**HERC Cost Effectiveness Analysis Course**

**2/1/2012**

**Budget Impact Analysis**

**Presenter: Patsi Sinnott, PT, PhD**

**Host: Todd Wagner, PhD PRIVATE**

Todd:  I just wanted to welcome everybody to today's HERC cyber seminar or cyber course on budget impact analysis.  So today's presenter is Patsi Sinnott, she's one of the health economists here and has been working on these types of studies, so it's a pleasure that she's going to be presenting today, so Patsi take it away.

Patsi Sinnott:  Okedoke.  I'm just trying to close up some other things—[pause] I'm sorry I didn't have all these things closed.  So, welcome.  I know all 500 of you on the signup are waiting eagerly to find out how to do budget impact analysis.  Are we okay?

Todd:  Yes, you're great.

Patsi Sinnott:  So welcome.  So we're going to talk about budget impact analysis today and I just want to remind everyone that this is not cost effectiveness analysis and I'm going to make a couple of allusions to how it is different, but also some comments about how it is similar and just as a reminder, all of these things start with costing and assessing, making sure that you're getting all the costs important to the analysis.

So a budget impact analysis is an analysis that covers just a short period of time.  It evaluates a scenario of activities and consequences, it compares to the status quo and includes a sensitivity analysis.  Usually a budget impact analysis is used to estimate the feasibility or affordability of a project or a new intervention.  Really, it's focused on what are your partners asking or likely to ask, a budget impact analysis often is done alongside a cost effectiveness analysis and proposed to be dependent on the findings of the cost effectiveness analysis.  Obviously if a cost effectiveness analysis determines that something was not cost effective, you would not then try to figure out how to implement it.  Really, the budget impact analysis is about how much will it cost to implement, how much will it cost in the short run, later and how much later?  Again a budget impact analysis usually only goes about three to five years.

For a budget impact analysis, you're going to look at or estimate the cost of the intervention, then also the changes in staffing, schedules and the use of technology.  Changes in patient access, throughput and demand, one of the things you really have to pay attention to is: How will this new intervention potentially draw more people into your system?  What are the potential savings or costs and how much will it cost to operate, both in the short run and in the long run?  You're really interested in understanding what's going to happen right now, but will there be efficiencies over time?

Another issue that you will address is what kind of differences in business operations you have across facilities?  So, for example, if you have an intervention that is for patients with PTSD and you have two different facilities, one that currently has a PTSD center and one that does not—not to say that there is a facility that doesn't—but just hypothetically and the intervention is to staff new facilities, or a standard facility in all sites, you can imagine that more new patients would be drawn to the site that didn't have a center than to the site that already has a center, so you have to take all of these concepts into mind for your estimation.

The budget impact analysis takes the perspective of the buyer or provider or payer, it does not take societal perspective.  That means that if you remember in a cost effectiveness analysis with looking at it from a societal perspective, you would include patient incurred costs, a budget impact analysis doesn't take into account anything that happens outside of what VA pays for, for example.  Just a note that this perspective: the buyer or provider or payer's perspective without societal costs, transportation costs, care giver costs, non VA care costs, for example, could make the intervention look much cheaper, using the budget impact analysis than a cost effectiveness analysis.  

One things that's important also to remember is the budget impact analysis because you're not gathering individual veteran or patient cost, you're not surveying the patient when you're doing these analyses.  

Again the horizon, you're using a short horizon, therefore, long-term modeling isn't necessary.  Costs aren't discounted and savings in the far future can't be used to offset initial or startup costs.

Again, because the budget impact analysis is not a cost effectiveness analysis, you're not going to measure utility.  You won't be surveying patients, you won't be calculating qualities.  So just to think schematically, what does a budget impact do, this is a diagram from the key paper on estimating a budget impact from the Mauskopf paper in ISPOR.  You'll see on the left-hand side you have the current environment, the right-hand side the new environment and really you're trying to estimate what happens to each of these elements as you institute a new intervention.

So here's a little cleaner perspective—you need to know who your total population is.  You need to know what your sick population is and the percentage that are diagnosed and the percentage currently treated by the current intervention.  You need to know what your target population is.  You need to know current resources and when you sum up all of that, having costed those elements, you have the current cost of illness.  

Now what you're going to be looking at and want to estimate is what will be your new population, will incidence and prevalence change?  Will the sick population be different?  That's the question of drawing in more patients into the system and you'll have your new therapy or procedure and what that costs and who the new target population is and then your unit cost for all of the care is going to give you your resource utilization and predict or help you estimate the new cost of illness.

So essentially you're taking the elements you estimate on the right-hand side and this is a very gross over-simplification, you're then subtracting what's happening on the left-hand side to get the budget impact analysis, but this framework is set to help you think about all the things that are going to change in the implementation or the adoption of the new intervention.

So your reference scenario for all of this is your current environment.  How many patients are getting care?  Who gets it, whether there are changes in enrollment priority, how many people will need VA-funded transportation?  What is the size of the target population?  What is the current population getting and what are the other health resources that the current population is getting?

Then you're looking at the intervention, you need to include the entire scenario of the new intervention.  What is it?  How much does it cost to provide it?  Where is it provided?  Will there need to be new space or new facilities or new equipment?  How often is it provided?  Does it impact other patient scheduling?  Who provides the care?  Will you need additional staff?  What do the providers do when they're providing the care?  How much time do they take?  How does that impact their other scheduled times?  Will entirely new staff be needed and what resources, technologies, equipment, supplies are going to be used?

In this environment you really want to know all of the elements of the intervention and unless you are able to list, define, describe all of these elements, you're likely to miss an impact of the new intervention.  So it's really—if we go back here to this right-hand side, you're really trying to look at the difference between the left- and the right-hand side and think through all of the elements on the right-hand side that are going to be influenced by your—the new intervention.

Then also will the demand for care change?  Will there be new demands for contract care, home care, anything else?  What the future need for care will be within the budget impact analysis and whether co-payments will be collected.  How it might impact VERA payments in the short run, but, of course, VERA payments are delayed several years, so you're not likely to see—some—VERA allocation changes, but you should think about that in your estimations.

Again, you're looking at how the staff mix will change.  You can model in two different ways, using static models, and in the second bullet this is likely to be sufficient if the alternative and reference scenarios are similar and the probabilities are well known, but it may be that you need to do dynamic models, where you need to use the literature to estimate changes over time, particularly in things like enrollments or the probability of clinical outcome.  

So in the implementation research, the key difference is that you need to include the cost of the implementation program.  In doing this, you need to be able to clearly articulate in your analysis plan and your study plan what is a research cost which will go away once the implementation occurs and what is the implementation that is going to need to occur to adopt a new intervention?

For example, if you need to have meetings with key stakeholders, if you need to identify your kind of spokesperson for adoption of the intervention, who is going to do that?  How much time is it going to take?  How much time is going to take for the stakeholders, as well as the quote "coach"?  You need to understand or have firm estimates about whether implementation costs will change or disappear over time and think through—can the implementation be made more efficient?  The implementation plans that I've seen have very discreet descriptions of what model they're going to use, what framework they're going to use?  What are the components of the framework, but one of the issues in implementation research is what is really going to be key in getting that intervention adopted and can you make the intervention, the coaching, whatever you're doing, the mailing to the providers, the reminders to the providers, can you make that more efficient?  So that it doesn't cost so much ongoing to keep the intervention sustained and you should keep in mind that not—what is it they say?  If you've seen one VA, you've seen one VA, you need to be able to understand how the scenarios or the service that you're trying to implement are different across VAs and that you'll need to develop alternative scenarios for other patients.

So back to this original slide, so this is what you're trying to estimate, the cost, the changes, the access, the potential savings and the cost to operate.  Again, just as with the implementation, at the end of doing the estimation on how much it's going to cost, you want to be able to look at kind of the production function, so to speak, of the implementation of the intervention and see if there are areas that you could—you and the rest of the research group could make more efficient.  

So let's say that one of the big things that happens is you have a big change in the throughput of patients, in other words, they're timed to followup appointments, for example, so they get delayed and that has long-term consequences for the patients.  Is it reasonable, feasible, would it be more efficient to add more staff, to provide the intervention, so that the throughput is reduced and the outcomes are better.  These are all the kinds of things that need to be considered.

This next slide—I talked a little bit about why both?  The BIA addresses the provider or payer's perspective and it's really about how much is this going to cost to implement?  So where are we going to get the data and what's the data you need?  The perspective of the VA you're going to use VA costs, not society's cost and not the patient's cost.  You're going to estimate the amount of change in the demand or units of care provided.  The change in cost, both in the short term and the longer within the VA BIA framework.  

Your encounters you can get from DSS and the National Data Extracts, I believe these are fairly familiar to all of you.  You can use average cost data and, again, you can use both.  You may use DSS or data collection forms to detail out a time and motion like study of the intervention and how much time providers are using.  Just a reminder that there is a difference between average cost and DSS and that average cost gives you more similarity in costs across encounters and across facilities.  Here's a reference about publications that help you understand average costs versus DSS.

We also have the hourly staff costs.  So, for example, if you have an intervention that is going to require a provider that's new to a clinic, they have to estimate the time of the new provider and then how much that's going to cost per patient.  You can use the DSS ALBCC and the Financial Management System or go to our technical report #12 to look up the average salary and that's salary plus benefits wage or hourly wage by class of employee and that times the hours spent will give you the estimation of the cost of the personnel to provide the services.

Then if you have machines and prosthetics and other supplies that's in the NPPD, you can also get information from your A&MMS, Acquisitions and Material Management Service, and then here are a couple of references on indirect—and, of course, you want to do sensitivity analyses to test the robustness of your results.  You want to see if there is something that is driving the cost differences and whether adding more cost, for example, hourly 

wage—or lower cost would have an impact—and how much impact it would have on the estimation.

So, just as a summary, the BIA requires six items: The characteristics and size of the patient population, what's happening currently, currently how much it costs?  What is the mix of care under the new intervention?  What is the cost of care and how that use in the mix is going to change over time, with the new intervention. 

Here are some additional resources for various technical reports on cost and research user guides from VIREC.  If you need to do modeling, some journals that publish a lot of these.  Here's the reference on the ISPOR recommendations on BIA and a literature review on budget impact analysis from the VA and that's it.

Todd:  Patsi?

Patsi Sinnott:  Yes.

Todd:  There's a question that's come up and it relates to—someone noted that there's patient projections are available on an Intranet Web site that they give.  I don't know if there's any way for us to note that Intranet Web site, Heidi? 

Heidi:  What I can do for our audience is I can put it out in the chat right now.

Todd:  I appreciate the member who asked that question or made that available to us and she knows that these projections are used in VHA budgets.

Patsi Sinnott:  They're projections by patients?

Todd:  I don't know exactly, I've never used this data set, so I can't answer that for you, so one would need to look more at it, but in theory, it's either by market or by facility, to try to understand how the budget is going to be set up at the facility.  There's also another question that's come up, which is, "What software are folks using to do the sensitivity analysis, the budget impact analysis?"

Patsi Sinnott:  Well, other than [SAS] and [STATA]?

Todd:  Yeah.

Patsi Sinnott:  I don't know, do you?  [Triage]?

Todd:  So some people have used Triage in the past.  I try to do everything in STATA, it's just my go to right-hand person in life, but there might be other models out there.  Triage definitely makes cost effectiveness analysis possible and considerably easier and I suspect that one could do the same thing with budget impact analysis, just changing the parameters of the model as needed.  

There was a clarification, the person who pointed out the issue about enrollment notes that these are projections of enrollment and utilization costs by market [inaudible].  So thank you.

Patsi Sinnott:  Any other questions?

Todd:  Yes.  There's a question about what exactly do we mean by sensitivity?  Is that variance... can you speak a little more about sensitivity?

Patsi Sinnott:  Let me see if I can go backward.  [Pause]  If we talk about sensitivity analysis, we're going to change various assumptions in the model and see how the outcome changes.  So we're going to be estimating the cost of the intervention arm versus usual care and each element of the cost might vary.  For example, salaries, for example, equipment costs and you might vary them up so that they're more expensive or assuming over time that some of the time spent would be shorter and therefore cost less you might estimate down in the elements of the model, the independent variables.  Does that help?

Todd:  One question has come in: Does BIA account for benefits?

Patsi Sinnott:  Yes.  But you do not use facilities or overhead costs in a budget impact analysis.

Todd:  Can you be a little more specific, Patsi, how you define benefits in this case?

Patsi Sinnott:  Well, I'm talking about salary-based benefits.

Todd:  Yes.  I think that there's two types of benefits.

Patsi Sinnott:  Right.

Todd:  There's a benefit there and then there's sort the—[simultaneous speaking]

Patsi Sinnott:  The health benefits, right.  No.  Health benefits are not included because it is assumed that what we're looking at is something that already has been shown to have health benefits.

Todd:  I guess the one distinction there is if the health benefits result in a budgetary impact?

Patsi Sinnott:  Right.

Todd:  They're feeling better and so they're using less care, that's what you're interested in rather than valuing the quality or the decrease in depression.

Patsi Sinnott:  Right.  For example, if you have an intervention that is going to affect patients with diabetes who might be headed towards renal failure, let's say that they are quite advanced.  If you have an intervention that is going to delay the SRD by one year, that's a health benefit and that would be taken into account in the costing estimate of the utilization as a result of the intervention.

Todd:  There is one more question that's come in so far.  Heidi, is it possible to un-mute all the lines and have people ask questions themselves?  I know that was in theory one of the potential benefits?

Heidi:  It is, most of the people are connected, using their computer audio it looks like and if people do not have a microphone, then we can't open up their line.

Todd:  Got you.

Heidi:  But if people do want to—

Todd:  For those of you—

Heidi:  If people are on their phones and they want to ask me questions, they can just raise their hands and I can respond to that.

Todd:  One of the questions that's come in, Patsi, is could sensitivity analysis of a budget impact analysis include different input prices or different factor prices.  For example, if you're interested in looking primarily at VA, but they're not thinking about what would happen if this was considered in another setting, for example, Medicare,?

Patsi Sinnott:  Yes.  That's what we're talking about, I'm sorry if it wasn't clear.

Todd:  Of course, there's institutional differences that make that sensitivity analysis a little bit challenging.

Patsi Sinnott:  More complicated, yes.

Todd:  In particular, you think of pharmacy costs that make that much more complicated in part because of the charges that we see or the costs we see for pharmacy are so much less than the—

Patsi Sinnott:  Right, right.  Remembering also that our in-patient care includes some long-term care that is not included in, for example, Medicare in-patient care databases.  Correct?

Todd:  I'm not sure I followed you, sorry.

Patsi Sinnott:  Well, if we pull in-patient care, there are many bed sections beyond what is classically defined as in-patient care in the Medicare world or in Medicare data sets.  

Todd:  Very true, so that we make transfers between bed sections, for example, from med/surg to long-term care, which in Medicare would be a discharge and an admission.

Patsi Sinnott:  An admission, um-hmm.

Todd:  So if you're counting workload or utilization that would affect and you'd have to make the right changes.  How do you allocate labor hours to particular interventions?

Patsi Sinnott:  Well, there are two ways to do it.  You can extract it from the workload assigned through DSS and then through—well—

Todd:  Can I take this one, Patsi?

Patsi Sinnott:  Yeah.  [Laughter]  Go ahead.

Todd:  There is actually a separate cyber course that I think I actually gave and that's on estimating the cost of an intervention.  As Patsi says, there really are two approaches.  One is let's say you're giving a disease management intervention and you know it is the one nurse at each facility and you know they're seeing approximately 100 patients at each facility, you could just estimate the cost of that nurse at each facility, and divide it by 100 and you would get the per person cost of implementing that intervention.  It's what I think of as a relatively straightforward accounting method, what it prevents you from doing is any types of sub group analyses because each patient or each subject has been assigned the same average cost and so if you're trying to do sub groups and trying to figure out is there a particularly high risk group or a sicker group that use more resources but had better benefits, you would actually have to follow the nurse at each facility and follow how much time they're spending with each patient and then if you think about that time, that number of minutes as being a relative wait, you can then assign the total cost of the nurse in proportion to that relative wait, to each participant and that permits the sub group analysis.  So it really depends on your budget and your needs for your study, but there are two major avenues and I don't have the talk, but it was probably about two months ago, so I apologize.  It should be on the HSR&D cyber seminars archives.

Patsi Sinnott:  Just to add to that, in interventions which, for the most part, are not nursing- or physician-based interventions, where there's a discreet time or treatment or evaluation that's performed, an alternative to the waiting is to have each provider document the time they spend in providing the care, whether it's face-to-face or on the phone or actually traveling with the patient to another site or talking to other people on behalf of the patient and then that cost—first of all, it's differentiated by type of service that the provider is giving, but it's also very specific to the patient.  Again, you can look at the per-patient and per-provider differences to better understand how the cost is built and where efficiencies might be gained in the future.

Todd:  So we have some additional questions and I want to thank people for writing in.  So there's three and there will probably be more coming in, so we'll just take them as they come in.  The next one is: Do you look at the distribution of estimates?  Let me rephrase this, You might have a lot of parameters in your model and how did you do sensitivity analysis on all your parameters or do you want to select a subset, how do you choose that subset, to figure out what's important for sensitivity and what's not?

Patsi Sinnott:  Do you want to take it?

Todd:  I'll let you take it.  [Laughter]

Patsi Sinnott:  Here's what I would do, I would essentially—in the various testing you would do in your model, I would try to identify the elements or the right-hand side variables that are most influential on the cost and then use them to do your sensitivity analyses.

Todd:  Thanks, Patsi, that allowed me a little bit of time to think about how I would answer this question, so I appreciate you're jumping in first.  In general, there's two types of analyses that I've found helpful at times, one is the budget impact analysis, that's much like a multivariated analysis, where I'm looking at the data, at this rectangular data set and I have inputs and outputs in this rectangular file and it's a person-level data set.  Right off the multivariated analysis, I get to see sort of how each parameter affects the sensitivity and then I can go into more detail and you can say, "Well, what if that was a non VA parameter or a non VA cost and you can work right off the multivariate.  

Perhaps the more challenging one is the one that I think Patsi was describing, which is your—sometimes in developing this model based on parameters, some from the literature and some from your data, and then you really do have to try to figure out what's driving the cost and if this is an implementation study, hopefully you've done some qualitative work that tells you a little bit about what's going on at each facility.  What's a key parameter, but that's often the challenge is trying to figure out where you're sensitive to and actually diving into the data, trying to figure that out.  Anything else, Patsi?

Patsi Sinnott:  I have a budget impact analysis that I'm doing right now. It's a patient evaluation.  So in this scenario the patients have some variants to them in their age, their gender, their years since their injury, those kinds of things.  There's variation across sites, but the question really in my mind is—so you can't change the age of the patients and you can't change the gender of the patient, the question is: What elements on the right-hand side are actually mutable with operations?  Is it the prescheduled time or allotted time for the examination?  Do changes in those have an impact on the cost of the intervention?  Is there training that the examiners or evaluators have that makes them more or less efficient in the time they take to do the exam?  So it's those kinds of things that you have to think through, what is it that might be changed that's on the one hand going to impact cost, but also is an opportunity to gain efficiency?

Todd:  That's great.  Here's another question for you: How do you allocate the cost of durable items and facility space in a budget impact analysis?  It's a really tricky question.

Patsi Sinnott:  Well, [laughter] I'll take the easy part of the tricky stuff.

Todd:  Okay.

Patsi Sinnott:  Which is if you have to buy new equipment that is used for this intervention only, then you have to allocate it or amortize it over its quote "life span", and its patient usage, which is much more complicated than it seems.  You want to go from there like for space?

Todd:  Yeah.  The one thing that often people try to differentiate cost effectiveness versus budget impact analysis, in cost effectiveness, we're often interested in this very long-term horizon, where in theory, everything is a variable cost, even a hospital that you're building.  You could always tear it down and rebuild, but in some sense it's a variable cost.  What a budget impact analysis is trying to say is: No, we're also interested in this short-run cost, in the short-run production function and so when you think about these costs like your durable medical equipment, the question really is: Is the use going to change in the short run and maybe it's not going to change and maybe you don't even want to include those costs in the short run, but if you have to purchase, as Patsi is saying—space or durable medical equipment for your intervention, yeah, that is a short-run cost and so there has been some interesting articles out there about—we're now reducing people's use of technology, but we're not saving money and why are we not saving money?  Well, in some sense it's this short-run perspective.  We're kicking people off or we're encouraging people not to scan patients who don't need scanning, but the scanners are staying open and there's a cost to having that scanner.  It's one of those tricky questions about how do you think about the short-term versus the long-term horizon?  I don't think there's a set answer where you can say, "Here's the correct way to go," I think you just have to work on that.  

Patsi Sinnott:  Right.  Of course, if it's durable medical equipment in the sense that it is for single person use only like a brace or a walker or crutches that gets attributed to the individual cost.  Under Medicare for a long time raised toilet seats and toilet arm bars were not considered reimbursable to the patient because other people might come into their house and use them, so they were not considered personal use items.  That's just an aside.

Todd:  Here's another question for you, Patsi.

Patsi Sinnott:  Yeah.

Todd:  I'm sorry, I'm might have missed several parts, but do we account for lost productivity in budget impact analysis?

Patsi Sinnott:  No.  Because we're not talking—of the patient—we're not talking about patient's lost productivity.  We may have to take into account—go ahead.

Todd:  I was going to jump to the other—when they said lost productivity, I was immediately thinking of the facility's lost productivity.

Patsi Sinnott:  Right.  Which is what you were just talking about with the MRI or CT scanner.  In other words, there it has to be operated.

Todd:  Yeah.  You could also think of a new intervention that's designed to increase patient engagement in HCV treatment, but it requires the nurse has to check them to do something, so there's a cost and a lost productivity and sometimes that versus the 

patient—so I think your point's very well taken.  You've got to think of it as very separate and I think you're right, it excludes the patient's lost productivity.  We're not interested in whether they're working or not working and that's sort of their benefit, if you will.

Patsi Sinnott:  We're interested, but we're not including it in the estimation.

Todd:  On the facility side, it's the intervention of the productivity of your employees.  One would expect that that would also affect their cost and you would want to include that, if you're making them more productive or at least less productive, then it does affect—that is an important budgetary outcome because then all of a sudden they're doing either more with their time or they're doing less with their time.  And amortizing that to the patient or contributing it to the patients... I think that makes sense.  I think we got through all the questions and hopefully we didn't confuse everybody.  We still have 111 people here, which is amazing.  [Laughter]  Any other questions out there?  Yes.  Back to variable versus fixed cost.  What if the cost for developing a kiosk that diabetes patients will use in the clinic before their appointment—there's a one-time development cost for the kiosk, make or buy, so would you treat this as an intervention cost or as an implementation cost?  

Patsi Sinnott:  The recommendations are that you do not include development costs in the budget impact analysis, but you would choose, for example, the purchase of the kiosk and the operation of the kiosk and I would assume updating of the materials presented in the kiosk in the budget impact analysis, but the recommendations are that development costs for a questionnaire, a survey, anything—the development of the intervention is not included in the budget impact analysis.

Todd:  You raise a really interesting question, which is the sort of updating of IT, a lot of people are interested in implementing new IT interventions and it's not as easy as just buying the computer as most people realize now.  It's setting up the network, it's making sure that its connected, it stays connected, it's updated and those are real costs.

Patsi Sinnott:  And it doesn't disappear.

Todd:  True.

Patsi Sinnott:  Or become out of date or obsolete.

Todd:  So I hope we answered the person's question, if not [inaudible].  Any other questions out there?  This is one of those questions on budget impact analysis that's coming to us more and more so as people do these, we hope to learn from you as well.  If you're doing a budget impact analysis, please let us know, we'd like to keep track of who's doing these things and share information about how it's going on either side of the fence.  So please keep us posted, it's definitely something that central office is also very interested in.  I just wanted to thank Patsi for a great presentation, very provocative.  So thank you very much Patsi.

Patsi Sinnott:  You're welcome and there's a survey.  You got a survey at the end?

Todd:  Yup.

Heidi:  ... Webinar, it actually pops up when people leave the meeting.  As people leave, it will come up on their computer.

Patsi Sinnott:  Okedoke.

Heidi:  Thank you to everyone for joining us.  The last session in this cost effectiveness course will be held on February 29th and Paul Barnett will be presenting: How Can Cost Effectiveness Analysis Be Made More Relevant to U.S. Health Care?  We'll be sending out registration information on that in just a couple of weeks.  We hope everyone is able to join us.  Thank you so much Patsi and Todd, we appreciate the time that you put in to this.

Todd:  Thank you so much.

Patsi Sinnott:  Thank you, Heidi.

Heidi:  Thank you.  We'll talk with you later.

Todd:  Bye.

Heidi:  Bye.

**[End of Recording]**

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