Health economics Health economic evaluation

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1 Health economics Health economic evaluation FEBRUARY 2011 About this briefing This briefing will help you to understand health economic evaluations. It is one of a series of briefings. Please see our health economics webpages for information on measuring costs or outcomes. Contents 1. Measurement of consequences in Economic Evaluation 2. Cost-minimisation analysis (CMA) 3. Cost-consequence analysis (CCA) 4. Cost-effectiveness analysis (CEA) 5. Cost-utility analysis (CUA) 6. Cost Benefit Analysis (CBA) 7. The reliability of economic evaluations 8. Consensus in HE Evaluation for Public Health 9. References The aim of producing evidence in economic evaluation is to help inform decision makers faced with competing demands upon the health budget. It is important to recognise that both the costs and consequences of two or more health intervention options must be examined in the analysis for it to be classified as an economic evaluation. Consider that there are two ways to treat the same disease x and y. If x costs less and leads to more health benefits than y, the decision will be quite clear. If x costs more than y, but has more benefits than y, the decision is not as straightforward. Before we can get to this stage, we have first to assemble and analyse the evidence. How the evaluation is constructed and the outcomes are measured determines what type of economic evaluation is undertaken. Everyday language can obscure this. For example, the terms cost benefit analysis and cost-effectiveness are often used loosely in everyday language as equivalent to economic evaluation. As we will see below, this loose use of language obscures some important issues. 1

2 Several economic evaluation techniques are available to measure and value the consequences of health care interventions, reflecting different notions of efficiency. These are summarised in the table below and explained with examples after the table. 1. Measurement of consequences in Economic Evaluation Type of economic evaluation Cost-Minimisation Analysis Cost-Consequence Analysis Cost-Effectiveness Analysis (CEA) Identification of consequences Assumes consequences are identical for alternatives of interest. Single or multiple outcomes of interest, common to both alternatives but achieved to different degrees. Single outcomes of interest, common to both alternatives, but achieved to different degrees. Measurement and valuation of consequences Requires published evidence. Natural units (eg lifeyears gained, disability days saved, points of blood pressure reduction etc). Natural units (eg lifeyears gained, disability days saved, points of blood pressure reduction etc). Cost Utility Analysis within the CEA umbrella Cost Benefit Analysis Single or multiple outcomes, not necessarily common to both alternatives. Single or multiple outcomes, not necessarily common to both alternatives. Healthy years typically measured as qualityadjusted life-years (QALYs). Monetary units based on individual compensation. 2

3 2. Cost-minimisation analysis (CMA) Cost-minimisation analysis compares the cost of two or more options and it assumes that the interventions achieve the given outcome to the same extent. Therefore, it involves the comparison of costs alone with the aim to find the least-cost alternative. Cost minimisation requires that evidence upon the outcomes being equivalent is known in advance, before the costing exercise is undertaken. Example For example, consider that a study proposes undertaking a costminimisation analysis upon hernia repair by comparing day-case surgery with surgery using conventional inpatient stay. If it is assumed that both types of surgery deliver the same outcome, such as the number of operations successfully completed, it would be possible to compare the two interventions to establish the leastcostly alternative. However, if it was found that day-case surgery led to increased post-operative complications (which would increase cost over the long term) then to assemble sufficient evidence for a robust decision, it would be necessary to examine both the costs and outcomes of each alternative in the evaluation. Cost minimisation studies are rare. An old example is Lowson et al., (1981) which examined options for providing long term domiciliary oxygen therapy, where each option produced identical health benefits. 3. Cost-consequence analysis (CCA) A cost-consequence analysis collects both costs for two or more options, while the consequences are collected often as a multiple of outcomes, common to the two options, but achieved to different extents. Example Consider the impact of two interventions upon patients with diabetes. Outcomes of interest may include HbA1c levels, adverse events, quality of life, diabetes- related complications and blood pressure. A CCA would present the costs of the two interventions along with the impact on each of these markers. The issue is that decision makers would then have to apply their own subjective weighting system to the different outcomes of interest. If CCA can be avoided by using one of the methods below, this is a preferable. However, there may be situations, often within the wider public health, where an intervention can impact in several ways. See our guide about measuring outcomes Hollinghurst et al (2010) undertook a CCA alongside a RCT which examined providing information to help women, who already had had one caesarean birth, plan the mode of delivery for their subsequent pregnancy. Three options were looked at, usual care compared with two different ways of providing information to help women decide. The outcomes of interest were: costs to the NHS of care to mother and baby; the score on the decision tool; and the mode of delivery (proportion of caesarean births). 3

4 4. Cost-effectiveness analysis (CEA) Cost-effectiveness analysis compares the costs of two or more interventions measuring the benefits on a single, common outcome. The outcome is a clinical measure of interest, eg change in blood pressure when treating hypertensive patients. By using this common outcome the cost-percommon outcome can be calculated for each option. Examples Kendrick et al (2006) assessed the relative cost-effectiveness in a randomized control trial of three classes of antidepressants: tricyclic antidepressants (TCA); selective serotonin reuptake inhibitors (SSRI); and lofepramine (LOF). They collected patient costs over a 12 week period for each antidepressant. The main outcome measure used was number of depression free weeks. Kendrick et al calculated the cost per depression free week for each antidepressant. They found that SSRIs were probably the most cost effective. Godfrey et al (2005) estimated the service costs of 58 NHS smoking cessation services in England in the early years that they were operating. NHS smoking cessation services collect a four week quit rates, which is insufficient to predict long term quit / relapse behaviour. The authors used robust epidemiological evidence to first estimate 1 year quit rates and then 8 year quit rates. The outcome used was life years saved. Godfrey et al concluded that costs per life year saved for smoking cessation services were a good buy when compared to the NICE criteria. It will be noted that this study did not compare two options, rather it aimed to address what were the new smoking cessation services likely to achieve, given the fact that routine data did not collect good outcome data and what were their costs. 5. Cost-utility analysis (CUA) Cost-utility analysis compares the cost of each intervention upon a single common outcome measure: the generic quality adjusted life year (QALY). QALYs combine length of life with the quality of life experienced in that period which are combined on a single measurement scale. In Europe the tool used is the EQ5D (Euroqol). This is the method required by NICE. The EQ5D has been designed to be straightforward for an individual to complete and uses utility values obtained from several thousand members of the British public. It is the individual who answers the questions upon how they are feeling, rather than being determined by an external clinical measure. This is to take into account subjectivity: eg people tolerate pain differently; the loss of a leg will end the career of a footballer, but not that of a health economist and as a result the loss will be valued differently by the two individuals. Costs for the two or more options are collected and the cost per QALY can be compared. Cost per QALY can be compared across many different health care interventions. This is the reason why NICE use them and they are also used in the NHS Outcomes Framework. NICE has approved treatments which come in at or under 20,000-30,000 per QALY, although there have been some adjustments for orphan drugs and end of life care. See the page upon measuring outcomes for more information 4

5 CUA example Whitehurst et al., (2007) undertook a CUA alongside a RCT which compared two interventions to treat low back pain in primary care: a brief pain management program targeting psychosocial factors compared with physical therapy. Costs were collected for each option. The outcome measure was the EQ5D. As is common in randomized control trials, clinical measures were collected alongside the EQ5D. The authors found that physical therapy had an incremental cost per QALY of 2,362 when compared to the pain management program. If you are interested, the article that launched the QALY (before the EQ5D had been developed) to both the medical profession and the NHS was Williams, A. (1985) Economics of coronary artery bypass grafting. British Medical Journal, 291: Cost Benefit Analysis (CBA) Cost Benefit Analysis measures both the costs and the consequences of the options being analysed in money. The net benefit of each option can be calculated: the difference between the money value of the consequences and the money value of the costs. The concept of CBA goes back to the nineteenth century and the method has been widely used in several branches of economics. One common method used to measure benefits in money terms is Willingness to Pay (WTP). This involves asking people how much they value something, e.g. an intervention. A common issue when using WTP is providing respondents with sufficient information so they can provide an informed response. Concern has often been expressed that human life cannot be valued. This view ignores the fact that social decision makers take such decisions regularly and that by making the issues transparent, analysts can improve the quality of decisions. For example, see (Gould, 1971) for an interesting example of how the UK government initially decided that it would be too expensive to regulate that all medicine jars had child proof lids. Using very conservative estimates, Gould demonstrated that the government valued a child s life at less than 1,000 per annum (1971 prices). Measuring benefits in money terms is the way to measure the multiple consequences produced by each option in a single measurement scale, which also uses the same units as that of the resources, ie money. CBA examples Donaldson et al., (1995) measured the willingness to pay (in s) of women for information provided by two methods of service delivery for antenatal carrier screening for cystic fibrosis. The authors found no statistically significant differences between the two delivery methods, which meant the NHS 5

6 provider could select the lower cost one. They concluded that measuring non health benefits, such as the value placed upon information provided by tests to take a decision, was feasible with WTP. prove fatal. It is experience in using the method in developing countries which suggests that economic evaluation in the wider public health in the UK may not be limited to cost consequences analysis. Ortega et al., (1998) measured the costs and used WTP to measure how much cancer patients being treated with chemotherapy valued prophylactic epoetin alfa, which could reduce the risk of anaemia, a side effect of the chemotherapy. They compared the costs and benefits of being treated with and without prophylactic epoetin alfa. This was a full cost benefit analysis as both costs and benefits were measured in money values. They concluded that the cost of the intervention was greater than its benefits, and recommended that further research into using it on high risk patients was explored. WTP may have an application in the wider Public Health in the UK. A concern that has been raised is the viability of using WTP in socially deprived communities. WTP has been extensively used in developing countries. For example, Bhatia and Fox Rushby (2002) undertook a study to determine how much people living in 80 villages in rural Surat in India were willing to pay for insecticide treated mosquito nets to reduce the risk of contracting malaria, a disease which causes significant morbidity and can 6

7 7. The reliability of economic evaluations It is important to assess the reliability of any economic evaluation that you use, especially when it may be used as part of a decision making process. Drummond et al. (2005) have developed a checklist of 10 questions which can be used to assess the strengths and weaknesses of individual economic evaluations. The checklist can also be used at the design stage of an economic evaluation to provide guidance on how to conduct an economic evaluation. 1. Was a well-defined question posed in answerable form? 2. Was a comprehensive description of the competing alternatives given? (ie can you tell who? did what? to whom? where? and how often?) 3. Was the effectiveness of the programmes or services established? 4. Were all the important and relevant costs and consequences for each alternative identified? 5. Were costs and consequences measured accurately in appropriate physical units? (e.g. hours of nursing time, number of physician visits, lost work-days, gained life-years) 6. Were costs and consequences valued credibly? 7. Were costs and consequences adjusted for differential timing? (ie benefits may not be apparent for years to come) 8. Was an incremental analysis of costs and consequences of alternatives performed? 9. Was allowance made for uncertainty in the estimates of costs and consequences? 10. Did the presentation and discussion of study results include all issues of concern to users? 8. Consensus in HE Evaluation for Public Health Is there a consensus about which type of economic evaluation is appropriate for public health interventions? The short answer is 'no'! The appropriate form of economic evaluation will always depend on the questions being addressed and the decision-making perspective adopted. Typically health economists would not recommend cost-minimisation analysis and would advocate at least using cost-effectiveness analysis. The debate tends to polarise between those who advocate the cost-utility analysis approach (usually using the QALY) and those who prefer cost-benefit analysis, incorporating willingness-to-pay type methodologies. Use of cost-consequence analysis, tends to cause significant debate between economists, with some viewing it as a 'fudge' that does not help to produce sufficient quantitative information to aid decision-makers. However, the benefit of applying cost-consequence analysis to public health is that it allows the many impacts of a public health intervention to be captured and presented transparently. Whilst it does not allow the benefits to be presented in a single outcome measure, this may be appropriate in public health settings where benefits may accrue in multiple sectors such as health, social care, education and the environment. For now it is probably safe to conclude that the 'gold standard' type of economic evaluation is either cost-utility analysis or cost-benefit analysis, and that there remains important debate within the health economics profession regarding which is more appropriate to the analysis of public health interventions. For many procedures and pharmaceuticals provide in acute care for comparability purposes (with the health technology assessment field), NICE has pursued the cost per QALY route in the meantime, whilst recognising that important methodological and practical issues of application remain to be resolved. 7

8 References Bhatia, M. R. and Fox-Rushby, J. A. (2002) Willingness to pay for treated mosquito nets in surat, India: the design and descriptive analysis of a household survey. Health Policy and Planning, 17(4), Donaldson, C. (1995) Willingness to pay for antenatal carrier screening for cystic fibrosis. Health Economics, 4 (6): Drummond, M.F., Sculpher, M.J., Torrance, G.W., O'Brien, B.J. and Stoddard, G. L. (2005) Methods for the economic evaluation of health care programmes. Oxford University Press:Oxford. Godfrey, C., Parrott, S., Coleman, T. and Pound, E. (2005) The costeffectiveness of the english smoking treatment services: evidence from practice. Addiction. 100 (Suppl. 2), Gould, D. (1971) A groundling s notebook. New Scientist, 51; 271 Hollinghurst, S. et al (2010) Economic evalaution of the DiAMOND randomized trial: cost and outcomes of 2 decision aids from mode of delivery among women with a previous caesarean section. Medical Decision Making, 30, Kendrick, T. et al.( 2006) Costeffectiveness and cost-utility of tricyclic antidepressants, selective serotonin reuptake inhibitors and lofepramine: randomised controlled trial. British Journal of Psychiatry, 188, Lowson, K. V., Drummond, M. F. and Bishop, J. M. (1981) Costing new services: long-term domiciliary oxygen therapy. Lancet, May 23, Ortega, A., Dranitsaris, G., Puodziunas, A.L. (1998) What are cancer patients willing to pay for prophylactic epoetin alfa? a costbenefit analysis. Cancer, 83 (12), Whitehurst, D.G., et al (2007) A brief pain management program compared with physical therapy for low back pain: results from an economic analysis alongside a randomized clinical trial. Arthritis and Rheumatism, 57(3), Richard Little, Health Economist YHPHO Yorkshire and Humber Public Health Observatory Innovation Centre York Science Park, Heslington York YO10 5DG General Enquiries Tel: yhpho-info@york.ac.uk 8