# Presentation: 045151

## Recommendations for Conducting Cost Effectiveness:Elements of the Reference Case

**Ciaran S. Phibbs, Ph.D.**
**April 18, 2007**

## PHS Recommendations

- MR Gold, JE Siegel, LB Russell, MC Weinstein (1996)  _Cost-Effectiveness in Health and Medicine_ Oxford University Press.  Especially Appendix A (pp 304:311)

## PHS Recommendations, JAMA Summary

- Russell LB, et al.  The Role of Cost-effectiveness Analysis in Health and Medicine.  JAMA. 1996:276:1172-1177.
- Weinstein MC, et Al.  Recommendations of the Panel on Cost-Effectiveness in Health and Medicine.  JAMA. 1996;276:1253-1258.
- Siegel JE, et al.  Recommendations for Reporting Cost-effectiveness Analysis.  JAMA. 1996;276:1339-1341.

## What is the “Reference Case”

- A standard set of methods and assumptions to serves as a point of comparison across studies

## Why Do We Need a Reference Case?

- There are many different assumptions, methods, and perspectives that can affect the outcomes of a cost-effectiveness analysis.
- Without standardization, it would not always be possible to compare the results across studies.
- Standardization greatly increases the policy value of C-E analysis.

## PHS Recommendations: Summary

- Adopt perspective of society
- Measure all costs
- direct cost of intervention
- all health care expenditures
- patient incurred cost
- Express outcomes as Quality-Adjusted Life Years (QALY)

## PHS Recommendations: Summary (continued)

- All health effects in the denominator of the C/E ratio
- The numerator of the C/E ratio captures all changes in resource consumption associated with the intervention
- Discount costs and outcomes at 3% annual rate

## PHS Recommendations: Summary (continued)

- Model when effects of intervention not fully realized during the study period
- Conduct sensitivity analysis
- Test statistical significance of cost-effectiveness findings
- Standards for reporting of C/E analyses.

## Societal Perspective

- Adopt perspective of society
- Payer perspective may yield very different results; benefits or costs may occur to others, including:
- Patient
- Other payers
- Other individuals (e.g., family members)
- Employers

## Denominator vs. Numerator

- All health effects in the denominator, expressed in QALYs
- The numerator of the C/E ratio captures all changes in resource consumption associated with the intervention
- There are gray areas, that could be placed in either
- Avoid double counting.

## Components Belonging in the Numerator of the C/E Ratio

- Costs of health care services
- Costs of patient time
- Costs of care-giving (paid and unpaid)
- Other costs (e.g. travel time)
- Costs measured in constant dollars
- Use wage rates to value time costs

## Components Belonging in the Numerator of the C/E Ratio (cont)

- Non-health care costs
- E.g., education, criminal justice, environment
- Costs imposed on others
- E.g., employers, rest of society
- Do _**NOT**_ include lost productivity; would result in double counting

## Components Belonging in the Numerator of the C/E Ratio (cont)

- Health care costs that result from living longer
- Include costs for intervention-related diseases within original expected life span, and for added years of life
- Include costs of treating adverse events
- Exclude unrelated health care costs and non-health care costs within original expect life span
- Exclude non-health care costs for added years of life
- No recommendation for unrelated health care costs for added years of life

## Components Belonging in the Denominator of the C/E Ratio

- Measure health effectiveness in QALYs
- QALYS should be preference based
- Weights based on community preferences
- Use a generic health-state classification, as opposed to disease-specific
- Use age- and sex-specific HRQL to value gains and loses

## Modeling May Be Necessary

- Most clinical trials don’t cover full time horizon of the potential effects
- It is allowable to use modeling and/or data from other sources to complete the analysis
- Use of expert judgment should be avoided, if possible

## Discounting

- Real discount rate of 3%
- All costs should be adjusted for inflation
- Both costs and health outcomes should be discounted
- Conduct sensitivity analysis of the discount rate.

## Sensitivity Analysis

- Conduct sensitivity analysis
- 1-way sensitivity analysis for key assumptions
- 1-way sensitivity analysis under-state overall uncertainty; should also conduct multivariate sensitivity analysis

## Bootstrap Determination of Cost-Effectiveness Confidence Region

- Sample n observations with replacement
- Find incremental cost-effectiveness ratio
- Repeat 1,000 times
- Find percentage of replicates that are not “cost-effective”
- this is the p-value
- p-value may vary by threshold

## Slide 19

## Sensitivity Analysis: How Does Significance Vary by CE Threshold?

## Standards for Reporting Results

- Details of recommendations in paper distributed in advance; checklist
- List of information that needs to be included to allow comparison across studies
- This is very important from a policy perspective

## Alternative Method

- Just to mention, alternative to reporting ICER, net benefit regression
- Hoch JS, Briggs AH, Willan AR.  Something old, something new, something barrowed, something blue: a framework for the marriage of health econometrics and cost-effectiveness analysis.  Health Economics.  2002;11:415-430.