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An overview of cost modeling and cost effectiveness analysis

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  • 1. An Overview of Cost Modeling and Cost-Effectiveness Analysis
    Benjamin P Geisler, MD MPH
    MIT LCP/BRP Lunch Talk, 8/12/2010
  • 2. Outline
    Why?
    Cost or Charge?
    Efficacy or Effectiveness?
    What is Value?
    What kind of study?
    What is a good way to communicate results?
  • 3. Why?
  • 4. $$$
  • 5. Why?
    Source: Prof. Levin-Scherz, HSPH
  • 6. Why?
    Source: business-insider.com
  • 7. Why?
    “Every country spends 100% of its gross domestic product on something.”
    Victor Fuchs
    Annals of Internal Medicine, 2005
    Source: Prof. Levin-Scherz, HSPH
  • 8. Why?
    Source: OECD.
  • 9. Why?
    Costs
    Quality
    Source: Dartmouth Atlas
  • 10. Cost or Charge?
  • 11. Cost or Charge?
    Depends on the analysis and the perspective!
    Societal perspective demands costs
    Provider might be interested in both
    Charges might be more relevant from payor perspective
    Cost = money needed to provide service = expenses
    Charges =actual amount paid by payor = revenue = costs  profit/loss
  • 12. Cost or Charge?
    Costing study
    “Micro-cost” all used resources “as they go”: x unites · $ unit price = $ sub-total
    Tedious!
    Might not be generalizable (e.g., n=1 hospital)
    Claims studies
    Analyze billing records
    Medicare charges (~20% under indemnity plan rates) accepted proxy for real costs
  • 13. Efficacy or Effectiveness?
  • 14. Efficacy or Effectiveness?
    Evidence-based medicine frameworks, e.g. AHA
    Classification of Recommendations
    Class I: Conditions for which there is evidence and/or general agreement that a given procedure or treatment is useful and effective.
    Class II: Conditions for which there is conflicting evidence and/or a divergence of opinion about the usefulness/efficacy of a procedure or treatment.
    Class III: Conditions for which there is evidence and/or general agreement that the procedure/treatment is not useful/effective, and in some cases may be harmful.
    Levels of evidence
    Level of Evidence A: Data derived from multiple randomized clinical trials
    Level of Evidence B: Data derived from a single randomized trial, or non-randomized studies
    Level of Evidence C: Consensus opinion of experts
    Source: Circulation/AHA
  • 15. Efficacy or Effectiveness?
    Many health outcomes, some disease-specific, some general
    Mortality/survival
    Progression-free survival
    Time to cure
    Gold-standard study type in medicine, RCT, comparable w/ real world outcomes?
    Heterogeneity of patients
    What about patient-reported outcomes?
  • 16. Efficacy or Effectiveness?
    Patient-reported outcomes!
    Health-related Quality of life as measured by
    Surveys (SF-36, EQ-5D…)
    Standard gamble
    Time trade-off
    Visual analogue scale
    Summarized as utility
    1 = best HRQoL possible
    0 = death
  • 17. Efficacy or Effectiveness?
    Adjustment of life-time by utility, representing health-related quality of life
    Unit: QALY (quality-adjusted life year)
    Source: Drummond 1997
  • 18. Efficacy or Effectiveness?
    Source: Adapted from Willich 2006
  • 19. What is Value?
  • 20. What is Value?
    ↑Costs
    ↓Health outcomes
    ↑Costs
    ↑Health outcomes

    ↓Costs
    ↓Health outcomes
    ↓Costs
    ↑Health outcomes

  • 21. What is Value?
    DCosts
    $50K/QALY

    DCosts
    DQALYs
    DQALYs

  • 22. What is Value?
    DCosts
    DQALYs
    “Efficiency Frontier”
  • 23. 23
    Costs
    QALY
    What is Value?
    ICE Scatter Plot
    Cost-effectiveness
    acceptability curve
    Source: Pietzsch & Geisler
  • 24. What kind of study?
  • 25. What kind of study?
    Cost-minimization analysis
    Looks just at costs
    Does not take (health) outcomes into account
    Cost-benefit analysis
    Widely used in public policy
    (Health) outcomes monetarized
    Controversial to attach $$$ to life saved, life year gained etc.
  • 26. What kind of study?
    Cost-effectiveness analysis (CEA)
    Introduced to medicine by Milton Weinstein (HSPH) in the late 1970s
    Ratio of incremental costs over incremental effectiveness
    Effectiveness can be expressed in all kinds of ways, eg life years gained , ulcers healed
    Cost-utility analysis
    Special case of CEA: effectiveness expressed in quality-adjusted life years (QALYs) gained
  • 27. 27
    Incremental Cost-Effectiveness Ratio
    $ Strategy A - $ Strategy B
    ICER =
    Health benefits Strategy A - Health benefits Strategy B
    eg, $ per QALY gained
  • 28. What kind of study?
    Economic analysis “along the trial”
    Decision-analytic modeling
  • 29. Why use decision-analytic (DA) models for health economic evaluation?
    “Juggle” or combine
    Short-term clinical results (eg, RCTs) with long-term observational studies
    Diagnostics with treatments
    Costs
    Duration (LYs) and quality of life (QALYs)
    Transfer to different
    Patient cohort
    Epidemiology
    Baseline characteristics
    Compliance
    HC provider
    Standard of care
    Payor
    Coverage
    Country
    Extrapolate
    to long-term (ideally life time)
  • 30. How do DA models for health economic evaluation look like?
    Mathematical and statistical models
    E.g., regression models, “area under the curve”
    Decision trees
    Markov models
    Modifications incl. “memory”
    Markov chains and decision processes
    Sequential decisions
    Influence diagrams
    Causal inference
    Compartment models
    System dynamics
    Discrete event simulations
    Flexible, growing popularity
    Agent-based models
    Communicable diseases
    Great “taxonomy” and overview in Stahl JE. Pharmacoeconomics 2008; 26 (2): 131-148
    30
  • 31. What is a good way to communicate results?
  • 32. What is a good way to communicate results?
    High value Acceptable value Low value
    Cost-saving $0 $50K $100K $150K $200K $300K
    Cost per quality-adjusted life year (QALY)
    Clinical Effectiveness
    Superior (A)
    Incremental (B)
    Comparable (C)
    Unproven/Potential (U/P)
    Inadequate (I)
    Cost-effectiveness
  • 33. What is a good way to communicate results?
    Clinical Effectiveness
    Cost-effectiveness
    Integrated Evidence Rating Matrix™ developed by Institute for Clinical and Economic Review
  • 34. Thank you!
    Feel free to get in touch via email: ben.geisler@gmail.com
    I blog at http://value-strategies.blogspot.com
    I’m new to the Twitterverse: @ben_geisler