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ECONOMIC EVALUATION

PRESENTED BY:Ramvilas Reddy

Post-graduate Public Health Dentistry

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ACKNOWLEDGEMENT I thank Dr. Shakeel Anjum Sir M.D.S Professor, Public Health

Dentistry, for guiding me to prepare the presentation and Dr.

Shibu Sebastian M.D. S for providing the study material.

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CONTENTS Introduction

What is economic evaluation of health?

Why Is Economic Evaluation important?

Benefits of Economic Evaluation

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Different Structures of Economic Evaluation Cost Minimization Analysis (CMA) Cost Effective Analysis (CEA) Cost Utility Analysis (CUA) Cost Benefit Analysis (CBA)

Other Forms of Economic Evaluation

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Check List For Evaluating The Health Care Programs

Economic Evaluation In Dentistry

Limitations

Future development of Economic Evaluations (Oral Health Care)

Conclusion

References

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Adam smith (1776) “a branch

of the science of a statesman

or legislator [with the two-fold

objectives of providing] a

plentiful revenue or

subsistence for the people

[and] to supply the state or

INTRODUCTION

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Economics is defined as “the science which studies human

behavior as a relationship between ends and scarce means

which have alternative uses” (Robbins 1935).

Economics is the social science that describes the factors

that determine the production, distribution and consumption of

goods and services.

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The objective of economics is to maximize human welfare or utility

and it is important that the allocation of resources in society is done

as efficiently as possible.

In economic terms, an efficient allocation of resources is defined as

one that takes advantage of every opportunity to ensure that some

individuals will be better off while not making anyone else worse off.

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ECONOMIC EVALUATION?? Economic evaluation is the process of systematic

identification, measurement and valuation of the inputs and

outcomes of two alternative activities, and the subsequent

comparative analysis of these.

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ECONOMIC EVALUATION OF HEALTHCARE ?

According to WHO it is defined as “that which seeks

inter alia-to quantify over times, the resources used in

health service delivery, their organization functioning

and the efficiency with which the one resources

allocated and used for health purposes and the effect

of preventive curative and rehabilitative health

services on individual and national productivity”.

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Drummond et al (1987) defined as “comparative analysis of

alternative courses of action in terms of both their costs and

consequences.”

Economic evaluation of healthcare programs is now common-

place in medicine and is becoming increasingly important in

dentistry.

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Any economic analysis involves measurement of both the

benefits of healthcare and also the costs.

It aims to answer two main questions:

Is the health procedure in question worth doing compared

with other things we could do with the same resources?

Are we satisfied that the healthcare resources should be

spent in this way rather than in any other way?

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HISTORY OF ECONOMIC EVALUATION…

The code of Hammurabi in ancient Egypt prescribed

fiduciary rewards for physicians who successfully treated

patients.

In the 1800s, mortality statistics were the primary

outcomes reported by the healthcare institutions, with no

regard for the results of the operations and interventions

that were performed within their institutions.

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Apart from small experiments in collecting outcome data and

relating it to healthcare interventions, very few advances were

made in the first half of the 19th century.

Donabedian’s work was the first to assess the healthcare

interventions using the concepts of structure, process and

outcomes.

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Because of a lack of uniformity in approach , these early

economic analyses were of limited use in aiding decisions

about which treatments to fund and for whom.

The early and ambitious use of economic evaluation occurred

through the Oregon Initiative in 1989.

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Economic evaluation deals with costs and benefits and only

when information is available.

Decisions are made regarding the combination of health care

interventions which should be made available to maximize

benefits from the available budget.

The basics involve identifying, measuring, valuing and

comparing the costs and benefits of alternatives being

considered.

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BENEFITS Comparing the benefits of treatment.

Out comes are measured in common natural units.

Outcomes are measured in similar health state values based on individual

preferences.

Outcomes can be measured in similar or different units and are always

valued in monetary units.

It attempts to incorporate the concept of quality of life.

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DIFFERENT STRUCTURES OF ECONOMIC EVALUATION

The four main approaches that are currently in use are:

Cost-minimization analysis

Cost-effectiveness analysis

Cost-utility analysis

Cost-benefit analysis.

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COST-MINIMIZATION ANALYSIS(CMA)

The benefits of two or more health care technologies being compared are assumed to be equivalent, hence the analysis focuses on the cost alone.

Which costs should be included?? When the evaluation is made from the society as a whole– the three main

categories of costs must be included; Health service costs Costs borne by patients and their families External costs borne by rest of the society

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EXAMPLES The costs of laparoscopic and ‘open’ procedures to treat appendicitis are compared. Both types of procedure have an equivalent outcome but laparoscopic appendicectomy has a higher cost

Cost-minimization analysis of a tailored oral health intervention designed for immigrant older adultsKaleed A et al. 1999 Cost minimization analysis of laparoscopic and open appendicectomy. European Journal of Surgery 165: 579–582

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ADVANTAGES

It is simple to conduct.

It focuses on cost alone.

It assumes that equivalence of benefits has been proved unambiguously,

much research effort would be needed to demonstrate.

DISADVANTAGES

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COST-EFFECTIVE ANALYSIS(CEA)

This type of analysis is used to compare health care technologies that

have different outcomes , common one dimensional health benefits

and which are measured in the same units.

CEA can be used to compare both across and within disease groups

as long as the effectiveness can be measured in common units.

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For example, costs can be compared using common units,

such as ‘per lives saved’ or ‘per pain free day’.

A CEA can therefore be used to compare heart surgery and

kidney transplantation.

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It is essential to specify which costs are included in a

cost-effectiveness analysis and which are not, to ensure

that the findings are not subject to misinterpretation.

Large number of evaluation studies in the dentistry are are

comparison of costs of preventive strategies with their

effectiveness.

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The results of CEA are usually presented in the form of a ratio, ex;

cost per life year gained.

If two treatments A & B are compared, costs are lower for A and

the outcomes are better, then the treatment A is said to dominate

and on the basis of health economic analysis. Incremental cost effectiveness = (cost of B-cost of A)

(benefits of B – benefits of A)

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EXAMPLES It is used to compare coronary artery bypass grafts with breast cancer screening, if in both the cases, years of life gained in over riding benefit of interest.

Cost effectiveness of a school based sealant program. Examining cost effectiveness of early dental visits.

Lee et al. Examining the cost effectiveness of early dental visits. Pediatric Dentistry. 2006; 28:2. 102–105.

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ADVANTAGES This method is used when the programs may have differential success in outcome, as well as differential costs, but the outcome must be common to both programs.

To find the most efficient treatment option in terms of cost per unit effect.

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DISADVANTAGE The disadvantage of the cost-effectiveness approach is that it

cannot be used to assess a single program or to compare

interventions which have several different clinical effects.

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COST UTILITY ANALYSIS To overcome the concerns of expressing all benefits in terms

of money an alternative measure used is this concept of utility.

Utility value lie between 0 and 1.

To compare the costs and benefits of health care technologies.

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It is a method of choice when quality of life is an important outcome.

It is also the ideal method when interventions affect both morbidity

and mortality or when treatments have a wide range of different

outcomes and a common unit is required.

Benefits are measured in terms of quality adjusted life years (QALY).

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QALY is calculated by multiplying the change in utility value as

a result of medical intervention by the years of life remaining.

The principle behind CUA is that a QALY gained is considered

to be worth the same no matter who receives it.

This is a useful method of economic analysis when looking at

dental interventions which produce changes in quality of life.

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EXAMPLE For example, a treatment is available for condition X. without

treatment A, a patient is likely to survive for five years and have a

relatively poor quality of life. A panel is asked to decide on the

numerical value which they would allocate to this health state -1

equating to health worsens the value and falls closer to 0.

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A cost–utility analysis of patients undergoing

orthognathic treatment for the management of

dento-facial disharmony. ( Cunningham SJ)

Management of dentofacial discrepancies using orthognathic

treatment. Twenty-one patients were interviewed five times during

treatment using the time trade-off (TTO) method to establish utility

values.

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ADVANTAGES Allows comparison across different health programs and

policies by using a common unit of measure (money/QALYs

gained).

CUA provides a more complete analysis of total benefits than

simple cost–benefit analysis does.

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DISADVANTAGES Elderly individuals are assumed to have lower QALYs since

they do not have as many years to influence the calculation of

the measurement.

Specific health outcomes may also be difficult to quantify, thus

making it difficult to compare all factors that may influence an

individual’s QALY.

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COST BENEFIT ANALYSIS Comprehensive and theoretically sound form of economic

evaluation.

CBA seeks to place monetary values on both the inputs and

outputs i.e. treatment costs and consequence costs.

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Since both costs and consequences are measured in monetary

units, it is possible to calculate whether a treatment delivers

an overall gain to society.

The effects of treatments, such as complications, number of

disability days, and number of life years gained, need to be

converted into costs.

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THE HUMAN CAPITAL APPROACH.

According to this method “humans are similar to pieces of equipment, and are expected to form a product or activity of some monetary value in future years (Mushkin, 1978).”

The benefits of health care can be measured in terms of future income that would have been lost Using a technique called ‘time discounting’, the amount of money foregone is adjusted according to the number of years over which it would have been expected to accumulate.

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The human capital approach places a monetary value on human

life and, in the past, ethical objections have been raised.

There is no measure of the benefits of not having to actually go to

work, or of the benefits of reduced pain and suffering due to

illness.

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FRICTION COST METHOD Estimates the value of human capital when another person from the unemployment pool replaces the present value of a worker's future earnings until the sick or impaired worker returns or is eventually replaced.

It is presumed that the FCM will estimate a lower cost than the human capital method in the long run.

FCM assumes that impairment or premature death will not affect the total productivity following the friction period,

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WILLINGNESS TO PAY APPROACH

Using interviews or questionnaires, subjects are asked how

much they would be prepared to pay, in order to obtain the

benefits of a treatment, or to avoid the costs of ill health.

For example, an opening bid is made which the subject can

accept or reject.

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The subject is often presented with a series of prices and is

asked to offer a yes/no answer depending on their willingness

to pay (Robinson, 1993).

Problems may arise because the amount different people are

willing to pay for a benefit is variable and influenced by their

income.

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EXAMPLES Cost-Benefit Analysis of a Worksite Oral-Health Promotion

Program.

Cost-Benefit Analysis of the Age One Dental Visit for the Privately Insured.

Ichihashi1 T, Muto T, Shibuya K. Cost-Benefit Analysis of a Worksite Oral-Health Promotion Program. Industrial Health, 2007;45: 32–36.

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ADVANTAGES Allows comparisons between a wide range of programs of both within

health sector and between the health and non-health sectors.

DISADVANTAGES Places monetary value on life which is considered as priceless.

Practical problems in evaluating the health.

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COST CONSEQUENCE ANALYSIS

Costs and effects are calculated but not aggregated into quality

adjusted life years or cost effectiveness ratio

This analysis provides the most comprehensive presentation of

information describing the value of intervention and has the advantage

of being more readily understandable and more likely to be applied by

health care decisions makers.

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EXAMPLE For example two programs aimed at improving fuel efficiency might have

a variety of outcomes, ex., warmer home, reduced heating bills and lower

incidence of childhood asthma.

It would be appropriate to present the results in a disaggregated form in

order that all of the outcomes can be carefully considered within a

framework of evaluation.

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DRAWBACKS Decision made at the individual decision maker’s might not be

made in the patient’s or societies best interests.

All of the data are not comparable quality.

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COST-OF-ILLNESS STUDIES Attempt to represent the burden of disease from a particular

ailment or medical condition in monetary terms.

Estimate the maximum amount that could potentially be

saved or gained if a disease were to be eradicated.

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The costs associated with an illness and do not consider

benefits, therefore this is a true economic evaluation.

Knowledge of the costs of an illness can help policy makers to

decide which diseases need to be addressed first by health

care and prevention policy.

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In addition to their use by government organizations, cost-of-

illness studies are often cited in disease studies that attempt

to highlight the importance of studying a particular disease, as

well as in cost-effectiveness and cost-benefit studies. Hodgson, Cai. Medical care expenditures for hypertension, its complications, and its comorbidities. Medical Care 2001;39(6):599–615.

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DRAWBACKS Cost-effectiveness and cost-benefit analyses provide additional

information not included in cost-of-illness studies that can be used to determine the best course of action with respect to the disease studied.

They are limited in determining how resources are to be allocated because they do not measure benefits.

Studies can vary by perspective, sources of data, inclusion of indirect costs, and the time frame of costs.

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PROGRAM BUDGETING & MARGINAL ANALYSIS

Program budgeting is the notion that is important to understand how

resources are currently being spent before thinking about ways of

modifying this pattern of resource use.

This is a retrospective appraisal of resource allocation, broken down into

meaningful programs, with a view to tracking future resource allocation

in those same programs.

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Marginal analysis is the appraisal of added benefits and added

costs when new investment is proposed (or lost benefits and

lower costs when disinvestment is proposed), in an incremental

way.

Marginal analysis seeks to explain that in order to have more of

some services, it is necessary to have less of others or if

growth monies are available.

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STAGES OF PBMA Identify your program.

Statement of expenditure and activity by sub- programs (i.e. the 'program budget')

Decide on services which are candidates for expansion or introduction and services which are candidates for reduction.

Measure costs and benefits of proposed changes (i.e. 'marginal analysis’)

Make recommendations

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PBMA is the framework that highlights the use of local cost and

activity data, accessibility and availability of effectiveness evidence

and the many decisions are still based on the judgments.

It starts by analyzing the activity and expenditure data of existing

services and then goes on to examine marginal changes in those

services, rather than starting with a blank piece of paper and

attempting to allocate in some hypothetical fashion.

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EXAMPLE

Holmes RD,Steele J, Exley CE, Donaldson C. Managing resources in

NHS dentistry: using health economics to inform

commissioning decisions.

The aim of this study is to develop, apply and evaluate an

economics-based framework to assist commissioners in their

management of finite resources for local dental services.

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SENSITIVITY ANALYSIS In economic evaluation, some form of sensitivity analysis is

frequently carried out in order to allow for uncertainty.

This uncertainty may be present in the evaluation for several

reasons:

Data are unavailable and assumptions are necessary

Available but inaccurate

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In this type of analysis the values recorded for important

parameters are varied, usually one at a time, in order to

determine whether the results are sensitive to the

assumptions made.

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TYPES OF SENSITIVITY ANALYSIS

Simple sensitivity analysis entails varying one or more of the

components of an evaluation to see how it affects the results.

An extreme scenario is another form of sensitivity analysis.

Probabilistic sensitivity analysis assigns ranges and distribution

to variables and computer programs are used to select values

at random from each range and to record the results.

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By using these different methods of sensitivity analysis it is

possible to show whether the results of a particular study over

a range of assumptions or hinge on the accuracy of particular

assumptions.

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CHECK-LIST FOR EVALUATING HEALTH CARE PROGRAMS

Decision makers, faced wit allocating resources among competing health programs, must identify relevant studies that have been published and determine which studies are useful to help inform the decision.

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Was a well-defined question posed in answerable form?

Was comprehensive description of the competing alternatives given?

Was the effectiveness of the program or services established?

Were all the important and relevant costs and consequences for each

alternative identified?

Were costs and consequences measured in appropriate physical

units?

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Were costs and consequences valued credibly?

Was an incremental analysis of costs and consequences of

alternatives performed?

Was uncertainty in thee estimates of costs and consequences?

Did the participation and discussion of study results include all

issues concern to users?

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ECONOMIC EVALUATION IN DENTISTRY

It is likely there will be an increased demand for economic analyses of

dental interventions by the public and by those funding the health care.

To date most of the analyses that have been used most frequently are

cost-effectiveness and cost-benefit, and the studies have focused

largely on comparison of restorative materials.

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Cost effectiveness and cost benefit studies are carried out

much more frequently than cost utility studies.

The cost utility method would be particularly useful in the field

of dentistry.

QALY based investigations in dentistry would also allow some

method of comparing dental interventions with other forms of

medicine.

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Cost effectiveness and cost benefit studies are majorly done in

comparing the restorative materials and cost implications of

fluoride, fissure sealants and caries prevention.

Severens et al assessed the short term cost effectiveness of

pre-surgical orthopedics in babies with complete unilateral

cleft of the lip and palate.

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Klock looked at CBA and CEA of a preventive program

(including oral hygiene, fluoride application and fissure

sealants) and found that in spite of a reduction in caries

activity the program was uneconomic when compared with the

traditional dental care.

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A number of cost effectiveness studies have looked at different

restorative materials.

Mjor studied the cost effectiveness of restorative materials of

two surface and three surface restorations undertaken in

Norway and found amalgam to be most cost-effective.

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Jacobson et al undertook utility based investigations in which

implant retained prostheses and conventional denture were

compared using a rating scale method. They concluded that this

was reliable measure of patients preferences and the implant

group rated a successful implant supported prosthesis as higher

than a functional, fitting , esthetic than conventional denture, in

spite of higher costs and longer periods of non-function.

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In Restorative Dentistry: Fyffe and Kayy (1992) assessed the average

utility values for four different “tooth states” in which the highest mean

utility values were for the restored tooth and lowest values for the

decayed and painful posterior tooth.

Downer and Moles (1998) used a computer simulation to study the

influence of relevant factors on health gain from restorative treatment

under varying assumptions and compared this with a ‘do nothing’

approach.

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Maxillofacial Surgery:

Armstrong et all (1995) and Brickley et al (1995) studied

relative utility values for the management of third molars .

Downer et al (1997) used a convenience sample to elicit the

public’s perceptions of different oral cancer states (pre-cancer,

small cancer and large cancer).

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Downer had found the utility values of 0.92 for pre-cancer,

0.88 for stage I cancer and 0.68 for stage II cancer.

These values then allow the QALY’s gained and the cost per

QALY involved in the treatment of such lesions to be

calculated.

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LIMITATIONS Determination of the effectiveness of a program:

If the effectiveness of an intervention has not been established, an

economic evaluation should not be considered, since there is no

basis on which to estimate the health consequences.

Data may be available for many community based health

programs, but its quality and usefulness must be assessed.

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EQUITY AND DISTRIBUTION OF COSTS AND HEALTH CONSEQUENCES

Health programs for certain high risk groups may never be

shown to be cost-effective relative to other health programs;

however, these high risk groups may be the most vulnerable

individuals in a population, and programs aimed at improving

their health status may be of highest priority.

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Use of saved resources

Economic evaluations assume that resources freed or saved by

adopting more cost-effective programs will be used in

alternative ways that are also cost-effective.

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Resources Required to Conduct Economic Evaluation

Conducting a cost-effectiveness analysis to determine how best

to allocate 1000$ may require that a sizeable of the sum be

spent in conducting the evaluation itself.

In this case economic evaluation may not be justified.

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FUTURE DEVELOPMENT OF ECONOMIC EVALUATIONS (ORAL HEALTH CARE)

It is used less frequently in dentistry.

At present many studies in the literature are generally focused

on the comparison of restorative materials and the cost

implications of fluoride, fissure sealants and caries prevention

programs.

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The demand for health economics analysis is bound to increase

with both public health services and private insurance companies

looking for the evidence of value for money in a field where some

therapies can be seen as providing ‘cosmetic’ treatment.

Methodological developments aimed at incorporating an equity

dimensions into current economic evaluations are needed.

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Where the inequalities in oral health are of concern in many

countries, the discipline of health economics may prove to be

useful tool in addressing the issue in future.

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CONCLUSION Health economics: the science of optimism?

Health economists should be creative agents concerned with

improving population health at least cost health economics.

The number of economic evaluations undertaken will only increase

if the quality of the underlying scientific evidence improves.

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The application, in the last three decades, of the techniques of economic

evaluation.

Economic evaluation of health care has developed quite significantly in

the past thirty years.

Efforts to improve guidelines for the conduct of economic evaluation

might have some positive effect on raising standards but are a fairly

indirect approach.

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As a fraternity of public health, we are also concerned with the

issue of equity in policy making decisions.

The economic evaluation of health care has been labelled a

half-way technology in that it has not yet reached an advanced

stage where it can be applied routinely.

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Pine C. Community Oral Health. 2nd ed. Germany: Quintessence Publishing Co;2005.

Cunningham S J. Current Products and Practice: An Introduction to Economic Evaluation of Health Care. JO. 2001;3: 246-250.

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Cunningham S J. Economic Evaluation of Healthcare- Is It Important to Us?. British Dental Journal. 2000;188(5): 250-254.

Robinson R. Economic Evaluation and Health Care- What Does it Mean?. BMJ. 1993;307: 670-673.

Shiell, Donaldson, Mitton, et al. Health Economic Evaluation. J Epidemiol Community Health. 2002;56:85-88.

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Kumar S, Williams AC, Sandy RJ. How Do We Evaluate the

Economics of Health care?. European Journal of Orthodontics.

2006;28:. 513-519.

THANK YOU

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