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1. 5. Cost-Effectiveness Analysis (CEA): Theory and Methods 1

2. Introduction Cost-effectiveness analysis is one of a number of techniques of economic evaluation in which consequences of different interventions are measured using a single outcome , usually in ‘natural’ units: life-years gained, deaths avoided, heart attacks avoided or cases detected. Alternative interventions are then compared in terms of cost per unit of effectiveness . 2

3. Intro… Many cost-effective analyses rely on existing published studies for effectiveness data , as it is often too costly or time consuming to collect data on costs and effectiveness during a clinical trial. Under CEA, effects are measured in terms of the most appropriate uni-dimensional natural unit. Example: If the question to be addressed was: what is the best way of treating renal failure ? Then the most appropriate ratio with which to compare programmes might be ‘ cost per life saved ’. 3

4. Example ….. 2. If we wanted to compare the cost-effectiveness of programs of screening for Down’s syndrome; the most appropriate ratio might be ‘ cost per Down’s syndrome fetus detected ’. 3. In deciding whether long-term care for the elderly should be provided in nursing homes or the community; the ‘ cost per disability day avoided ’ might be the most appropriate measure. 4

5. Intro… The aim of cost effectiveness analysis is to maximize the level of benefits – health effects – relative to the level of resources available. CEA is considered a full economic analysis. All the principles that apply to costs are applicable in this analysis. All cost-effectiveness analyses should be subjected to sensitivity analysis , which should be included as part of the reporting of the findings. 5

6. Costs in CEA In cost-effectiveness analysis it is conventional to distinguish between the: direct costs, indirect or productivity costs - associated with the intervention, as well as, intangibles - although they may be difficult to quantify, are often consequences of the intervention and should be included in the cost profile. 6

7. When should CEA be used? When a limited range of options within a given field are available given a limited budget. Here appropriateness of outcome measures is very important: Final outcomes vs intermediate outcomes Generally final outcomes should be selected 7

8. Examples of effectiveness measures used in CEA Clinical field Effectiveness measure Treatment of hypertension mmHg BP reduction Treatment of hypercholesterolemia Percentage serum cholesterol reduction Asthma Episode free days Thrombolysis Years of life gained 8

9. How to use cost effectiveness analysis A distinction must be made between those interventions that are: Completely independent – where the costs and effects of one intervention are not affected by the introduction or otherwise of other interventions. and Mutually exclusive – where implementing one intervention means that another cannot be implemented , or where the implementation of one intervention results in changes to the costs and effects of another. 9

10. Independent programs Using cost-effectiveness analysis with independent programs requires that cost effectiveness ratios (CERs) are calculated for each program and placed in rank order: 10

11. Example for Independent programs In Table 1 there are three interventions for different patient groups, with the alternative for each of them of ‘doing nothing. 11

12. Independent Example … According to cost-effectiveness analysis, program Z should be given priority over X since it has a lower CER; however, in order to decide which program to implement, the extent of resources available must be considered (Table 2). 12

13. Independent Example …. If a further program becomes available, it should be considered on the basis of its CER figure compared with Table 1. Resources for the new program should be considered in the same manner as above. 13

14. Mutually exclusive interventions In reality, the likelihood is that choices will have to be made between different treatment regimens for the same condition, different dosages or treatment versus prophylaxis – that is, mutually exclusive interventions. The key question is: what are the additional benefits to be gained from the new therapeutic intervention , for example, and at how much greater cost? 14

15. Mutually exclusive … 15 In order to answer such a question, incremental cost-effectiveness ratios (ICERs) are used :

16. Mutually exclusive … 16 The alternative interventions are ranked according to their effectiveness – on the basis of securing maximum effect rather than considering cost – and ICERs are calculated as shown in Table 3.

17. Mutually exclusive … The least effective intervention (P1) has the same average CER as its ICER, because it is compared with the alternative of ‘doing nothing’. 17

18. Mutually… The negative ICER for P2 means that by adopting P2 rather than P1 there is an improvement in life-years gained and a reduction in costs. The ICER for P3 works out to be 120, which means that it costs £120 to generate each additional life-year gained compared with P2. Alternatives that are more expensive and less effective are excluded. 18

19. Mutually… In Table 3 both P1 and P3 are followed by programs that have increased effectiveness and reduced cost. In other words, P2 and P4 are associated with a negative ICER. P1 and P3 are therefore excluded. Having excluded P1 and P3, ICERs are recalculated for P2, P4 and P5 and are as shown in Table 4. 19

20. P2 is ‘dominated’ by P4 as the latter is more effective and costs less to produce an additional unit of effect (£57.14 compared with £66.67). The dominated alternative is then excluded and the ICERs are recalculated again (Table 5). 20

21. 21

22. CE Quadrants 22

23. Mutually… The process can be illustrated as shown in Figure 1. In our example, programs P4 and P5 would be in the cost-effective quadrant. In deciding between them, the size of the available budget must be brought to bear. If the available budget is £140,000, all patients should receive intervention P4, while, if the available budget is £170,000, all patients should receive the more effective P5. Concept of mutual exclusion!!! 23

24. Sensitivity analysis The need for sensitivity analysis arises because of a number of factors. These include: Methodological issues - arising from different approaches and methods employed in the evaluation Potential variation in the estimates of costs and effects used in the evaluation Extrapolation from observed events over time or from intermediate to final health outcomes Accuracy??? Transferability of results and the validity of results from different populations/patient groups. 24

25. Sensitivity analysis… ICERs therefore require some indication of the confidence that can be placed in them. What would happen, for example, if the ‘true cost’ of one of the treatment strategies was somewhat higher or lower than the estimate used in the investigation, or if there were significant changes in the life-years gained or other parameters used? Sensitivity analysis tests all the assumptions used in the model and enables the impact of changes on the baseline estimates to be investigated . 25

26. Some additional points on CEA Which is best to be implemented (used) ? 26

27. Additional points… Dominance occurs when one drug is both more effective and less costly than another. Cost-effectiveness analysis can indicate which one of a number of alternative interventions represents the best value for money . Cost-effectiveness is only one of a number of criteria that should be employed in determining whether interventions are made available. Issues of equity, needs, priorities and so on should also form part of the decision-making process . 27

28. Additional points… CEA is not as useful when comparisons need to be made across different areas of healthcare , since the outcome measures used may be very different. In order to know which areas of healthcare are likely to provide the greatest benefit in improving health status, a cost–utility analysis needs to be undertaken using a ‘common currency’ for measuring the outcomes across healthcare areas . If information is needed as to which interventions will result in overall resource savings, a cost–benefit analysis has to be done, although both cost–utility analysis and cost–benefit analysis have their own drawbacks . 28

29. Exercise 1 The following table is the cost and effectiveness of five completely independent interventions. Show the program which is best to be implemented. 29 Interventions Cost (Dollars) Effects (Lives Saved) P1 100 000 5 P2 50 000 7 P3 200 000 10 P4 150 000 12 P5 300 000 15

30. Exercise 2 The following table is the cost and effectiveness of five mutually exclusive interventions. Show the program which is best to be implemented. 30 Interventions Cost (Dollars) Effects (Lives Saved) P1 100 000 5 P2 50 000 7 P3 200 000 10 P4 150 000 12 P5 300 000 15

31. 6. Cost Utility Analysis 31

32. Introduction : Focuses on the quality of outcomes, In addition to quantities!! Many similarities with CEA A sophisticated form of CEA CUA differs in the way it considers effects 32

33. Introduction : Outcomes are valued as generic rather than program specific: CUA offers something that CEA more generally cannot, which is the possibility of comparing across treatments for different conditions. 33

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35. Intro… 35

36. Intro… CUA tends to be used when quality of life is an important factor involved in the health programs being evaluated . CUA combines life years ( quantity of life) gained as a result of a health program with some judgment on the quality of those life years. It is this judgment element that is labeled utility . Utility is simply a measure of preference , where values can be assigned to different states of health (relevant to the program) that represent individual preferences. This is normally done by assigning values between 1.0 and 0.0 . 36

37. Intro… States of health may be described using many different instruments which provide a profile of scores in different health domains. EuroQol EQ-5D for example, simplifies health into just five domains (such as mobility, self care, usual activities, pain/discomfort and anxiety/depression). Each domain is given a score from 1 to 3, So the health profile would read 11111 for the best scores in all domains and 33333 for the worst. 37

38. Intro … This approach of using utility can be used to compare very different health programs in the same terms. It is possible to compare surgical , medical , pharmaceutical and health promotion interventions with each other. Comparability then is the key advantage of this type of economic evaluation. The key problem with CUA is the difficulty of deriving health benefits. Can a state of health in fact be collapsed into a single value ? If it can, then, whose values should be considered in these analyses? For these reasons, CUA remains a relatively little used form of economic evaluation . 38

39. When should CUA be used When HRQOL is the important outcome When the interest is focused on how well the different programs will be improving the patient’s physical function, social function, and psychological well being . 2. When the program affects both morbidity and mortality and you wish to have a common unit of outcome that combines both effects. For example, treatments for many cancers improve longevity and improve long-term quality of life , but decrease quality of life during the treatment process itself . 39

40. When should CUA be used… 3. The case of limited budget situation When the programs being compared have a wide range of different kinds of outcomes and we wish to have a common unit of output for comparison. For example, if you are a health planner who must compare several disparate programs applying for funding, such as expansion of neonatal intensive care, a program to locate and treat hypertension, 4 . When we wish to compare a program to others that have already been evaluated using cost-utility analysis. 40

41. Example If you are a director of chronic disease control in MoH and need to design disease intervention strategies with $1,000,000 at this time, you have to show the better intervention alternatives for the payers. E.g. Diabetes versus HIV/AIDS 41

42. Example… Diabetes – health compromise kidney, heart, nerve and premature death HIV/ AIDS Pulmonary complication, Infection, Premature death Affect Population Physiology Complication mortality 42

43. Example.. Diabetes versus HIV/AIDS , The better health benefit for the population, Health related quality of life (HRQOL) can be assessed using DALY or QALY which are the measure of the value of health outcomes. Take samples, assess & calculate. 43

44. Quality of Life Definitions Health related QOL : is a multidimensional concept referring to a person’s total well-being including his or her psychological, social and physical health status. HRQOL: The value assigned to duration of life as modified by the impairments, functional states, perceptions and social opportunities that are influenced by disease, injury, treatment or policy. 44

45. Measuring Quality Measuring a person’s quality of life is difficult. Nonetheless, it is important to have some means to have for doing so since many health care programs are concerned primarily with improving the quality of a patient’s life rather than extending its length. For this reason, various quality of life scales have been developed in recent years. 45

46. General or Specific 46 General: Applicable across all diseases or conditions , different medical interventions , and a wide variety of populations . E.g . Medical Outcomes Study ( MOS) Sickness Impact Profile (SIP ) Disease specific: measures are designed to be used in populations with specific conditions or diagnosis. E.g . Arthritis Impact Measurement Scale (AIMS) European Organization for Research and Treatment of Cancer Quality of Scale (EORTC-QLC )

47. Quality – Adjusted Life – Years (QALY) It is a year of life adjusted for its quality or value. One year in perfect health is considered equal to 1.0 QALY. The value of a year in ill health would be discounted. It is commonly used in health economic evaluations as a means of quantifying the health effect of a medical intervention or a prevention program  and ultimately to help payers allocate health care resources . Combine all dimensions of health & survival into a single index. 47

48. Calculation The QALY is a measure of the value of health outcomes. It assumes that health is a function of length of life and quality of life, It combines these values into a single index number . To determine QALYs, one multiplies the utility value associated with a given state of health by the years lived in that state . A year of life lived in perfect health is worth 1 QALY (1 year of life × 1 Utility value). 48

49. Calculation A year of life lived in a state of less than perfect health is worth less than 1 QALY; For example, 1 year of life lived in a situation with utility 0.5 (e.g. bedridden, 1 year × 0.5 Utility) is assigned 0.5 QALYs . Similarly, half a year lived in perfect health is equivalent to 0.5 QALYs (0.5 years × 1 Utility). Death is assigned a value of 0 QALYs, and in some circumstances it is possible to accrue negative QALYs to reflect health states deemed " worse than dead ’’. 49

50. Exercise Which of the following patient has better QALY? Two years life with 0.8 utility value. A year & half lived with perfect health. Four years life with 0.6 utility value. Eight years lived with 0.1 utility value. A year lived with 0.99 utility value. 50

51. Weighting The "weight" (utility) values between 0 and 1 are usually determined by methods such as those proposed in the Journal of Health Economics. Time-trade-off (TTO): Respondents are asked to choose between remaining in a state of ill health for a period of time , or being restored to perfect health but having a shorter life expectancy . 51

52. Weighting (Time Trade-off (TTO)) For chronic states, the subject is offered two alternatives: State i for time t (life expectancy of an individual with the chronic condition) followed by death; Healthy for time x < t followed by death Time x is varied until the respondent is indifferent between the two alternatives at which point the required preference score for state i is given as h i = x/t 52

53. Example: Rheumatoid Arthritis Time-Tradeoff Imagine a new drug can cure you completely, but will shorten your life. If your life expectancy was 20 years, what is the maximum time you would give up? 53

54. Weighting 2. Standard gamble (SG) : Respondents are asked to choose between: remaining in a state of ill health for a period of time, or choosing a medical intervention which has a chance of either restoring them to perfect health, or killing them. 54

55. Standard gamble …. The probability P is varied until the respondent is indifferent between the two alternatives, at which point the required preference score for state i for time t is simply P. that is h i = P 55

56. Example: Rheumatoid Arthritis Standard Gamble Imagine a new drug can cure you completely, but severe reactions kill a percentage of people. What is the maximum percentage risk of death you would be willing to take? 56

57. Weighting 3. Visual analogue scale (VAS ): Respondents are asked to rate a state of ill health on a scale from 0 to 100, with 0 representing being dead and 100 representing perfect health. This method has the advantage of being the easiest to ask, but is the most subjective. 57

58. Example: Rheumatoid Arthritis Direct Scaling (visual analogue) Imagine you have rheumatoid arthritis: you have constant partially controlled pain, but can do most daily tasks, though with much difficulty. The joints of your hands are now deformed, but function with assistive devices. 6/11/2019 58

59. Weighting… 4. EuroQol: Another way of determining the weight associated with a particular health state is to use standard descriptive systems such as the EuroQol Group's EQ-5D questionnaire. which categorizes health states according to five dimensions: mobility, self-care, usual activities (e.g. work, study, homework or leisure activities), pain/discomfort and anxiety/depression 59

60. Quality-Adjusted -Life-Years (QALY) Computation of QALYs for a single health state QALYs for health state ( i ) = quality-adjustment weight ( i ) x yrs in state ( i ) Computation of QALYs for a lifetime profile of health states QALYs for lifetime profile= sum of QALYs for the i health states in the path 60

61. 61

62. Exercise Mr. Jonathan, died at the age of 77. His life expectancy was 81 years. He lived a healthy and stable 55 years which was estimated to be 0.96 HRQOL. But after this, he lived 11 years complaining strong headache which reduced his HRQOL to 0.85. Then after, upon diagnosis he started a medication for stroke lived with episodes and medication discomforts for the rest of his life with 0.52 HRQOL. Calculate his QALY. 62

63. Disability-Adjusted-Life -Year (DALY) The disability-adjusted life year ( DALY ) is a measure of overall disease burden , expressed as the number of years lost due to ill-health, disability or early death. DALY is standardized quantitative measure for burden of disease . DALYs are related to the quality-adjusted life year (QALY) measure; however, QALYs only measure the benefit with and without medical intervention and therefore do not measure the total burden . 63

64. DALY… Traditionally, health related problems were expressed using one measure, the years of life lost (YLL) due to dying early. A medical condition that did not result in dying younger than expected was not counted. The years lost due to disability (YLD) component measures the burden of living with a disease or disability . Mortality does not give a complete picture of the burden of disease borne by individuals in different communities. The summary measure used to give an indication of the burden of disease is the DALY . DALYs are calculated by taking the sum of these two components: DALY = YLL + YLD 64

65. DALY…. The DALY relies on an acceptance that the most appropriate measure of the effects of chronic illness is time , both: time lost due to premature death and time spent disabled by disease. One DALY, therefore, is equal to one year of healthy life lost. 65

66. Disability weight (DW) How much a medical condition affects a person is called the disability weight (DW). This is determined by disease or disability and does not vary with age. Tables have been created of thousands of diseases and disabilities, ranging from Alzheimer's disease to loss of finger, with the disability weight meant to indicate the level of disability that results from the specific condition. 66

67. Examples of Disability weight Condition DW 2004 [4] Alzheimer's and other dementias 0.666 Blindness 0.594 Schizophrenia 0.528 AIDS, not on ART 0.505 Burns 20%-60% of body 0.441 Fractured femur 0.372 Moderate depression episode 0.350 Amputation of foot 0.300 Deafness 0.229 Infertility 0.180 Amputation of finger 0.102 Low back pain 0.061 67

68. DALY … It combines mortality and morbidity. Mortality LY (Life year lost = Life expectancy of – Age of death due to the disease) healthy individual a disease at being studied But the morbidity part is difficult to measure. Each illness effect given a severity weight by Disability Weight i.e disability adjustment (DA). 68

69. DALY .. DA = disability weight X duration of disability Example – An individual dies at 60 years and with out Diabetes his life expectancy was 75 year. YLLs = 75-60 = 15 mortality part of DALY If morbidity affect kidney complication disable 50% of 10 years life: YLD = 0.5 X 10 = 5 morbidity DALY Sum total: 5+15 = 20 DALY 69

70. DALY… At the population level, the disease burden as measured by DALYs is calculated by adding YLL to YLD. YLL uses the life expectancy at the time of death. YLD is determined by the number of years disabled weighted by level of disability caused by a disability or disease using the formula: YLD = I x DW x L I = number of incident cases in the population, DW = disability weight of specific condition, and L = average duration of the case until remission or death (years). 70

71. EXERCISE A man with HTN + DM died at the age of 76 even though his life expectancy was 86. He lived his last 8 years losing his eyes, given a disability weight of 0.6. What will be his DALY? 71

72. QALY & DALY # Both incorporate disease related reduction in the years of life. # Both scale 0 – 1 # compare how sick people are across a certain disease state. 72 QUALY Quantify health Bigger is better Utilities for QALY The utility is how good they feel DALY Quantify burden Smaller is better Disability weight for DALY The disability weight is how much people are disabled by their illness

73. Above example Diabetes versus HIV/ AIDS #of people have diabetes #how much shorter life #how much disability they suffer Information can be found Clinical surveys Epidemiological studies Global burden of disease table 73

74. 7. Cost-Benefit Analysis 74

75. 7. Cost-Benefit Analysis Cost benefit analysis is the most comprehensive and theoretically sound form of economic evaluation. It has been used as an aid to decision making in many different areas of economic and social policy in the public sector for more than fifty years. Cost-Benefit Analysis (CBA) estimates and totals up the equivalent money value of the benefits and costs to the community of projects to establish whether they are worthwhile. 75

76. CBA… The main difference between cost-benefit analysis and other methods of economic evaluation is that it seeks to place monetary values on both the inputs (costs) & outcomes (benefits) of health care. CBA requires program consequences to be valued in monetary units, thus, enabling the analyst to make; a direct comparison of the programs incremental cost with its incremental consequences in commensurate units of measurement, be their Birr, dollars, or pounds. 76

77. CBA… CBA compares the discounted future streams of incremental program benefits with incremental programs costs; the difference between these two streams being the net social benefit of the program . The goal of analysis is to identify whether a program’s benefits exceed its costs, a positive net social benefit indicating that a program is worthwhile. CBA is a full economic evaluation because program outputs must be measured and valued . 77

78. Advantages of CBA CBA is broader in scope and able to inform questions of allocative efficiency , because it assigns relative values to health and non-health related goals to determine which goals are worth achieving , given the alternative uses of resources, and thereby determining which programs are worthwhile. (E.g., the benefit from adding a new drug for multiple sclerosis to the provincial drug program’s formulary compared to building a bridge over a river that will save hours of transportation time). 78

79. Advantage… If the value of benefits exceeds the costs of any intervention, then it is potentially worthwhile to carry that intervention out. It is concerned with the question, is a particular goal worthwhile? Potentially it can answer questions such as should extra money be used for heart transplants or improving housing? . 79

80. Disadvantage Method requires that all resources and benefit generated by an intervention need to be assigned a monetary value. Therefore, needs to cost things which have no market value, i.e , changes in health, quality of life, length of life, pain, etc. The problem is huge measurement challenges in putting a dollar value on human lives and health states. 80

81. Stages in the application of CBA Identify all costs and benefits Measure them Discount them back to common time period Assess whether benefits>costs Perform sensitivity analysis Assess whether project is worth it 81

82. Approaches for Determining a Monetary Value for Health Outcomes Methods of valuing Willingness to pay (WTP) Human Capital Approach 82

83. Approaches… 1. Productivity or Human Capital Approach The theory of investment in human capital is that the human being is viewed as a capital investment , the sole purpose of which is economically productive output. Therefore, health changes should be valued by the changes in economic productivity they cause. 83

84. Types of Lost Productivity Mortality loss : years lost due to premature death = life expectancy at death – age at death Morbidity loss : impact on productivity is more difficult to measure i.e., it is not simply the number of work days lost because: ability to return to work may be occupationally related and the change in health status may necessitate job switching returning to work does not necessarily mean resuming the same level of productivity 84

85. Valuation of Lost Productivity in the Human Capital Approach Assumes that the value of a worker's productivity = earnings (because a profit-maximizing employer will not pay a worker more than the additional value she contributes) 85

86. Cost-Benefit Decision Indexes Cost-Benefit Ratio = benefits/costs  Net Present Value (NPV) = benefits - costs A worthwhile project is one for which the discounted value of the benefits exceeds the discounted value of the costs; i.e., the net benefits are positive. This is equivalent to the benefit/cost ratio being greater than one .      86

87. 10Q!!! 4 Ur Every thing!!! See U Again!!!!! 87