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