An overview of cost modeling and cost effectiveness analysis


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An overview of cost modeling and cost effectiveness analysis

  1. 1. An Overview of Cost Modeling and Cost-Effectiveness Analysis<br />Benjamin P Geisler, MD MPH<br />MIT LCP/BRP Lunch Talk, 8/12/2010<br />
  2. 2. Outline<br />Why?<br />Cost or Charge?<br />Efficacy or Effectiveness?<br />What is Value?<br />What kind of study?<br />What is a good way to communicate results?<br />
  3. 3. Why?<br />
  4. 4. $$$<br />
  5. 5. Why?<br />Source: Prof. Levin-Scherz, HSPH<br />
  6. 6. Why?<br />Source:<br />
  7. 7. Why?<br />“Every country spends 100% of its gross domestic product on something.”<br />Victor Fuchs<br />Annals of Internal Medicine, 2005<br />Source: Prof. Levin-Scherz, HSPH<br />
  8. 8. Why?<br />Source: OECD.<br />
  9. 9. Why?<br />Costs<br />Quality<br />Source: Dartmouth Atlas<br />
  10. 10. Cost or Charge?<br />
  11. 11. Cost or Charge?<br />Depends on the analysis and the perspective!<br />Societal perspective demands costs<br />Provider might be interested in both<br />Charges might be more relevant from payor perspective<br />Cost = money needed to provide service = expenses<br />Charges =actual amount paid by payor = revenue = costs  profit/loss<br />
  12. 12. Cost or Charge?<br />Costing study<br />“Micro-cost” all used resources “as they go”: x unites · $ unit price = $ sub-total<br />Tedious!<br />Might not be generalizable (e.g., n=1 hospital)<br />Claims studies<br />Analyze billing records<br />Medicare charges (~20% under indemnity plan rates) accepted proxy for real costs<br />
  13. 13. Efficacy or Effectiveness?<br />
  14. 14. Efficacy or Effectiveness?<br />Evidence-based medicine frameworks, e.g. AHA<br />Classification of Recommendations<br />Class I: Conditions for which there is evidence and/or general agreement that a given procedure or treatment is useful and effective.<br />Class II: Conditions for which there is conflicting evidence and/or a divergence of opinion about the usefulness/efficacy of a procedure or treatment.<br />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.<br />Levels of evidence<br />Level of Evidence A: Data derived from multiple randomized clinical trials<br />Level of Evidence B: Data derived from a single randomized trial, or non-randomized studies<br />Level of Evidence C: Consensus opinion of experts<br />Source: Circulation/AHA<br />
  15. 15. Efficacy or Effectiveness?<br />Many health outcomes, some disease-specific, some general<br />Mortality/survival<br />Progression-free survival<br />Time to cure<br />Gold-standard study type in medicine, RCT, comparable w/ real world outcomes?<br />Heterogeneity of patients<br />What about patient-reported outcomes?<br />
  16. 16. Efficacy or Effectiveness?<br />Patient-reported outcomes!<br />Health-related Quality of life as measured by<br />Surveys (SF-36, EQ-5D…)<br />Standard gamble<br />Time trade-off<br />Visual analogue scale<br />Summarized as utility<br />1 = best HRQoL possible<br />0 = death<br />
  17. 17. Efficacy or Effectiveness?<br />Adjustment of life-time by utility, representing health-related quality of life<br />Unit: QALY (quality-adjusted life year)<br />Source: Drummond 1997<br />
  18. 18. Efficacy or Effectiveness?<br />Source: Adapted from Willich 2006<br />
  19. 19. What is Value?<br />
  20. 20. What is Value?<br />↑Costs<br />↓Health outcomes<br />↑Costs<br />↑Health outcomes<br /><br />↓Costs<br />↓Health outcomes<br />↓Costs<br />↑Health outcomes<br /><br />
  21. 21. What is Value?<br />DCosts<br />$50K/QALY<br /><br />DCosts<br />DQALYs<br />DQALYs<br /><br />
  22. 22. What is Value?<br />DCosts<br />DQALYs<br />“Efficiency Frontier”<br />
  23. 23. 23<br />Costs<br />QALY<br />What is Value?<br />ICE Scatter Plot<br />Cost-effectiveness<br />acceptability curve<br />Source: Pietzsch & Geisler<br />
  24. 24. What kind of study?<br />
  25. 25. What kind of study?<br />Cost-minimization analysis<br />Looks just at costs<br />Does not take (health) outcomes into account<br />Cost-benefit analysis<br />Widely used in public policy<br />(Health) outcomes monetarized<br />Controversial to attach $$$ to life saved, life year gained etc.<br />
  26. 26. What kind of study?<br />Cost-effectiveness analysis (CEA)<br />Introduced to medicine by Milton Weinstein (HSPH) in the late 1970s<br />Ratio of incremental costs over incremental effectiveness<br />Effectiveness can be expressed in all kinds of ways, eg life years gained , ulcers healed<br />Cost-utility analysis<br />Special case of CEA: effectiveness expressed in quality-adjusted life years (QALYs) gained<br />
  27. 27. 27<br />Incremental Cost-Effectiveness Ratio<br />$ Strategy A - $ Strategy B<br />ICER =<br />Health benefits Strategy A - Health benefits Strategy B<br />eg, $ per QALY gained<br />
  28. 28. What kind of study?<br />Economic analysis “along the trial”<br />Decision-analytic modeling<br />
  29. 29. Why use decision-analytic (DA) models for health economic evaluation?<br />“Juggle” or combine<br />Short-term clinical results (eg, RCTs) with long-term observational studies<br />Diagnostics with treatments<br />Costs<br />Duration (LYs) and quality of life (QALYs)<br />Transfer to different<br />Patient cohort<br />Epidemiology<br />Baseline characteristics<br />Compliance<br />HC provider<br />Standard of care<br />Payor<br />Coverage<br />Country<br />Extrapolate<br />to long-term (ideally life time)<br />
  30. 30. How do DA models for health economic evaluation look like?<br />Mathematical and statistical models<br />E.g., regression models, “area under the curve”<br />Decision trees<br />Markov models<br />Modifications incl. “memory”<br />Markov chains and decision processes<br />Sequential decisions<br />Influence diagrams<br />Causal inference<br />Compartment models<br />System dynamics<br />Discrete event simulations<br />Flexible, growing popularity<br />Agent-based models<br />Communicable diseases<br />Great “taxonomy” and overview in Stahl JE. Pharmacoeconomics 2008; 26 (2): 131-148<br />30<br />
  31. 31. What is a good way to communicate results?<br />
  32. 32. What is a good way to communicate results?<br />High value Acceptable value Low value<br />Cost-saving $0 $50K $100K $150K $200K $300K<br />Cost per quality-adjusted life year (QALY)<br />Clinical Effectiveness<br />Superior (A)<br />Incremental (B)<br />Comparable (C)<br />Unproven/Potential (U/P)<br />Inadequate (I)<br />Cost-effectiveness<br />
  33. 33. What is a good way to communicate results?<br />Clinical Effectiveness<br />Cost-effectiveness<br />Integrated Evidence Rating Matrix™ developed by Institute for Clinical and Economic Review<br />
  34. 34. Thank you!<br />Feel free to get in touch via email:<br />I blog at<br />I’m new to the Twitterverse: @ben_geisler<br />