**Transcript of Cyberseminar**

**HERC Cost Effectiveness Analysis Course**

**Budget Impact Analysis:  Methods & Data**

**Presenter: Patsi Sinnot, P.T., Ph.D**

**November 28, 2012**

**Budget Impact Analysis:  Methods & Data**

**November 28, 2012**

Patsi Sinnott:  This is Patsi Sinnott at HERC.  We’re going to do an introductory class about budget impact analysis.  My first question to everyone, and I’m hoping you’ll respond in the question area, is has anybody done a budget impact analysis and, if so, on what topic?  If you’ll just put your answers in the question block that Heidi talked about, that would be great. {PAUSE}

Heidi: Yup, and that’s on the Q&A screen that’s on the dashboard on the right hand side of your screen. You can use that orange arrow at the upper right hand side of your screen to open and collapse that against the side of your monitor. Just type yes or no or whatever your response is into the Q&A portion. {PAUSE}

Patsi Sinnott: My next question is does anybody have a budget impact analysis planned in the near future?  If yes, on what topic?  If no, please just answer no.

I’m going to begin. It looks like this is a fairly new topic for folks. Budget impact analysis is an analysis of the expenditures for a program.  It’s a short period of time including the effect of any offsetting savings.  Importantly, it evaluates a scenario.  It compares to the status quo and includes a sensitivity analysis.  The purpose of a budget impact analysis is to estimate the feasibility or affordability of a new program.  It’s a response to what your partners are asking about a new program, which is how much will it cost now and in the future.  It takes the buyer’s or payer’s perspective, meaning that it excludes patient-incurred costs or societal costs.  But it reflects the impact on enrollment and retention that can result from affecting patient decisions about care.  Practically, ignoring the patient and societal costs can make many interventions seem less expensive in a BIA, or budget impact analysis, and in a cost effectiveness analysis.

The BIA uses a short-term horizon; long-term modeling is not necessary.  Costs are not discounted, and savings that occur in the far future can’t offset initial or startup costs.  It does not measure utility, so there’s no need to survey patients.  There’s no calculation of QALYs.  The outcomes of the intervention are assumed to be known; in other words, you would not do a budget impact analysis if the effectiveness of an intervention has not been proven, although you might do it at the same time to save time.  The framework for the budget impact analysis has been defined by ISPOR, the International Society for Pharmacoeconomics and Outcomes Research.  You estimate the cost of the intervention, then changes in staffing schedules and use of technology, changes in access, throughput, demand, potential savings, and the cost to operate the new intervention.  

The framework is that you start with the current environment including the total population and estimate of the sick population with the condition of interest, the target population that you’re currently reaching with your intervention, and the resources and utilization that goes into costing for the cost of that particular intervention.  

Then you need to identify changes in the demand for services that will occur with the new intervention and changes in the way the intervention is costed.  You want to know what the incidence and prevalence are; when you identify the target population, you’re looking at the percent that are diagnosed and treated.  You’re estimating the current way of treatment and estimating a unit cost for a single person’s intervention.  Then you want to estimate or look at the changes or impacts on the population and the use of services with the new intervention.  You want to know if there’s expected to be a change in the incidence of the problem.  You want to know if, for example, there’s a change in the percentage of the population who are diagnosed or treated.

For example, the original estimates for the use of lithotripsy were that only people who were in life-or-death situations would get lithotripsy for their urinary stones.  But what happened, of course, is there was treatment creep because more and more people sought care for their non-life threatening stones, so that there was a larger proportion of the population with stones who were treated.  That’s the kind of creep that you’re looking for.  Then you want to look at the complex of services that will remain from the previous treatment as well as the new therapy and new procedures that go into the new treatment.  This gives you the new population, the sick population and the target population, and a new estimate of the resources or utilization that go into treating the population and the new cost of illness.  That’s a basic framework; this comes from Josephine Mauskopf in ISPOR.  There’s a reference at the end of the slide presentation.

So you’re looking at, in the current environment, how many patients are getting care?  What are the clinical characteristics of them?  You may want to look at enrollment criteria, priority or VERA category.  How many need VA-funded transportation?  What is the size of this target population?  What treatments are they getting?  And what other healthcare resources is the current population getting?  Then what is the intervention?  Where is it provided?  How often is it provided?  Who provides the care?  What is the mix of providers who provide the current status of care?  What do they do when they’re providing the care?  What resources and technologies are used?  What medication?  What surgery?  What durable medical equipment?  

All of these things need to go into estimating what is currently being used.  It may be that where they get care is, in the VA, maybe complex.  They may be treated in clinics; they may be treated in in-patient.  They may receive fee-basis care.  You want to know how frequently they get intervention.  For example, if they come in for dialysis on a weekly basis or bi-weekly basis, you need to know what that current treatment is to go into the estimation of the reference scenario.

Compared to this reference scenario, how are these things going to change?  You need to look at how the demand for care will change and what the future need for care will be within the BIA horizon—again, it’s only three to five years—and whether there are copayments collected.  In unusual situations you might look at VERA payments received.  In the comparison, again, we talked a bit about this, will the new intervention impact the staff mix?  Will new clinical space be required?  How will that space be rented, purchased, or built?  Then will there be technology purchases and repair costs?  For example, let’s say the new intervention requires software and hardware of some kind in the clinic; let’s say a self-survey on alcohol use or something of that nature.  Will there be repair costs in the short term that need to be considered?  Will there be updates to the software which will need to be done?  

Costing in the BIA; again, you’re using the VA’s costs when you’re doing the perspective of the VA, but not patient costs and not society’s costs.  You’re going to estimate the change in units and the change in cost per unit of care.  In VA you’re going to look at, currently, the encounter information from the DSS in-patient and outpatient files, and pharmacy files.  You can also use average cost data and DSS or PBM pharmacy data.  You’ll have to make your decisions about average cost versus DSS in the same manner that you would for a cost effectiveness analysis or any other costing event. And here are a list of resources for making that decision.

The cost of the intervention you can do with three different methods; either direct measurement, where you observe or track activities and assign them a cost; a pseudo bill using billing codes or services and assigned costs; or a cost regression, which you do when the costs of the care are not known and you’re going to estimate the marginal costs of the new intervention compared to the current practice.  In direct measurement you’re going to need to identify all elements of the intervention, observe or track the activities, summarize the time, and use VA labor costs to estimate the value of the time.  For example, in the simplest scenario you are only looking at a change in an evaluation procedure for a C&P exam.  The only change is the nature of the exam.  What you’re really interested in is what kind of time is changed by using a new exam format; time, rather than the usual care or previous exam format.  Let’s say that the new exam format takes forty-five minutes to an hour longer.  You only know that because you’ve tracked that activity by surveying providers during a study.  Then what you would do is take that average time difference between the two groups and multiply it times the cost for the examiner’s time.  

In a pseudo bill, you’re going to use CPT or other utilization codes to estimate the intervention cost.  You can use this when the CPT coding is specified and has face validity.  You have to be careful about using this methodology because, of course, in the VA not all CPT codes have the same work value across VA medical centers.  Therefore, the value of the time might vary only because of the administrative decision about the workload assigned to a CPT code.  Additionally, you have to be careful using CPT coding because you don’t want to double count.  If you’re using direct measurement for a provider, you don’t want to also estimate the provider’s cost using the CPT codes or utilization codes that show up in VA administrative data; then you can use Medicare or other payment schedules to estimate the cost of the intervention.  

Micro-costing the intervention; you’re going to estimate marginal costs using statistical techniques, but you only use this when the data exists for current practice.  It’s not for new technology; it’s for when you don’t know what the time is or when accounting cost is not known.

The cost data sources for staff time; HERC produces an average hourly staff cost for seventy-plus occupation categories in VA, and you can access this through the HERC Web site.  You can also use VLS data, which is not very different from HERC average costs.  Todd, is this updated through ’09 or only through 2008?

Todd:  I haven’t looked at the data report.  I know they’ve been working on an update.  I think it’s up through 2009, maybe even ’10 now.

Patsi Sinnott:  To estimate the cost for your DME machines, even stents, you would go to the NPPD.  We have a technical guide on using the NPPD on the HERC Web site.  You can also ask your local A&MMS purchasing officer about your local costs.  Then you want to do a sensitivity analysis to change assumptions in your model and see if the final outcome changes.  Again, you can do univariate or multivariate models to estimate the cost difference.  

In summary, the BIA requires six items, which are the current population, the current mix of care, the cost of the usual care, the cost of the new mix of care, and the changes in population and use of other healthcare services related to the intervention and the condition under study.  As I said, there are several resources about cost from the HERC Web site; VIREC also has guidebooks for various data sources and pharmacy utilization.  Also, there are many articles on decision modeling and these kinds of advanced modeling that you might need to do your estimation.  The ISPOR recommendations are the Mauskopf article; *VA-funded Literature Review* is the Luck and Parkerton article.  Paul Barnett and Dr. Rosenheck have done some description of how to estimate indirect costs on VA, costing exercises.

Todd:  Patsi, you’ve got a couple questions come up.  One of the questions is, could you explain more why cost regression doesn’t work for new technology in the other scenarios that you described?

Patsi Sinnott:  If you don’t know what the new intervention costs or what goes into it, it would be very difficult to create a model that would estimate the marginal difference in cost.  Do you want to add to that, Todd?

Todd:  Sure.  I’ll be very specific here.  We were doing a study; not necessarily a budget impact analysis, but it was a study trying to understand the cost of a new robot for stroke rehab.  Well, this is a very new robot that’s not currently reimbursed by Medicare.  If you went to DSS or Medicare or other large datasets that have some form of cost information in them, the technology’s not there to observe.  You couldn’t create a regression to say, “What’s the marginal cost of another unit of this technology?”  You’d have to directly observe it.  We had to go out there and measure how much staff time it took, make some assumptions about that, and then look at the purchase price of the robot and estimate how long the robot would live, so to speak.  The burden was on our shoulders to estimate those things versus just looking at data.

There was also a question about whether there was a formula to calculate the budget impact analysis.

Patsi Sinnott:  If you look at this framework, what you’re going to see is the estimation of the impact is the cost of the new minus the cost of the current environment.  Your cost for the new VA budget is the cost for the new intervention taking into consideration the cost per person of the new intervention plus the change in the number of people who are being treated, so there’s an assumption here in this framework that there may be a change in the number of people who are treated.  You have to take that into consideration in some framework, in some format, so that you can estimate how much total cost difference there will be between the two groups.  

For example, in the C&P exam study that I talked about previously, we had a difference per exam of the cost for the new exam type.  Our estimation of the budget impact is a forty-five minutes times every single exam that was performed in 2011.  In that scenario we did not assume that the new exam would cause more people to require the exam or that more people might be treated as a result or examined as a result of the new exam.  We held constant the number of exams because we didn’t have a way to estimate or didn’t want to include an estimation of how the number of exams was changing over time.

Todd:  So in some sense it’s not a formula per se; it’s more a process of trying to understand the cost implications of developing or changing a process?

Patsi Sinnott:  Right, and I just want to say that if you are looking at a budget impact analysis alongside an implementation study, you have to take into account the cost of the implementation as well.  Let’s say you have a complex implementation for a new intervention, and that implementation is going to be somewhat different across sites.  You have to estimate the cost of the implementation at your current site or your study sites and then estimate or make assumptions about how that might vary across sites if you were doing, for example, a cross-VA implementation.  But I would suggest that might be pretty difficult because, as they say, one VA is one VA.  Are there any other questions?

Todd:  Not yet.

Patsi Sinnott:  I just want to say that this is an overview of budget impact analysis and that if people have specific questions or need assistance we can certainly help them here at HERC.  And the next HERC course is on December 5, and Paul Barnett is presenting “How Can Cost-Effectiveness Analysis be Made More Relevant to the US Healthcare System?”

Todd:  One of the questions that’s come in now is, “Can you describe the typical health outcomes used in a budget impact analysis?”

Patsi Sinnott:  As I said, you’re assuming that the outcomes are known; you’re not assessing outcomes.  You’re only going to do a budget impact analysis if the outcomes are preferred over the current practice.  It’s not like a cost effectiveness analysis where you’re looking at the incremental change in cost over the change in outcomes.

Todd:  Yeah, whereas the CEA—you might be asking the question “Is this new technology worth it?  How much more do you have to spend to get the change in quality or quality-adjusted life years with the budget impact analysis.......”

Patsi Sinnott:  You really want to know how much is it going to cost because it’s decided or were considering doing this.

Todd:  That’s correct.  Some other VA or some researcher identified this as being a good practice, and it’s not clear how this is going to impact your VA.  So the question becomes, “What’s going to be the budgetary impact for you?”

Patsi Sinnott:  Again, this is used for forecasting and budgeting from the payer’s perspective.  You could also do it for yourself if you think about, “I’m going to buy a new car.  My car’s a wreck.  I have to take the bus all the time.  It’s time for me to buy a new car.”  

You take into consideration your current repair costs, maintenance costs, public transportation costs, and the mileage you use with your current vehicle.  Then you would compare that to how much you would use the car, how much public transportation you would use, what your maintenance costs, your insurance costs, and your mileage costs with the new car.  The difference is the budget impact for you of buying a new car.  It’s not just a down payment; it’s not just the monthly payments.  It’s “How much more am I going to spend to use the car?  Is it going to be more expensive for me to commute wherever I’m going in the car than on public transportation?”  That doesn’t take into account your preference for being in a new car or the quality of life you have as a result of the new car, or the time you spent trying to get around with the new car versus the old car.  Is that helpful?

Todd:  I think that example’s actually ideal.  It makes it very personal, so I think it helps a lot.

Patsi Sinnott:  Are there any other questions?

Todd:  That’s it for now.

Patsi Sinnott:  Thank you very much.

**End of recording**

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