Economic Evaluation Introduction and in its usage in dentistry

1. ECONOMIC
EVALUATION
PRESENTED BY:
Ramvilas Reddy
Post-graduate
Public Health Dentistry
1

2.  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.
2

3. CONTENTS
 Introduction
 What is economic evaluation of health?
 Why Is Economic Evaluation important?
 Benefits of Economic Evaluation
3

4. ….
 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
4

5.  Check List For Evaluating The Health Care Programs
 Economic Evaluation In Dentistry
 Limitations
 Future development of Economic Evaluations (Oral Health Care)
 Conclusion
 References
5

6.  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
6

7.  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.
7

8.  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.
8

9. 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.
9

10. 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”.
10

11.  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.
11

12.  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?
12

13. 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. 13

14.  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.
14

15.  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.
15

16.  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.
16

17. 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.
17

18. 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.
18

19. 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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20. 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 adults
Kaleed A et al. 1999 Cost minimization analysis of laparoscopic and open
appendicectomy. European Journal of Surgery 165: 579–582
20

21. 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
21

22. 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.
22

23.  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.
23

24.  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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25.  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)
25

26. 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.
26

27. 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.
27

28. 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.
28

29. 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.
29

30.  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).
30

31.  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.
31

32. 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.
32

33. 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.
33

34. 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.
34

35. 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.
35

36. 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.
36

37.  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.
37

38. 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.
38

39.  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.
39

40. 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,
40

41. 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.
41

42.  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.
42

43. 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.
43

44. 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.
44

45. 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.
45

46. 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.
46

47. 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.
47

48. 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.
48

49.  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.
49

50.  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.
50
Hodgson, Cai. Medical care expenditures for hypertension, its complications,
and its comorbidities. Medical Care 2001;39(6):599–615.

51. 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.
51

52. 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.
52

53.  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.
53

54. 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
54

55.  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.
55

56. 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.
56

57. 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
57

58.  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.
58

59. 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.
59

60.  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.
60

61. 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.
61

62.  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?
62

63.  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?
63

64. 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.
64

65.  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.
65

66.  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.
66

67.  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.
67

68.  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.
68

69.  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.
69

70.  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.
70

71.  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).
71

72.  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.
72

73. 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.
73

74. 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.
74

75. 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.
75

76. 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.
76

77. 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.
77

78.  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.
78

79.  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.
79

80. 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.
80

81.  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.
81

82.  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.
82

83. REFERENCES
 Sebastian S, Johnson T. Economic Evaluation in Dentistry. 1st ed.
Germany: LapLambert Academic Publishing; 2103.
 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.
83

84.  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.
84

85.  Kumar S, Williams AC, Sandy RJ. How Do We Evaluate the
Economics of Health care?. European Journal of Orthodontics.
2006;28:. 513-519.
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86. THANK YOU

87. 87