HOW TO INCORPORATE MEASURING COSTS INTO RESEARCH DESIGN

HOW TO INCORPORATE MEASURING COSTS INTO RESEARCH DESIGN

Table of Contents q. Introduction q. Economic Evaluation q. Cost Analysis q. Cost Effectiveness q. Cost Utility Analysis q. Cost Benefit Analysis q. Review Questions

Introduction ØWhen conducting research, measuring cost is an important concept of research findings. ØEvaluating costs helps guide decision makers as to the value of adopting beneficial research findings.

ØThe dollars and cents approach to measuring research may be a foreign concept to those starting out in healthcare research. ØHowever, it is important to be introduced to it because it might hold the key to closing the deal in conducting research and implementation of research findings.

Scenario Let’s say you have discovered an intervention that reverses plaque accumulation in coronary arteries. To the researcher, there is no question as to the value of this finding; it would be championed by patients and clinicians alike! One would expect that there would be immediate adoption of the intervention. Without a doubt. Right?

Maybe not! • The reality is that in today’s economic climate, many ideas and research findings are competing for the monetary resources that make them possible to be implemented.

You must take your research a step further by measuring costs of the intervention you are researching so you can “sell it” to those important stakeholders who hold the purse strings that will fund your findings.

These stakeholders (decision makers) include: Patients Clinicians Administrators Legislators Insurance companies

The stakeholders speak in “dollars and cents” and “the bottom line”, and come from a perspective that looks at both quality AND cost. The stakeholders speak in a language called Economic Evaluation.

Economic Evaluation Economic evaluation converts research results into economic language, so researchers can present the findings to financial stakeholders in a language they understand.

This doesn’t necessarily mean that the cheapest method is chosen however. So, even though a healthcare intervention is costly, if it significantly improves a healthcare outcome for patients, it is deemed cost-effective. Conversely, if a healthcare intervention does not improve outcome, it is not cost-effective at any price.

Incorporating Measuring Costs into Research Design First, you need an intervention study. Then, you must to determine if the intervention is efficacious: does it produce results? If you have conducted research on an intervention with great results, next you want to determine: How much did the improvement cost?

An economic analysis will help determine the answers to questions such as: • “Is it cost effective? ” • “Was the improvement in function or prevention of health problems worth it? ”

Factors to consider before initiating an economic evaluation 1. From whose perspective: ◦ ◦ patient, provider, payers, or societal? 2. Time frame of the intervention.

Methods of Measuring Economic Evaluations 1. 2. 3. 4. Cost Analysis Cost Effectiveness Cost Utility Analysis Cost Benefit Analysis

1. COST ANALYSIS

Cost Analysis First and most basic economic evaluation Straightforward process Compares cost ONLY. Assumes that the alternative intervention(s) produce the same level of effectiveness

Drug A • Decreases Bp 20 mm. Hg • Costs $4 Drug B • Decreases Bb 20 mm. Hg • Costs $10 Both drugs have the same efficacy, but Drug A costs less. COST ANALYSIS COMPARING COST FOR DRUG A AND DRUG B TO LOWER BP

The next level of economic evaluation 2. COST EFFECTIVENESS

COST EFFECTIVENESS Economic evaluation of alternative interventions. This analysis looks at the cost and effectiveness of an intervention and compares it to the cost and effectiveness of an alternative intervention (or interventions) so a decision can be made regarding the more cost-effective choice in light of available resources. Effectiveness needs to be measured in the same unit for alternative interventions.

SCENARIO: ØLet’s say we have two Bp medications and we want to know which one is more cost effective. ØAn equation is used that shows us the differences between the costs and effectiveness of the two medicines to help make this decision.

COST EFFECTIVENESS EQUATION ICER : Incremental Cost-Effectiveness Ratio

ICER DIFFERENCE SIMPLY MEANS • how much additional cost was intervention A to produce the additional effectiveness compared to intervention B.

∆COSTS The numerator is made up of the difference in costs of the two interventions. COST OF DRUG A – COST OF DRUG B

∆EFFECTIVENESS The denominator is made up of the difference in effectiveness of the two interventions EFFECT OF DRUG A – EFFECT OF DRUG B

ØWe want to determine the more cost effective drug to use to lower Blood pressure ØYou compare two drugs: üDrug A and üDrug B. Drug A Drug B

DRUG A DRUG B COST $5 $2 EFFECTIVENESS Decreases Bp 20 mm. Hg Decreases Bp 10 mm. Hg

Cost Effectiveness Equation To compare the cost effectiveness of these two drugs, we use the cost-effectiveness equation:

The answer is a ratio of the differences: $3 10 mm. Hg Ø The ratio reflects the difference in cost between Drug A and Drug B, Ø $3, to the difference in effect on Bp, 10 mm. Hg. Ø These results are called the “Incremental Effectiveness Ratio” or ICER. Cost

Using our example, we say that we know that the difference between the cost of Drug A ($5) compared to the cost of Drug B ($2) is $3. For cost-effectiveness analysis, this is referred to the incremental cost or cost difference between the two. We can also think of this as “Drug A costs $3 more than Drug B”, which is another way to describe incremental cost.

In the same vein, the incremental difference in effectiveness between the two drugs is 10 mm. Hg. Or, we can think of this as “Drug A (effectiveness 20 mm. Hg decrease in Bp) reduces Bp 10 mm. Hg more that Drug B (effectiveness 10 mm. Hg decrease in Bp)”; Again this is another way to describe the incremental effectiveness or difference in effectiveness between these two drugs. In our example, the ICER (or ratio) is: “$3 more spent for Drug A to reduce additional 10 mm. Hg Bp compared to Drug B. ”

QUESTION FOR DECISION MAKER: Do you want to spend $3 more for a medication that decreases Bp 10 mm. Hg more?

In cost effectiveness analysis, you may use different disease groups; however you MUST use the same outcome for comparison. This makes it a more limited, narrow analysis. Also, you can only compare same effects; for our example, the effect of the change in Bp.

The next level of economic evaluation is 3. COST UTILITY ANALYSIS

COST UTILITY ANALYSIS A specialized form of cost effectiveness analysis that the health outcome (effectiveness) is measured by utility. Here, the utility in a general sense refers to the preferences individuals or society may have for any particular set of health outcomes. The health outcomes are often measured in QUALITYADJUSTED LIFE-YEARS (QALY).

Scenario ØI have $2000 to spend on a healthcare intervention to benefit my community. ØI have two programs to choose from: Ø One is an intervention for medication that decreases Bp by 20 mm. Hg. Ø The other is a vaccination program to protect the community from the flu. ØHow do I decide how to spend the money between these two choices? ØWhat would benefit the community the most? ØHow do I answer this?

On the surface, Bp control and flu prevention are not comparable: Different Interventions Bp Control Flu Prevention Bp Medication Flu Vaccination Health Conditions Older Adults with Hypertension Community who are vulnerable to the flu Different Outcomes Disease prevention Bp control v And different populations

For the example cited, Bp control and disease prevention need to be transformed into a common measure such as “‘life years’ before you can apply the Cost effectiveness analysis. However, the same number of ‘life years’ may mean different quality or values for different people. With cost utility analysis, one can compare the value of spending the $2000 between the two programs despite their differences.

Cost utility analysis allows the researcher to compare health outcome (effectiveness) measured in quality-adjusted life-years (QALY). This is done by introducing “value” (or utility/preference) of people into measuring the outcomes of the alternative interventions (different quality of life years).

How Does QALY Work? • To make the determination, the patients’ perception of their Quality of Life (QOL) is introduced in this analysis. • The patient scores the effect of the intervention on the quality of their life. • A scale is used to score QOL from 0 to 1, • where • 0 = death and • 1 = perfect health. • This score is then converted to a measure of the effect of the intervention across time.

This second measurement is called a “Quality Of Life Years” or QALY (say “kwallee”) score. This QALY score can be changed by the intervention. We look for changes in the QALY score to tell us how effective the intervention we are testing is.

If the QALY score has increased after an intervention is applied, we can say our intervention is effective. If the QALY score decreases, this indicates the intervention made the QOL worse, and it is considered harmful.

If the QALY score has no change, the intervention did not work, or it is ineffective. QALYs become the standard measurement that researchers can use to compare different programs.

In the example we are using, a Bp medication decreases Bp by 20 mm. Hg. The patient determines how much this changes their QOL, and that score is converted to a QALY. For our purposes here, let’s say our patient’s QALY score increased to 0. 5 after taking the medication and experiencing a decrease in Bp. This indicates that the Bp medication is effective, reflected in the increased QALY score. So we can determine that for every $1 spent on Bp medication, we have an increase in QALY score to 0. 5.

ØFor our analysis, we will compare this QALY score to that given by patients receiving the flu vaccine. Ø To avoid flu illness and complications with the flu vaccine, a family says, “Avoiding this greatly increases our QOL”, which increases their QALY to 0. 7. Again, this positive increase reflects the flu vaccine is effective. Ø So we determine that for every $1 spent on our flu vaccination program, we have an increase in QALY to 0. 7. Ø So although these two interventions cannot be compared in their original form, we have expressed the effects of the two interventions in equal measurements—dollars spent and QALYs gained—so we can compare both interventions to each other based on the benefit they produce for the cost.

In this example, we get a greater improvement in QALY per $1 spent for the flu vaccine compared to a $1 spent for the Bp medication; or I get more “bang” for my $2000 on an intervention to benefit the community with a QALY of 0. 7 vs. a QALY of 0. 5; so I spend the $2000 of healthcare resource money on the flu vaccination program.

4. COST BENEFIT ANALYSIS

COST BENEFIT ANALYSIS involves measuring costs and benefits in proportionate terms, usually monetary. In this type of analysis, a dollar value is placed on both the cost and the effectiveness of the intervention. Cost Benefit Analysis compares cost and outcome measures to guide decisions for expenditures.

Cost benefit analysis makes it possible to determine if an individual intervention offers an overall net gain and, how the gain from that intervention compares with that from alternative interventions. By valuing all costs and benefits in the same units, cost benefit analysis compares different interventions using the net benefit criterion. It is worth noting that cost benefit analysis can be very controversial, as it involves placing monetary value on a person’s life and health; it also requires a lot of abstraction.

Scenario ØLet’s go to an example using Bp medication again. ØWe have a new Bp medication that costs $1 more to decrease Bp by an additional 10 mm. Hg. In cost benefit analysis, this reduction is converted to a monetary value. • Hypothetically speaking, let’s say 10 mm. Hg reduction of Bp is worth $ 20, 000 benefit. For cost benefit analysis, the effectiveness (10 mm. Hg reduction of Bp) is converted to a monetary value ($20, 000). Therefore, you could say that a dollar spent on Bp medication returns $20, 000 in benefits.

SUMMARY What we have discussed is a brief overview of economic evaluation. There are many considerations to conducting economic analysis. In-depth theory and methods are behind the processes that cannot be covered easily without a specialized economic background. For your research, you MUST consult and get a cost analysis person on board to guide you.

REVIEW QUESTIONS

"Life Years" is a common form of measurement for which analysis? A) Cost Analysis B) Cost Benefit Analysis C) Cost Effective Analyisis D) Cost Utility Analysis Correct - Click anywhere to continue Your answer: Incorrect - Click anywhere to continue You did not answer this You answered this correctly! The correct answer is: question completely Submit Clear

Complete the sentence below by filling in the blanks. One assumption of Cost Analysis is that the alternative interventions produce the same level of effectiveness. Correct - Click anywhere to continue Your answer: Incorrect - Click anywhere to continue You did not answer this You answered this correctly! The correct answer is: question completely Submit Clear

Which analysis uses a montetary measurement A) Cost Analysis B) Cost Benefit Analysis C) Cost Effective Analysis D) Cost Utility Analysis Correct - Click anywhere to continue Your answer: Incorrect - Click anywhere to continue You did not answer this You answered this correctly! The correct answer is: question completely Submit Clear

What does QALY stand for? A) Qualtiy Adjusted Life Years B) Quantity Added Life Years C) Quality Added Life Years D) Quantity Added Long Years Correct - Click anywhere to continue Your answer: Incorrect - Click anywhere to continue You did not answer this You answered this correctly! The correct answer is: question completely Submit Clear

You can compare different effects in Cost Effective Analysis A) True B) False Correct - Click anywhere to continue Your answer: Incorrect - Click anywhere to continue You did not answer this You answered this correctly! The correct answer is: question completely Submit Clear

What does "ICER" stand for? A) Incremental Cost Effective Ratio B) Increasing Cost Effective Ratio C) Increasing Care Effective Rato D) Incremental Care Effective Ratio Correct - Click anywhere to continue Your answer: Incorrect - Click anywhere to continue You did not answer this You answered this correctly! The correct answer is: question completely Submit Clear

The difference between the costs of the two drugs that are being compared is the A) Incremental Cost B) Differential Cost C) Increasing Cost D) Added Cost Correct - Click anywhere to continue Your answer: Incorrect - Click anywhere to continue You did not answer this You answered this correctly! The correct answer is: question completely Submit Clear

Complete the sentence below by filling in the blanks. and are two things that one should consider when making healthcare resource decisions Correct - Click anywhere to continue Your answer: Incorrect - Click anywhere to continue You did not answer this You answered this correctly! The correct answer is: question completely Submit Clear

Cost Benefit Analysis is not controversial becuase it places monetary values on a person's life and health A) True B) False Correct - Click anywhere to continue Your answer: Incorrect - Click anywhere to continue You did not answer this You answered this correctly! The correct answer is: question completely Submit Clear

Different comparisons (units) can be used in Cost Effective Analysis A) True B) False Correct - Click anywhere to continue Your answer: Incorrect - Click anywhere to continue You did not answer this You answered this correctly! The correct answer is: question completely Submit Clear

If the QALY score remained the same after an intervention is applied, the intervention is effective A) True B) False Correct - Click anywhere to continue Your answer: Incorrect - Click anywhere to continue You did not answer this You answered this correctly! The correct answer is: question completely Submit Clear

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