Cost‐Effectiveness Usin

D ii ec s on‐A l ti na y c Md

o e 

Kee Chan, PhD

A it t ss stant P f ro essor, B t os on U i n versity

VA Center for Health Quality, Outcomes and Econom

Research (CHQOER), Edith Nourse Rogers Memoria

Veterans Veterans Hospital Hospital, in Bedford Bedford, Massachusetts Massachusetts

August 15, 2012

HERC Seminar S i er es
Speaker Speaker Contact Contact Informat

Informat

Kee Chan, PhDVA Center for Health Quality, Outcomes and Economic Resear

Bedford, Massachusetts

Assistant ProfessorDepartment of Health Sciences

Boston University

Email: keechan@bu.edu
Overview

• This presentation will focused on the d

making process and fundamental mod

cost‐effectiveness analysis.

• Examples Examples of Cost‐Effectiveness Effectiveness Analysi

Analysi

• Limitations and strengths will be discus• Resources for further discussion.
–

Learning Objectives

• At the end of the presentation, you w

the following for your own study desig

– the decision‐making process.

the framework framework used in decision decision‐analytic analytic 

– the application in cost‐effectiveness ana
Outline Outline of Presentation Presentation

1. Concept of “PROACTIVE” in Modeling2. Structure Structure of Decision Decision Analysis Analysis3. Components of Cost‐Effectiveness An

4. Research Studies

5. Limitation Limitation and Strengths Strengths6. Resources
Decision Analysis

“A good decision is a logical decision based on uncertainties uncertainties, values, and

preferences of a decision‐maker.”

Ronald HowardProfessor, Stanford Univ
C

PROactive

Step 1: Defining the problem

P: ProblemR: Reframe the perspective

O: Objectives Objectives of interest interest
C

proACTive

Step 2: What are the alternatives, conse

and trade‐offs?

A: Consider Alternatives.

C: Model Consequences

T: Identify Trade‐offs.
C

proactIVE

Step 3: Integration and exploration

I: Integrate evidence

V: Optimize Expected Value

E: Evaluate Uncertainty.
C

PROACTIVE

P: ProblemR: ReframeO: ObjectivesA: Alternatives

C: Consequences

T: Trade‐offs

I: Integrate

V: Value

E: Evaluate
Structu

A Decision Decision Tree

A visual representation of all the possi

options and the consequence that ma

each option.
live Chance node

die

Treatment A

live

Treatment B

die

Decision node

No Treatment

Decision node

Cost

Cost

CostCost

Cos

Terminal node

Decision Analysis Tree

Step 1: PROactive Step 2: proACTive Step 

Structu

Decision Analysis Tree

pe

pe

pepe

t p
C

Cost‐Effectiveness

• Using decision‐analytic models to con

economics costs of health care.

• Health resources are consumed in ord

produce health benefits.
,

–

C

Research Questions

• What is the most efficient use of this h

resources, given the alternative uses?

– Time

Resources

– Cost
C

Time‐effectiveness

An hour of a p yh sic

time spent with on

is unavailable unavailable for a

a

patient.
m.

C

Resource‐effectiveness

• Health resources are consumed in ord

produce health benefits.

• Resources used for one program cann

spent to increase increase the program program use of 

or invest in new progra
C

Cost‐Effectiveness Effectiveness Grap

Effect

+

Superior Trade‐Off ?

‐ 

Trade‐Off ? inferior inferior

‐
–

C

Cost‐effectiveness

• Common measure of costs & health eff• Measure Measure can be expressed expressed as

– Cost– Case of disease prevented– Lives saved

– Years of life saved

– Quality Quality adjusted adjusted life year
–

C

Perspective

• A range of decision‐makers confront t

decisions.

– Societal perspective

Patient

– Provider

– Organizational
–

C

Different Different Types of Cost

• Total Resource Use includes different t

cost

– Health care resource

Nonhealth care resource
–

C

Cost Calculation

• Laying out the cost

• Categorize Categorize the cost in term health vs. 

health cost

• Organize the sequence of event

– Initial cost

– Induced cost

– Adverted cost

• Consider short or long‐run resource co
=

C

Probabilities

• Probability is the chance of the event.

• Range in 0 to 1.0

• 0 = event is impossible• 1 = event is certain• 0 5. = the event is equally equally as likely to o

not to occur
C

Preferences

• Preference‐based measures reflect th

an individual has for a particular healt

or the relative desirability of health ou
–

C

Effectiveness

• Health benefits in CEA can be express

– Single measure of health outcome

• Number of Cases Prevented• Number of Cases of Cancer Detected Detected• Number of Hospital Days Reduced

– Combined measures

• Quality Adjusted Life Years (QALYs)
–

C

Using cost‐effectiveness effectiveness ana

ana

• Cost‐effectiveness using decision‐anal

modeling

– summarize large amount of information.

clarify clarify the decision decision‐making process process.

– compare the different scenarios in comp

system.
C

Incremental Cost‐effectiveness 

(ICER)

Incremental cost‐effectiveness ratio (IC

– costs to benefits and is expressed as $ 

saved or the cost per QALY saved.

Cost intervention A ‐ Cost intervention B

Effectiveness intervention A Effectiveness ‐ inter
de

Chance node

live

Treatment A 0.9

live

di

Treatment B 0.8

die

0.2

No Treatment

$400

livedie

0.1

$20

$10

$50$0K/

ecision no

C

Decision Decision Analysis Analysis Tree

K

0K

0K

K/

D

0 

Terminal node
f

C

Incremental Incremental Cost‐Effectiveness Effectiveness Rati

Question: Is the extra health benefit worth the ext

$400K intervention A ‐ $100K intervention B

10 life years intervention A 8 life years ‐ intervention B

ICER =

$300 K per 2 life years = $150K / life yea

Answer: If intervention A is chosen, the additional inve

$150K results in one additional life year, relative to Int
–

C

Handling Uncertainty

Parameter and Model structure uncertaaddressed using sensitivity analyses.

– One‐Way

Two‐Way

– Multi‐way– Probabilistic
C

Examples
https://research.tufts‐nemc.org/cear4/

Com

Cost‐effectiveness effectiveness Studies Studies Re

Re
L

Limitations

• Availability of Data

• Modeling Modeling vs. Real‐time Experiment Experiment

• Assumption• Uncertainty
L

Strengths

• Illustrate a Visual Aid.• Formulate Objective.• Evaluate Complex System.

• Inform Policy and Guidelines.

• Guide Research.
References References and Resource

Resource

• Cost‐effectiveness in Health and Medicine, Gold, S

Russell, and Weinstein, eds. (1996), New York: Oxf

Press.

• Decision Making in Health and Medicine, Hunink, a

Glasziou (2001), Cambridge Cambridge University University.

• Decision Modelling for Health Economic Evaluation

Claxton, and Sculpher (2007), Oxford Univ. Press.

• Designing and Conducting Cost‐Effectiveness Analy

Medicine and Health Care, 2nd Ed., Muennig. (200

York: Oxford Univ. Press.

• Software: TreeAge
http://www.herc.research.va.gov/home/default.asp

HERC resources
Research Societies
Summary

• Use “PROACTIVE” modeling in your de

• Construct Construct a decision decision analysis analysis tree.

• Use cost‐effectiveness analysis.

• Compare research studies.

• Understand Understand the limitations limitations and streng

streng

• Find resources and references.
s

Contact Information

If you have any questions questions or would like to col

col

please contact me:

Kee Chan, PhDAssistant ProfessorDepartment of Health ScienceBoston University

Tel: 617‐358‐6025

Email: keechan@bu.edu