flagship program on health sector reform and sustainable financing
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Flagship Program on Health Sector Reform and Sustainable Financing. Principles of Economic Evaluation in Health. Purpose of the Session. To give an introduction to the topic of the economic evaluation in health. Contents. Concept of economic evaluation Basic methods of economic evaluation - PowerPoint PPT PresentationTRANSCRIPT
Flagship Program on
Health Sector Reform and
Sustainable Financing
Principles of Economic Evaluation in Health
3
Purpose of the Session
To give an introduction to the topic of the economic evaluation in health
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Contents
Concept of economic evaluation Basic methods of economic
evaluation Basic components of an economic
evaluation analysis Conclusions
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Concept of economic evaluation (1)
Idea of economic evaluation in health is relatively new. To some degree, scarcity not explicitly considered in former evaluations of health care.
For example: economic evaluation of pharmaceuticals
Before: To introduce a new pharmaceutical, it was enough to prove its effectiveness compared to placebos.
Nowadays: Economic criteria are getting ever more important when considering the approval of a new drug, especially if it is financed by a public entity. To be approved, new drugs have to be more cost-effective than previous ones to be financed.
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Concept of economic evaluation (1)
Economic evaluation increasingly used as a method of prioritization
For example, at MEDLINE more than 10, 0000 studies related to economic evaluation are yearly registered. Thirty year ago, less than 100 studies were produced yearly on this issue.
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Concept of economic evaluation (1)
Economic evaluation studies are based on economists’ way of thinking
Economists consider above all the following two principles: There is scarcity of resources When there is scarcity it is necessary to
make decisions that maximize benefits
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Concept of economic evaluation (1)
Economic evaluation studies try to answer the following two questions: Are resources being allocated in the best
possible way? Are benefits greater than if another decision had
been taken? ==> Economic evaluation analysis deals with efficient
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Concept of economic evaluation (2)
Economic evaluation can be defined as: “the comparative analysis of alternative courses
of action in terms of both their costs and their consequences”. (Drummond, 1997)
Examples: Compare the cost/result of construction of a hospital vs.
provision of scholarships for basic education Compare the cost/result of provision of benefits packages with
catastrophic coverage vs. provision of basic benefits package Compare the cost/result of caesarean section vs. a normal
delivery
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• Measure costs and results
• Compare alternatives
• Make decisions
Concept of economic evaluation (3)
In view of the former definition, economic evaluation consist of the following steps:
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Concept of economic evaluation (4)
Also, per previous definition, economic evaluation must contain following elements: 1. Both cost and results need to be
included. To analyze only costs, or only results implies a partial analysis
2. At least two alternatives have to be compared (status quo can be considered as an alternative).
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Concept of economic evaluation (5)
Examples of analysis that cannot be considered economic evaluations: Effectiveness analysis of early coronary
angioplasty ==>Does not consider costs, does not compare
alternatives Analysis of the cost of the provision of a
basic benefits package==> Does not consider results, does not compare
alternatives
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Making decisions
Concept of economic evaluation (6)
Economic evaluation refers to a group of tools that can be used to make decisions when i) it is necessary to chose among various alternatives and ii) there are economic constraints.
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Allocate resources to programs and projects
Choose
technologies
Allocate resources between sectors
Concept of economic evaluation (7)
Kind of decisions that can benefit from economic evaluation analysis
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Concept of economic evaluation (8)
Clarifying the perspective or point of view from which economic evaluation is carried out is important and influences the analysis and results
For example: the acquisition of a cat scan may be cost-effective from the private provider’s point of view but it might be cost ineffective from the society’s perspective
Therefore, it is important to clarify the perspective of analysis when starting or analyzing economic evaluation studies
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Society's point of
view
Individual's point of view
Concept of economic evaluation (9)
Points of view to carry out an economic evaluation analysis
Allocate resources to programs and projects
Choose
technologies
Allocate resources between sectors
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+1.Consequences beyond profit
2. Shadow price=
Concept of economic evaluation (10)
Basic differences between the perspective of the individual and the society when the economic evaluation analysis is made
Individual and/or businessman • To identify options• To identify costs and
results of each option• To evaluate cost and
results• To compare costs and
results to determine the total profits of the options
Society´s point of view
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Source: Mc Master Univ. How to read clinical journals VII, To understand an economic evaluation. Canadian Medical Association Journal Vol 130 June 1, p. 1430
Basic methods of economic evaluation (1)
YesIt only considers consequences
ResultsDescription
Is t
her
e m
ore
th
an o
ne
alte
rnat
ive?
Yes
No
Are costs and consequences considered?No
Effectiveness analysis
1.Cost-minimization analysis2.Cost-effectiveness analysis 3.Cost-utility analysis4.Cost-benefit analysis
It only considers costs
CostsDescription
Costsanalysis
Costs and ResultsDescription
Economic evaluation
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Basic methods of economic evaluation (2)
All four types of economic evaluation consider costs.
All four methods lead to the concept of “cost per unit of result”.
The “key” difference among the methods consists in the measurement and quantification of results.
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Basic methods of economic evaluation (3)
Method 1: Cost-minimization analysis Among various options it looks for the cheapest It is only appropriate when the alternatives being
compared have a similar level of effectiveness. For example
Compare the cost of providing ambulatory care services in a tertiary care level hospital vs. the provision of the same services in a health post
Compare the cost of IUD vs. contraceptive pills
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Basic methods of economic evaluation (4)
Method 2: Cost-effectiveness analysis This kind of analysis compares costs with results in
health. Results are measured in physical units that are natural for the program. There is no subjective valuation of the result.
For example: Prevention programs for malaria. It compares the cost per
prevented malaria case by program Treatment programs for malaria. It compares the cost per
treated malaria case by programs
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Basic methods of economic evaluation (5)
Method 2: Cost-effectiveness analysis Measures results on a single scale
For example, a road prevention accident program avoids deaths and injuries but a measure of cost-effectiveness only evaluates avoided deaths or injuries
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Basic methods of economic evaluation (6)
Method 2: Cost-effectiveness analysis It only can be used to compare programs
with the same results For example
It cannot be used to compare the malaria prevention program with the dengue prevention program
It cannot be used to compare the impact of wearing glasses vs. the impact of a cesarean section
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Physical welfare
Death Emotional welfare
+
?
+
?
Add different results
For example...
Basic methods of economic evaluation (7)
Cost-effectiveness cannot be used to compare programs or interventions with results that are not in the same units of measurement
In those cases, a common denominator is needed
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Basic methods of economic evaluation (8)
There are two methods to obtain the common denominator: Cost-utility analysis Cost-benefit analysis
Both of them evaluate the results of an intervention using the “utility”, or the subjective value of the result, for the decision maker.
That contrasts with cost-effectiveness analysis, that expresses the results in terms of physical units.
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Basic methods of economic evaluation (9)
Method 3: Cost-utility analysis It is a special case of cost-
effectiveness analysis where consequences are measured as life years (DALYs, QALYs and “DALES”, EuroQol) lost or gained.
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Basic methods of economic evaluation (10)
Method 4: Cost-benefit analysis
Evaluate the results in monetary units.
Compare costs and benefits, both of them
expressed in monetary units.
Evaluate if a project or program is desirable in
terms of criteria previously established (for
example, it accepts projects when the ratio
cost/benefit is less than 1).
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Basic methods of economic evaluation (11)
Cost-benefit
SummaryKind of analysis Costs are
considered?How each unit of
result is measured?
Cost-minimization Yes Project
Cost-effectiveness Physical units
Cost-utility DALYs, QALYsDales, Eurocol
Monetary units
Yes
Yes
YesCost-benefit
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1. Identify costs and results
2. Measure costs and results
3. Value costs and results
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CONSIDERATIONS
Time
Sensitivity analysis
Incremental analysis
BASIC STEPS
Basic elements of an economic evaluation (1)
All four economic evaluation techniques involve similar basis steps and considerations.
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Basic elements of an economic evaluation (2)
COSTS RESULTS
Costs
Identification Measure Value
Health sector (C1)
Patient and family (C2)
Other sectors (C3)
Consumed Resources
Health Program
Change in health status
Saved resources
Effects (E) Health gain
Preferences in health status
Willingness to pay (W)
Willingness to pay (W´)
Health Sector (S1)
Patient and family (S2)
Other sectors (S3)
Saved resources
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Staff costs
Out of pocket payments, waiting time
Lost production from work absenteeism
Basic elements of an economic evaluation (3)
Identification of costs and results
Costs to consider in an economic evaluation analysis
Costs for the health care sector
Costs for patients and their families
Costs for other sectors
For example
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Being unconscious
More income
Severe suffering
Basic elements of an economic evaluation (4)
Changes in the physical, emotional or social functioning (Disability )
Health sector and patient savings (monetary benefits)
Changes in the quality of life of the patients and their families (distress)
Identification of costs and results
Results to consider in an economic evaluation analysis
For example
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Basic elements of an economic evaluation (5)
Many times only the costs and results for the health system are considered. This could lead to erroneous decisions.
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Basic elements of an economic evaluation (6)
Example of an incomplete analysis of costs and results Problem: Use cost-utility to decide if
immunization program is carried out in urban or rural areas.
Results:• The provision cost is higher in rural area.
• Health outcomes equal in both areas (e.g., DALYs)
• Savings for health sector and patients are similar in both cases
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Basic elements of an economic evaluation (7)
Example of an incomplete analysis of costs and results : The study didn't take into account all
costs and benefits in the rural area:That the program in the rural area will produce
savings in transportation costs.
==> thus program benefits in rural area would be underestimated, leading to implementation in urban areas only on the basis of an incomplete cost and benefit analysis.
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Additional Considerations
The time Often costs are incurred before results are
obtained. Not all results are produced at the same
time. For example, a program meant to reduce
the risk of diabetes are incurred during a long period and the results are also produced in the long run.
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Additional Considerations
The time Costs and results must be adjusted according to
time in all economic evaluation analysis. The technique to do that kind of adjustment is called
discount. The principle behind this technique is that:
individuals and society prefer to have something today rather than in the future. For example it’s not indifferent between getting $1 million today or $ 1 million in a year. Works by giving greater weight to earlier costs and benefits.
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Additional Considerations
Sensitivity Analysis Many times the economic evaluation
studies are associated with uncertainty regarding the results due, in part, to information problems.
Thus, analysts must make calculations with their “best estimation” based on the available information and assumptions
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Additional Considerations
Sensitivity Analysis Evaluates how much results vary when
the assumptions and the parameters are changed.
Robustness of results is measured. A sensitivity analysis of the relevant
variables always has to be done after finishing an economic evaluation.
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Additional Considerations
Example: The case: Evaluation of different alternatives to
treat an ear infection. The final result favors one of them.
Sensitivity analysis: it is evaluated if the previous result changes significantly when effectiveness is changed and the number of hospitalizations due to post treatment complications are varied. It is found that results do not change substantially.
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Additional Considerations
Example Conclusion: The result remains mostly
unchanged, despite the changes in those relevant variables.
Thus, results not sensitive to them and economic evaluation is consistent
Strong conclusions are obtained.
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Additional Considerations
Incremental analysis This analysis measures the additional costs
of an intervention or a program to produce an additional unit of result (DALYs, QALYs, monetary units, etc.) compared to standard intervention/program.
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Additional Considerations
An incremental analysis example The case:
There are two alternatives of antimicrobials for the treatment of ear infections. They cost respectively $1,250,000 and $1,375,000 and produce 89% and 95 % of successful treatments. Cost-effectiveness ratios of each alternative are 14.045 and 15.473.
This means that:The incremental cost of the second strategy is $125.000
($1.375.000-$1.250.000) to get 6 additional units of result (95%-89%) per each 100, i.e. the marginal cost is $20.833.
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Additional Considerations
An example of incremental analysis The case:
Cost DALYsAlternative 1 3000 140Alternative 2 3400 220Difference 400 80
This means that: The incremental cost of the second strategy is 400 (3400-3000) monetary units to get 80 additional DALYs (220-140), i.e. the marginal cost is 5.
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Conclusions
The economic evaluation methods are tools meant to help the decision process.
Not all studies that include costs and results are considered economic evaluation analysis.
The results of an economic evaluation analysis vary according to the study perspective or point of view.
There are various methods and not all of them are appropriate in all cases
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Conclusions
The economic evaluation analysis usually includes the following elements: Costs estimation Results estimation The time Sensitivity Presentation of results in ratios of costs and
consequences