Sarah Karlsberg Schaffer, Jon Sussex, Dyfrig Hughes and Nancy Devlin - EuHEA 2016

1. Sarah Karlsberg Schaffer, Jon Sussex, Dyfrig
Hughes and Nancy Devlin
EuHEA Conference, Hamburg • 14th July 2016
Opportunity costs and local health service
spending decisions: A qualitative study
from Wales

2. Background
• In UK, decisions to approve/reject new
health care technologies taken by Health
Technology Assessment (HTA) agencies:
• National Institute for Health and Care
Excellence (NICE) in England
• All Wales Medicines Strategy Group (AWMSG)
in Wales
• Scottish Medicines Consortium (SMC) in
Scotland

3. Background
• HTA decisions made by comparing incremental cost-
effectiveness ratios (ICERs) against ‘threshold
range’ of £20,000-£30,000 per quality-adjusted life
year (QALY) gained
• Opportunity cost is QALYs obtainable by alternative use of
resources
• Figure is based on little empirical evidence
• Various attempts in literature to estimate ‘true’
value, e.g.
• Claxton et al. (2015)
• Appleby et al. (2006)
• Karlsberg Schaffer et al. (2015)

4. Background
• Underpinning previous attempts to estimate
threshold – and HTA process itself – is key
assumption:
• Approval of new, cost-increasing services will
displace funds from existing health care services
• Explicit in NICE decision-making (Methods Guide)
• If this holds, opportunity cost of NICE
recommendation is ICER of displaced service
• This paper investigates validity of
“displacement” assumption & discusses
alternative responses to cost-increasing TAs

5. Methods
• Semi-structured interviews with Medical
and/or Finance Directors of all 7 Local
Health Boards (LHBs) in NHS Wales
• Key interview sections:
1. Procedures, policies & guidelines for prioritisation
at LHB
2. How in practice LHBs found funds to comply with
NICE TAs issued in study period (Oct 2010-
March 2013)
3. How LHBs accommodated other financial
“shocks”

6. Results
• Financial impact of TAs generally planned for in
advance
• Majority of LHBs have contingency funds
• Efficiency savings (reductions in costs with no
assumed reductions in quality) = source of
funds for cost pressures of all kinds, incl. NICE
TAs
• Most common response to question of how TAs were
funded
• Note distinction between:
• Reductions in x-inefficiency (“slack”), e.g. switching to
generics
• Efficiency savings where health effects are more
complex, e.g. leading to increased waiting times

7. Results
• Service displacements not linkable to particular TAs
• Any displacements were result of cumulative cost pressures of all kinds
• More likely to be delayed investment than actual disinvestment
• Two interviewees highlighted absence of guidance on how displacement
could be achieved
• General lack of prioritisation activities
• “The level of clarity … is not yet such that decision-makers assess the
marginal benefit of various procedures versus those which NICE is
recommending”
• Welsh Government, on occasion, acted as funder of last resort
• Example: age-related macular degeneration (AMD) drug
• Welsh Government contributed towards infrastructure and unit costs
• Considered it an “irrefutably beneficial technology”
• Disinvestment within ophthalmology not seen as an option due to
demand for other services

8. Discussion/conclusions
• Implicit in displacement assumption is that:
• LHB budgets are fixed and fully deployed
• Providers are not x-inefficient
• Evidence in this paper that both of these
do not hold
• Opportunity cost is not wholly felt in terms of
displacement of other NHS services
• Opportunity cost falls at least in part:
• Outside the NHS (other areas of public spending)
• By increased efforts to improve x-efficiency

9. Thank you
• Contact details:
• Sarah Karlsberg Schaffer
• Office of Health Economics
• sschaffer@ohe.org
• Paper citation:
• Schaffer, S. K., Sussex, J., Hughes, D., & Devlin, N. (2016).
Opportunity costs and local health service spending
decisions: a qualitative study from Wales. BMC Health
Services Research, 16(1), 1.