

    EA

  • 8/4/2019 HECO U4 - Eco Evaluation

    42/80

    Incremental Cost- Effectiveness ComparingMultiple Treatment Options

    n Points A through G represent thecosts and effects of 7 options for thescreening or treatment of disease

    n The options that form the solid line(ABDFG) represent the economicallyrational subset of treatment options

    n Points that lie below the line, suchpoint C and E, represent treatmentoptions that are dominated by thosethat are on the line

    n As the slope of the line gets flatter, theICER increase, providing a clear

    depiction of the theoretical constructcalled the flat-of-the-curve

    A

    B

    DF G

    CE

    EFFECTIVENESS

    COST

  • 8/4/2019 HECO U4 - Eco Evaluation

    43/80

    Example: Costs and patient outcomes of 2 treatments for colon cancer:surgery alone, which has the current standard of treatment, and surgeryfollowed by 52 weeks of chemotherapy. They stimulated the direct medicalcosts of surgery to be $6,000 per patient and the direct medical costs ofsurgery and chemotherapy to be $13,000. The average life expectancy for apatient receiving surgery alone was estimated to be 13.25 years ascompared with 15.65 years for a patient treated with both surgery andchemotherapy. Thus, the incremental cost-effective ratio for surgery pluschemotherapy was

    CER = Additional costs of surgery plus chemotherapy

    Additional effectiveness of surgery plus chemotherapy= $13,000 -$6,000

    15.65-13.25 = $2,917

    The CE ratio is $2,917 per life year saved. This indicates that use ofboth surgery and chemotherapy will result in longer life for patients,

    but at an additional cost of $2,917 for each year of life saved

  • 8/4/2019 HECO U4 - Eco Evaluation

    44/80

    Cost-Effective Ratio:

    costs (net resource effect)

    effectiveness (net effect on health

    outcome)Dollar spent/no. of cures; lives saved (lost) by each intervention;life expectancy

  • 8/4/2019 HECO U4 - Eco Evaluation

    45/80

    Net cost measure of net effects

    of an intervention on resource use

    Production costs resources usedto provide the intervention

  • 8/4/2019 HECO U4 - Eco Evaluation

    46/80

    Induced resource losses

    resources consumed as aconsequence of tests andtreatment undertaken

    Induced resource savings expenses avoided as aconsequence of the initial

    intervention (economic benefit)

  • 8/4/2019 HECO U4 - Eco Evaluation

    47/80

    Single health effectiveness

    measure (# cures/P spent)

    may incorporate: Beneficial health effects drugefficacy

    Negative health effects drugtoxicity

  • 8/4/2019 HECO U4 - Eco Evaluation

    48/80

    Ceftriaxone

    Benzylpenicillin

    Drug cost 96.90 28.20

    Admin cost 39.45 157.80

    Hospitalizationcost

    1923.98 1923.98

    Toxicity cost 15.32 15.32

    Treatmentfailure cost 367.92 1385.97

    Total Cost 2443.58 3511.27

  • 8/4/2019 HECO U4 - Eco Evaluation

    49/80

    Examples of CEA

  • 8/4/2019 HECO U4 - Eco Evaluation

    50/80

    Examples of CEA

    1. CEA relates the cost of 2 or more treatment options to a single,common consequences that differs among options

    Examples: blood pressure reduction, hip fracture, or increase life

    expectancy2. The treatment options may be different treatments for the same

    conditions

    Example: kidney dialysis compared with kidney transplantation

    3. Unrelated treatments with a common effect

    Example: life-saving treatment for heart disease compared to endstage renal failure

    TYPES OF ECONOMIC EVALUATION

  • 8/4/2019 HECO U4 - Eco Evaluation

    51/80

    TYPES OF ECONOMIC EVALUATION

    2. Cost Minimization Analysis (CMA)

    @ focuses on the costs of different given alternativeprograms or intervention options

    @ the effects or the outcomes will be identical

    @ with the assumption that the outcomes of theinterventions are measurably identical, the least cost option ischosen

  • 8/4/2019 HECO U4 - Eco Evaluation

    52/80

  • 8/4/2019 HECO U4 - Eco Evaluation

    53/80

    Note:both interven- tionsare consideredequally effective

    CMA EXAMPLE

  • 8/4/2019 HECO U4 - Eco Evaluation

    54/80

    DRUG A: BRAND AMX ANTIBIOTICCOST: P 385/treatment course

    DRUG B: AMOXICILLINCOST: P189/treatment course

    90% treatmentSuccess

    10% failure

    2% minimalSide effects

    IDENTICALOUTCOMES(BOTH INNATURE ANDMAGNITUDE

    Treatment Options

    COST MINIMIZATION IN ANTIBIOTIC THERAPHY

  • 8/4/2019 HECO U4 - Eco Evaluation

    55/80

    Compares the costs of therapies that achieve the sameoutcomes

    Example:

    Ondasetron and granisetron are both used for theprevention of chemotherapy-induced nausea and vomiting

    If they are equally effective, then the choice between themcould be made using a CMA.

    CMA ANALYSIS

    TYPES OF ECONOMIC EVALUATION

  • 8/4/2019 HECO U4 - Eco Evaluation

    56/80

    TYPES OF ECONOMIC EVALUATION

    3. COST-UTILITY ANALYSIS (CUA)

    @ measures the effect of a project in terms of utilities (quality adjustedlife)

    @ costs are expressed in terms of costs per QALY or QALYs permonetary unit

    @ CEA, CMA, and CUA have costs as numerator and health effectsas denominators

    @ therefore: Costs/Health Effects

    How much money do we spend for every unitof health effect we want to get/

  • 8/4/2019 HECO U4 - Eco Evaluation

    57/80

  • 8/4/2019 HECO U4 - Eco Evaluation

    58/80

    improve lives of individuals in

    need of careoutcome is measured in

    terms of patient preference,willingness to pay or quality

    of the healthcareexpressed in intervention

    cost/quality-adjusted life year(QALY) gained

  • 8/4/2019 HECO U4 - Eco Evaluation

    59/80

    Treatment of patients with

    chronic diseases focusing moreon their quality of life thanpremature death or reductionof hospitalization days

    ( sense of well being, ability to perform daily activities,

    emotional state..)

  • 8/4/2019 HECO U4 - Eco Evaluation

    60/80

  • 8/4/2019 HECO U4 - Eco Evaluation

    61/80

    The Value of Life: Jones-Lee Approach

    Value of Life = (Value of Time) x (Hours used)

    Risk of death per hour saved

    = $ 20 x .117

    .000002

    = $ 1,170,000

    H pothetical QALY Calc lation E ample

  • 8/4/2019 HECO U4 - Eco Evaluation

    62/80

    Hypothetical QALY Calculation Example

    Year 1 Year 2 Year 3 Year 4 Year 5 Total

    Time discounting factor 1.00 0.95 0.91 0.86 0.82BASELINE

    Quality of life 0.60 0.50 0.40 (dead) (dead) Discounted Value0.60 0.48 0.36 0.00 0.00 1.44 QAL expectancy without surgery,

    1.44 years

    SUCCESSFUL SURGERY

    Quality of life 0.90 0.80 0.70 0.60 0.50 Discounted Value0.90 0.76 0.63 0.52 0.41 3.23 QAL expectancy with surgery, 3.23

    years

    Net gain QALYs 1.79 (3.23 1.44 discounted years) Probability40% Expected value

    0.72 Less surgical mortality -0.04(3% of baseline 1.44 years) Expected net QALY gain 0.68

    Cost of surgery $30,000

    Cost per QALY gained $ 44,000 ($30,000/0.68)

    Quality of Life Adjustment Factors

  • 8/4/2019 HECO U4 - Eco Evaluation

    63/80

    Duration Health State Adjustment

    Reference State: Perfect Health 1.00

    3 months Home confinement, tuberculosis 0.68

    3 months Home confinement, contagious disease 0.653 months Hospital dialysis 0.62

    3 months Hospital confinement 0.60

    3 months Hospital confinement, contagious disease 0.56

    3 months Depression 0.44

    3 months Home Dialysis 0.65

    8 years Mastectomy for injury 0.63

    8 years Kidney transplant 0.58

    8 years Hospital dialysis 0.56

    8 years Mastectomy for breast cancer 0.48

    8 years Hospital confinement, contagious disease 0.33

    Life Home dialysis 0.40

    Life Hospital dialysis 0.32

    Life Hospital confinement, contagious disease 0.16

    Reference State: Dead 0.00

  • 8/4/2019 HECO U4 - Eco Evaluation

    64/80

    Example: QALYsRate quality of life between 0.0 (death) and good health (1.00)

    Example 1:living for 3 months confined for tuberculosis treatment was worth

    only 1.8 months (0.60 x 3 months) of regular time spent at home ingood health

    Example 2:

    Living more 10 years confined in a hospital being treated for acontagious disease was considered to be worth only 1.6 years ofnormal life.

    TYPES OF ECONOMIC EVALUATION

  • 8/4/2019 HECO U4 - Eco Evaluation

    65/80

    TYPES OF ECONOMIC EVALUATION

    4. Cost Benefit Analysis (CBA)

    @ what value of a Human life?

    @ techniques values both costs and benefits in moneyterms and compares them through the criteria:

    BENEFITS/COSTS

    @ the ratio shows how many times the cost is earned byits health effect through the monetary benefits of a certain

    option@ a ratio of 1 means that the option simply had the same

    monetary benefits compared to the costs attached to theoption

    @ if program ratio is greater than 1, the project is

    worthwhile

    Valuing Benefits

  • 8/4/2019 HECO U4 - Eco Evaluation

    66/80

    what is the value of human life

    @ the values individuals place on things are based on theprices they are willing to pay for them

    @ Benefits are typically valued using the willingness-to-payapproach

    4 Factors (individuals willingness to pay)

    1. Wealth

    2. Life expectancy

    3. Current health status

    4. The possibility of substitute

  • 8/4/2019 HECO U4 - Eco Evaluation

    67/80

    May assess single or multiple

    interventions or programs

    Effect of diet and exercise tocontrol hypertension or

    diabetesMedication use in controllinghypertension and diabetes vsdiet and exercise

  • 8/4/2019 HECO U4 - Eco Evaluation

    68/80

    Comparing interventions withdifferent outcomes

    Choice between investing in a prenatal nutritionprogram or an AIDS awareness program

    Useful when funds are limited and

    budget allocation decisions have tobe made

  • 8/4/2019 HECO U4 - Eco Evaluation

    69/80

  • 8/4/2019 HECO U4 - Eco Evaluation

    70/80

    Example of a Cost-Benefit Analysis

    Assume that we are evaluating a project proposing to vaccinate2,000 children for measles in a certain distant province. Assume alsothat the cost per child immunized is P300.00. We know that if we donot immunize these children for measles, there is good chance thatthey will contract it. Is it cost-beneficial for us to immunize all ofthem?

    Assume that all these parameters are true

  • 8/4/2019 HECO U4 - Eco Evaluation

    71/80

    p

    90% of unimmunized children will contract measles

    of those who will contract it, 30% will have complications of those who develop complications, 30% will have meningo-encephalitis, and 70% will have bronchopneumonia

    Costs are as follows

    uncomplicated cases = P500.00/case

    meningo-encephalitis = P20,000.00/case

    Bronchopneumonia = P15,000.00/case

    ANALYSIS:

  • 8/4/2019 HECO U4 - Eco Evaluation

    72/80

    Costs of immunizing 2,000 children at P300.00 each =P600,000.00

    Cost of not immunizing children:

    200 withoutmeasles

    2,000 children 1,260with measles Uncomplicated

    1,800 cases meningoencephalitis162

    Complicated bronchopneumoniacases 540 378

    Costs

    1,260 uncomplicated cases x P500 = P630,000.00

    162 meningoencephalitis x P20,000 = P3,240,000.00

    378 measles bronchopneumonia x P15,000= P5,670,000.00

    TOTAL COST of non-immunization = P9,540,000.00

    Cost Benefit Ratio = 9,540,000/600,000 = 15.9 therefore the project ishighly beneficial

    CBA is about making Choices

  • 8/4/2019 HECO U4 - Eco Evaluation

    73/80

    CBA is about making Choices

    Example: Knee Injury

    Life, and the health care system in particular, confronts us withdifficult choices every day. Is it worth taking 3 hours, and possibility

    paying more than P1,000, to go to the ER so that doctors can examinethe throbbing knee you injured playing soccer? Since pain makes itdifficult to think, it can be helpful to make a list of the pros and cons

    First you have to enumerate the benefits and cost. Then, you mustquantify each benefit and cost accurately as possible, given what isknown about the situation.

    Knee Injury as an Example of CBA

  • 8/4/2019 HECO U4 - Eco Evaluation

    74/80

    Scenario: I injured my knee playing soccer this afternoon. I called and got an appointment to goorthopedics/sports medicine clinic in ten days, next Thursday. However, it has row begun to hurta lot and I wonder if I should go to emergency room (ER) right away.

    CONS (dont go)

    Visit to ER will cost P50, P100, or more Average = P80 (direct personal cost,ignores cost to insurance) I will have to wait for at least 2,may be 4 hours 3 x P7 =P21 (opportunity cost)

    My buddies on the team will think I am a wimp willingnessto pay = P40 ( willing to pay P40 for crutches just to to look good)

    Even if the injury is serious, surgery could make it worse Sunk cost = P0(The issue is treatment today v. Thursday, rather than

    treatment v. no treatment, so only incremental cost count) TOTAL COST P 141

    PROS (go to ER now) Mightstop the pain (pills stop pain with certainty, P150 x 1/3 = P50 going to ER just a 1-in-3 chance) Could prevent long-term injury.(WTP knee surgery P50,000 x1/2 x.71 = P178 P 50,000, 1/200 chance, discount 7 years@ 5% Will feel stupid if something was wrong and Idid not go WTP = P 20 (worried well WTP for regular office visit)

    I cant get any work done anyway while I sit here 6

    hours x P7 = P 42 worrying about it (time has same P value for benefits and costs)TOTAL BENEFITS = P 290

  • 8/4/2019 HECO U4 - Eco Evaluation

    75/80

    CBA OF KNEE INJURY (FIRST STEP)

    PROS (GO TO ER)

    n IT might stop pain

    n It could prevent long-term injury

    n I will feel stupid if something was wrong and I did not go

    n I cant get any work done anyway while I sit here worrying

    CONS (DONT GO TO ER)

    n It will cost P50, P100, or more

    n It will take at least 2, maybe 4, hours

    n Even if the injury is serious, surgery could make it over

    n My friends on the team will think I am not tough

    4. Cost of Illness (CI)

  • 8/4/2019 HECO U4 - Eco Evaluation

    76/80

    What is the Costs?evaluates the direct and indirect

    costs of a particular diseasenon comparativeserve as a baseline information

    consider descriptive diseaseparameters (e.g diseaseprevalence, incidence, mortality,morbidity)

    outcome = total cost

    ( )

    CI St di E l

  • 8/4/2019 HECO U4 - Eco Evaluation

    77/80

    Cost of treating asthma,diabetes or hypertension

    Cost of antibiotic treatment for aparticular infection

    CI Studies: Examples

    S f f

  • 8/4/2019 HECO U4 - Eco Evaluation

    78/80

    Sources of Data for

    Pecon Analysisvstock/purchasing records

    v adverse drug reaction datav non-essential/non-formularymonitoring

    A li ti

  • 8/4/2019 HECO U4 - Eco Evaluation

    79/80

    1. Drug Development (clinical research andpost marketing phase)2. Drug Formulary Decisions

    3. Evaluation of clinical treatment

    4. Evaluation of pharmaceuticalcare services

    5. Budget

    6. Pricing

    Applications

  • 8/4/2019 HECO U4 - Eco Evaluation

    80/80

    PATIENT

    DRUG TOXICBUT BENEFICIAL

    DRUG NOT TOXICBUT NOT

    BENEFECIAL

    DRUG NOT TOXICBUTBENEFICIAL

    DRUG TOXIC ANDNOT BENEFICIAL

    POSSIBLE OUTCOMES OF DRUG THERAPHY