Economic Analysis and Management

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Economic Analysis and Management

• Todd Wagner, PhD

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(No Transcript)
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Why Would Managers Care?

• CEA is being used to decide about
• formulary
• adoption of new technology
• scope of benefits
• strategies for management of care
• organization of health care

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Management Misperceptions

• Only three types of economic analyses exist
• Cost identification what does X cost
• CEA
• Return on Investment

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Researcher Misperceptions

• Managers do not understand economics
• Managers want CEAs
• A CEA must reflect a societal perspective and
  lifetime costs and benefits

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Basic Rules

1. Set the stage ask questions listen
2. Avoid jargon and use the word no liberally
3. Build in feedback (interim results)
4. Help the manager write a good report
5. Help yourself publish the results

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What is the Study Type?

• Cost identification
• Cost minimization
• Cost consequences
• Cost-effectiveness analysis
• Cost-benefit analysis
• Cost-utility analysis
• Other efficiency, demand

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Return on Investment (ROI)

• A type cost-benefit analysis
• Compares input costs to all monetary outputs
• Time frame is often very short (1 or 2 years)
• ROI lacks context when talking about health care.

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What is the cost?

• Do we know the cost?
• How precise are our cost estimates?
• How do costs vary over time?
• What affects the cost?

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Is Treatment Effective?

• Is there evidence?
• How strong is the evidence?
• A meta analysis may be necessary
  (http//www.cochrane.org/).

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Is a CEA Warranted?
CEA is more helpful
?

Standard care preferred
?
Intervention preferred
-
-

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Net Benefit Model

• In many cases, the QALYs are not well known
• Two approaches
• A net benefit model (Hoch, 2002, Health
  Economics) capitalize on effectiveness data
• A break even analysis how many QALYs would be
  required for the intervention to be more
  cost-effective than than control at 50,000 per
  QALY?

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Comparison Group

• An intervention or treatment can never be cost
  effective by itself
• CEA is always a relative decision
• Need at least one comparison group
• Treatment X is more cost-effective than Y

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Comparison Group (cont.)

• Important to identify the important comparison
  group(s) for managers
• Many clinical trials use placebo controls
• A CEA with an active comparison may require
  modeling

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Perspective

• Focus on a payers costs/benefits rather than on
  societys costs/benefits
• Congress might be interested in Medicares bottom
  line
• Excluding patient costs can be important for LTC,
  RX and some chronic illnesses (e.g., UI)

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Transfer Payments

• Welfare and governmental income assistance
  programs redistribute money.
• Transfer payments may be important, although they
  are not real to society.
• Transfer payments are important for governmental
  agencies.
• Always include any administrative fees (usually
  very small).

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Changing Assumptions

• Managers might want CEA tailored to their
  situation
• Consider
• Patient population
• Clinical risks
• Patient volume and costs

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Other Outcomes

• Externalities, such as the effect of substance
  use treatment on crime may be important
• Labor force participation and productivity may be
  particularly important for employers or means
  tested programs (e.g., Medicaid)

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Measurement of Costs

• VA or non-VA costs?
• Pharmaceuticals in the VA are much less expensive
  than outside the VA
• VA salaries tend to be lower
• VA inpatient stays tend to be longer
• Which VA cost data DSS, HERC national or HERC
  local?

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Main vs Secondary Analyses

• Wise to conduct an analysis that conforms to the
  Gold Book, even if this is not the managers
  desire
• A second analysis can focus on the question
  outlined for management.
• Encourages standardization
• Prevents misuse of the results in the future

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Use of CEA by Management

• Q Is it used?
• A Never as the only piece of information, and
  sometimes not at all.
• Hagen MD, Garber AM, Goldie SJ, et al. Does
  cost-effectiveness analysis make a difference?
  Lessons from Pap smears. Symposium. Med Decis
  Making. Jul-Aug 200121(4)307-323.

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Too Quickly, Too Little

• Managers want the answer immediately, and may not
  be willing to pay
• Retrospective studies often take 6 months or more
• The cost and time frame for a prospective study
  depend on the level of costing and the length of
  the study (generally 25 of the total budget)

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Managers May Not Know

• Managers may not know what is wanted (they may be
  the intermediary)
• Ask many questions the Gold Book can be used to
  identify key issues
• Try to find out what other stakeholders might
  want to know

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• Questions on Management Analyses?