This document provides an introduction to health economics and medical technologies. It discusses key concepts in health economic evaluations including comparing costs and health outcomes of alternative treatment options, quality-adjusted life years (QALYs), incremental cost-effectiveness ratios, and sensitivity analyses. Examples are provided to illustrate cost-effectiveness analyses of different medical technologies and treatments. Guidelines for conducting health economic evaluations are also summarized.

1. AN INTRODUCTION TO
HEALTH ECONOMICS and
MEDICAL TECHNOLOGIES
PART I: IN THEORY
MASTER OF SCIENCE BIOMEDICAL ENGINEERING
2015

2. HEALTH ECONOMICS FOR
NON –ECONOMISTS
AN INTRODUCTION TO THE CONCEPTS, METHODS AND
PITFALLS OF HEALTH ECONOMIC EVALUATIONS
PROF. L. ANNEMANS PhD
INTERUNIVERSITY CENTER FOR
HEALTH ECONOMICS RESEARCH (I-CHER)
ISBN 978 90 382 1274 6

3. « HEALTH IS PRICELESS »
BUT IS IT REALLY ?

4. WHAT IS A
HEALTH ECONOMIC EVALUATION?
The COMPARATIVE ANALYSIS OF
ALTERNATIVE COURSES OF ACTION
IN TERMS OF BOTH THEIR COSTS
AND HEALTH CONSEQUENCES

5. TREATMENT OF PERSISTENT AIR LEAKS

6. new
current
cost of a
medical technology
new
current
average other
treatment costs
hospital
drugs
physicians
+ =
new current
total cost
net
savings
NEW MT VS CURRENT MT

7. new
current
cost of a
medical technology
new
current
average other
treatment costs
hospital
drugs
physicians
+ =
new current
total cost
net costs
NEW MT VS CURRENT MT

8. new
current
cost of a
medical technology
new
current
average other
treatment costs
hospital
drugs
physicians
+ =
new current
total cost
net
costsNEW MT VS CURRENT MT

9. NEUROSTIMULATORS vs. (INTRATHECAL)
DRUG PUMPS FOR CHRONIC PAIN
Neurostimulators send electrical impulses to the spine.
These impulses replace pain also providing pain relief.
Drug pumps deliver pain medication directly to the
fluid around the spinal cord, providing pain relief.

10. Lower back pain
Treatment A
Treatment B
success
success
failure
failure
0.700
0.300
0.900
0.100
1000
1000 +
10000
2000
2000 +
10000
EXERCISE:
WHICH IS THE LESS EXPENSIVE STRATEGY
FROM THE PERSPECTIVE OF THE PAYER ?
4000
3000

11. BUT REMEMBER THE DEFINITION!
THE COMPARATIVE ANALYSIS OF
ALTERNATIVE COURSES OF ACTION
IN TERMS OF BOTH THEIR COSTS
AND HEALTH CONSEQUENCES

12. 10 QALY’s
QALY = QUALITY ADJUSTED LIFE YEARS
death 0
perfect 1
health
INDEX (‘utility level’)
TIME
0.5
0.6
20 25
0.6 * 25 = 15
- 0.5 * 20 = 10
5
2.0
2.5
0.5

13. MEDICAL NEED: IS A QALY A QALY?
0
1
0
1
0,4
0,2
0,8
0,6
?
E. Nord, person trade off method
3/4 1/4

14. HOW SHOULD THE INDEX BE MEASURED
QUALITY OF LIFE QUESTIONNAIRES
DIRECT
- VISUAL ANALOGUE SCALE (VAS)
- STANDARD GAMBLE (SG)
- TIME TRADE OFF (TTO)
INDIRECT
- EUROQOL 5D (EQ 5D)
- SHORTFORM (36) HEALTH SURVEY (SF-36)
PAIN

15. Mobility
1. I have no problems in walking about
2. I have some problems in walking about
3. I am confined to bed
Self-Care
1. I have no problems with self-care
2. I have some problems washing or dressing myself
3. I am unable to wash or dress myself
Usual activities (e.g. work, study, housework, family or leisure activities)
1. I have no problems with performing my actual activities
2. I have some problems with performing my actual activities
3. I am unable to perform my usual activities
Pain/Discomfort
1. I have no pain or discomfort
2. I have moderate pain or discomfort
3. I have extreme pain or discomfort
Anxiety/Depression
1. I am not anxious or depressed
2. I am moderately anxious or depressed
3. I am extremely anxious or depressed
12222
0.5473
E
Q
-
5
D

16. EXERCISE:
CALCULATE THE GAIN IN QALY’s
death 0
perfect 1
health
INDEX (‘utility level’)
YEARS
0.4
0.8
0.5
52 6
1.9 QALY’S

17. INCREMENTAL COST-FFECTIVENESS
RATIO ?
Cnew – Cold
ICER =
EFFnew - Effold
Cnew – Cold
ICUR =
QALYnew - QALYold

18. new medical technology
less effective
and more costly
A
new medical technology
cheaper but less
effective
B
new medical technology
more effective
and less costly
C
TOTAL COST
HEALTH EFFECT (QALY)O
D
new medical technology
more effective
but more costly
current medical technology
?

19. EFFECTIVENESS AND COST-EFFECTIVENESS
ARE NOT ENOUGH
IT MUST ALSO BE AFFORDABLE
BUDGET IMPACT

20. GDP BELGIUM 2012 = € 369.0 BILLION
POPULATION BELGIUM 31-12-2012 = 11.1 MILLION
AVERAGE GDP PER CAPITA = +/- € 30,000
http://www.nbb.be/belgostat/DataAccesLinker?Lang=E&Dom=2&Table=30
THE LIMITS OF « AFFORDABILITY »

21. At risk for CHD
No prevention
Prevention
No MI
MI
0.700
0.300
0.800
0.200
EXERCISE:
WHAT IS THE INCREMENTAL COST-
EFFECTIVENESS RATIO OF PREVENTION ?
3000
8.8 QALY
6000
9.2 QALY
No MI
MI
10 QALY
€ 0
6 QALY
€ 10000
10 QALY
€ 4000
6 QALY
€ 14000
€ 7500/QALY
ARR = 10% ABSOLUTE RISK REDUCTION
NNT = 10 NUMBER NEEDED TO TREAT

22. TAKE-HOME EXERCISE
Carotid stenosis is a narrowing of the carotid arteries, the two major arteries that carry oxygen-rich blood from the heart to
the brain. Carotid stenosis is caused by a buildup of plaque inside the artery wall that reduces blood flow to the brain and is a
major risk factor for stroke. There are different types of treatments:
• No medical treatment (by being physically active)
• Medical management following a medication regimen such as taking:
• platelet aggregation inhibitor medication (aspirin)
• cholesterol-lowering medication (statins)
• antihypertensive medication (ACE inhibitors)
•Minimally invasive vascular surgery: carotid stenting + adjuvant drug therapy
Surgery does not always the most optimal outcome, only 89% of patient gain significant health benefit from operation, health
status of additional 10.5% remains unchanged compared to their health status before the surgery. Surgery is not risk-free and
thereby 0.5% of patients die during the surgery.

23. TAKE-HOME EXERCISE
1. WHICH TREATMENT FOR CAROTID STENOSIS IS THE MORE COST-EFFECTIVE COMPARED TO THE NO MEDICAL
TREATMENT: THE MEDICAL MANAGEMENT OR THE MINIMALLY INVASIVE VASCULAR SURGERY CONSIDERING
FOLLOWING DATA?
2. WOULD YOU RECOMMEND THE BELGIAN NATIONAL INSTITUTE FOR HEALTH AND DISABILITY INSURANCE
(NIHDI) TO REIMBURSE THE MINIMALLY INVASIVE VASCULAR SURGERY?
Expected life years:
• no medical treatment 5 years
• medical mangement 9 years
• successful surgery 15 years
• unsuccessful surgery 9 years
Utility weights
Average utility weight for each life year until death
• no medical treatment 0.5
• medical management 0.6
• successful surgery 0.7
• unsuccessful surgery 0.6
Cost
• no medical treatment 0 €/year
• medical management 650 €/year
• surgery + carotid stent 7.450 €
• adjuvant drug therapy to carotid stenting 200 €/year
• unsuccessful surgery 650 €/year
Discounting
• discounting rate 0%

24. successful surgery = cost surgery + total cost adjuvant drug therapy
unsuccessful surgery = cost surgery + carotid stent + total cost medical management
patient died = cost surgery + carotid stent

25. probability total cost life years utility
no medical treatment 100% 0 € 5 0.5
medical management 100% 5.850 € 9 0.6
carotid stenting + adjuvant
drug therapy
successful
89% 10.450 € 15 0.7
carotid stenting + adjuvant
drug therapy
unsuccessful
10.5% 13.300 € 9 0.6
carotid stenting + adjuvant
drug therapy
patient died
0.5% 7.450 €
total cost QALY ICER = ∆cost/∆QALY
no medical treatment 0 € 2.5
medical management 5.850 € 5.4 2.017 €/QALY
carotid stenting + adjuvant
drug therapy
10.734 € 9.9 1.448 €/QALY
ANSWER

26. 1. Carotid stenting + adjuvant drug therapy is more cost-effective than medical management as treatment for carotid
artery stenosis.
1. Yes
The World Health Organization WHO states that the limit for being prepared to pay should be related to the wealth of
a country.
Following this rationale, a result expressed in cost per QALY which is lower than the level of the Gross Domestic
Product per person would be called cost-effective.
GDP BELGIUM 2012 = 369 BILLION €
POPULATION BELGIUM 31-12-2012 = 11,1 MILLION
AVERAGE GDP PER CAPITA = +/- 30.000 €
Thus in this hypothetical example the Belgian national payer SHOULD be in favor of reimbursing the carotid stenting
+ adjuvant drug therapy because the ICER is far below the 30.000 €/QALY.
ANSWER

27. THE VALIDITY OF HEALTH ECONOMIC
MODELS
SENSITIVITY ANALYSES
Assessment of robustness
The extent to which results of the model
are sensitive to changes in input data

28. ONE-WAY SENSITIVITY ANALYSIS
TWO-WAY SENSITIVITY ANALYSIS
TORNADO DIAGRAM
PROBABILISTIC SENSITIVITY ANALYSIS
OR MONTE CARLO ANALYSIS

29. TIME HORIZON

30. GUIDELINE
THE TIME HORIZON SHOULD BE
CHOSEN IN ORDER TO CAPTURE
ALL RELEVANT COSTS AND
OUTCOMES

31. THE MARKOV MODEL
HEALTHY SICK
DEAD
0.1
0.20.01
TRANSITION PROBABILITY

32. EXERCISE:
CALCULATE THE NUMBER OF PEOPLE IN
EACH CONDITION AFTER THREE YEARS
At the start After 1 year After 2 years After 3 years
Healthy 1000 890 792 705
Sick 0 100 169 214
Dead 0 10 39 81
Total 1000 1000 1000 1000

33. THE MARKOV MODEL
HEALTHY SICK
DEAD
0.05
0.20.01

34. HOW TO CALCULATE A
MARKOV MODEL?
LIKE A DECISION TREE (REPEATED)

35. EXERCISE:
CALCULATE THE NUMBER OF PEOPLE IN
EACH CONDITION AFTER THREE YEARS
At the start After 1 year After 2 years After 3 years
Healthy 1000 ? ? ?
Sick 0 ? ? ?
Dead 0 ? ? ?
Total 1000 1000 1000 1000

36. EXERCISE:
CALCULATE THE NUMBER OF PEOPLE IN
EACH CONDITION AFTER THREE YEARS
At the start After 1 year After 2 years After 3 years
Healthy 1000 940 884 831
Sick 0 50 87 114
Dead 0 10 29 56
Total 1000 1000 1000 1000

37. TIME PREFERENCE?
ONE PREFERS TO POSTPONE
PAYMENTS
ONE PREFERS TO RECEIVE A PAYMENT
YESTERDAY RATHER THAN TODAY

38. FUTURE AMOUNTS
HAVE TO BE RECALCULATED TO
THEIR ACTUAL VALUE
=
DISCOUNTING

39. DISCOUNTING FUTURE AMOUNTS
EXERCISE:
CALCULATE THE NET COST OF A PROJECT
OVER 5 YEARS
YEAR 0 1 2 3 4 TOTAL
savings 500 500 1000 2000 6000 10000
0.03
0.05
=B$2/
(1+$A3)^B$1
? ? ? ? ? ?
? ? ? ? ? ?
x
(1+i) y
=C$2/
(1+$A3)^C$1
=D$2/
(1+$A3)^D$1
=E$2/
(1+$A3)^E$1
=F$2/
(1+$A3)^F$1
=B$2/
(1+$A4)^B$1
=C$2/
(1+$A4)^C$1
=D$2/
(1+$A4)^D$1
=E$2/
(1+$A4)^E$1
=F$2/
(1+$A4)^F$1
∑
∑

40. DISCOUNTING FUTURE AMOUNTS
EXERCISE:
CALCULATE THE NET COST OF A PROJECT
OVER 5 YEARS
YEAR 0 1 2 3 4 TOTAL
savings 500 500 1000 2000 6000 10000
0.03 500 485.4 942.6 1830.3 5330.9 9089.2
0.05 500 476.2 907.0 1727.7 4936.2 8547.1

41. GUIDELINES FOR
HEALTH ECONOMIC EVALUATIONS
1. Medical problem and the target population must be clearly
explained
2. Comparative therapies to described
3. Perspective of the evaluation must be clearly stated
4. Design of the study
5. Calculating the costs
6. Calculating health effects
7. Time horizon
8. Uncertainty analysis
9. Discounting future amounts
10. Conclusions

42. HOSPITAL STAY MEDICAL FEES
MEDICAL
TECHNOLOGIES
PHARMACEUTICALS
…
INTRAMUROS EXTRAMUROS
INNOVATION BUDGET – CONDITIONAL REIMBURSEMENT « COVERAGE UPON EVIDENCE »
A PLEA FOR A « TRANSVERSAL APPROACH » IN HEALTHCARE
A POTENTIAL LEVERAGE FOR THE FINANCING OF
NEW INDICATIONS BY NOVEL MEDICAL TECHNOLOGIES

43. BIO HANS HELLINCKX
• Bachelor clinical chemistry (CTL-BME)
• Master biomedical sciences (health sciences - administration health care and hospital
management) (VUB)
• Master after Master in business administration (2y) (VUB)
• Master after Master in health care data management (1y) (UA-RUG-VUB)
• Postgraduate health economics (HUB-UGent)
• Certificat interuniversitaire en économie de la santé (UCL-ULB-ULg)
• Life sciences and biomedical technology (UGent)
• Quality management in a biomedical, biotechnical and pharmaceutical environment (KU Leuven)
• Staff member financial and medical director UZ Brussel
• Project manager public pharmacies (700) KAVA
• Product and marketing manager Benelux IVD Menarini Diagnostics Benelux
• Advisor medical consumables UNAMEC
Advisor medical equipment and systems UNAMEC
Advisor health economics, financing and reimbursement UNAMEC
Guest lecturer Health Economics and Medical Technologies KU Leuven, UGent, UCL-ULB-Ulg
(Biomedical Engineering)
Member of the Board “MedTech Flanders vzw”
++32 (0)473/292.592 - h.hellinckx@unamec.be