5.4 Economic Evaluation of Healthcare Interventions

Healthcare interventions are costly, so we need to know if they're worth it. Economic evaluation helps us figure that out by comparing costs and benefits. It's like deciding if a fancy new treatment is really better than what we're already doing.

There are different ways to do this, like cost-effectiveness analysis and cost-benefit analysis. These methods help decision-makers choose interventions that give the most bang for their buck. But it's tricky - there are challenges in measuring costs and benefits accurately.

Economic Evaluation in Healthcare

Concepts and Methods

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• Economic evaluation in healthcare is a systematic approach to comparing the costs and consequences of different healthcare interventions or programs
• Cost-effectiveness analysis (CEA) compares the costs and health outcomes of two or more interventions, typically using a measure of effectiveness such as life-years gained or cases prevented
  • The incremental cost-effectiveness ratio (ICER) is a key metric in CEA, representing the additional cost per unit of health benefit gained by choosing one intervention over another
  • For example, if a new drug costs $10,000 more than the current standard of care but leads to an average gain of 2 [quality-adjusted life years (QALYs)](https://www.fiveableKeyTerm:Quality-Adjusted_Life_Years_(QALYs)), the ICER would be$5,000 per QALY gained
• Cost-utility analysis (CUA) is a type of CEA that uses quality-adjusted life years (QALYs) or disability-adjusted life years (DALYs) as the measure of health outcome, incorporating both the quantity and quality of life
  • QALYs combine the length of life with a measure of health-related quality of life, typically on a scale from 0 (death) to 1 (perfect health)
  • DALYs measure the burden of disease by combining years of life lost due to premature mortality and years lived with disability
• Cost-benefit analysis (CBA) compares the costs and benefits of an intervention in monetary terms, allowing for the assessment of the net benefit or net cost of the intervention
  • CBA requires assigning monetary values to health outcomes, which can be challenging and controversial
  • For instance, a CBA of a vaccination program might compare the costs of the program with the monetary benefits of avoided healthcare costs and productivity losses due to prevented illnesses

Factors Influencing the Choice of Evaluation Method

• The choice of economic evaluation method depends on the research question, available data, and the perspective of the decision-maker
• CEA and CUA are often used when the primary objective is to maximize health outcomes within a given budget constraint, while CBA is used when the aim is to maximize overall social welfare
• The availability and quality of data on costs and health outcomes can also influence the choice of method, as some methods require more extensive data than others
• The perspective of the evaluation (e.g., healthcare system, society) can also dictate the choice of method, as different perspectives may prioritize different costs and benefits

Components of Economic Evaluation

Key Elements and Considerations

• The perspective of an economic evaluation determines whose costs and benefits are considered, such as the healthcare system, society, or the patient
  • A societal perspective includes all costs and benefits, regardless of who incurs them, while a healthcare system perspective focuses on costs and benefits within the healthcare sector
• The time horizon is the period over which costs and consequences are evaluated, which should be long enough to capture all relevant outcomes
  • For chronic conditions or preventive interventions, a lifetime horizon may be appropriate, while for acute conditions, a shorter horizon may suffice
• Discounting is the process of adjusting future costs and benefits to their present value to account for time preferences and opportunity costs
  • The choice of discount rate can significantly impact the results of an economic evaluation
  • For example, a higher discount rate will place less weight on future costs and benefits, which can disadvantage interventions with long-term benefits
• The choice of comparator, such as current practice or the next best alternative, is crucial in determining the incremental costs and benefits of the intervention
  • The comparator should represent a realistic and relevant alternative to the intervention being evaluated

Data Collection and Analysis Methods

• Data on resource use, costs, and health outcomes should be collected systematically and transparently, using appropriate sources and methods
  • Resource use data can be obtained from clinical trials, observational studies, administrative databases, or expert opinion
  • Costs should be measured in monetary terms and can include direct medical costs (e.g., drugs, hospital stays), direct non-medical costs (e.g., transportation, caregiving), and indirect costs (e.g., productivity losses)
  • Health outcomes can be measured using clinical endpoints (e.g., mortality, morbidity), patient-reported outcomes (e.g., quality of life), or intermediate outcomes (e.g., blood pressure, cholesterol levels)
• Sensitivity analysis is a method for assessing the robustness of the results by varying key parameters and assumptions within plausible ranges
  • One-way sensitivity analysis varies one parameter at a time, while probabilistic sensitivity analysis varies multiple parameters simultaneously
  • Sensitivity analyses can help identify the parameters that have the greatest influence on the results and the range of results that are possible under different assumptions

Interpreting Economic Evaluation Results

Presenting and Interpreting Findings

• The results of an economic evaluation should be presented clearly and transparently, including the incremental costs, incremental benefits, and the ICER or net benefit
  • The incremental cost is the difference in costs between the intervention and the comparator, while the incremental benefit is the difference in health outcomes
• The cost-effectiveness plane is a graphical tool for presenting the results of a CEA, showing the incremental costs and benefits of the intervention compared to the alternative
  • Interventions that fall in the southeast quadrant (lower costs, higher benefits) are considered dominant, while those in the northwest quadrant (higher costs, lower benefits) are considered dominated
  • Interventions in the northeast (higher costs, higher benefits) or southwest (lower costs, lower benefits) quadrants require a judgment about whether the additional costs are worth the additional benefits
• Cost-effectiveness acceptability curves (CEACs) show the probability that an intervention is cost-effective at different willingness-to-pay thresholds
  • The willingness-to-pay threshold represents the maximum amount that a decision-maker is willing to pay for a unit of health benefit (e.g., QALY)

Implications for Healthcare Decision-Making

• Economic evaluations can inform resource allocation decisions by identifying interventions that provide the greatest value for money within a given budget constraint
  • For example, if a healthcare system has a fixed budget for cancer treatment, economic evaluations can help prioritize interventions that maximize health outcomes within that budget
• The interpretation of the results should consider the uncertainty surrounding the estimates, as well as the relevance and applicability to the decision-making context
  • The results may be sensitive to changes in key parameters or assumptions, and decision-makers should consider the range of plausible results rather than focusing on a single point estimate
• However, economic evidence should be considered alongside other factors, such as equity, feasibility, and stakeholder preferences
  • An intervention that is highly cost-effective may not be equitable if it primarily benefits already advantaged populations, or it may not be feasible if it requires substantial changes to current practice or infrastructure
• The use of economic evaluations in healthcare decision-making varies across countries and healthcare systems, depending on the institutional and political context
  • Some countries (e.g., the United Kingdom, Australia) have formal processes for considering economic evidence in coverage and reimbursement decisions, while others rely on more informal or ad hoc approaches

Challenges of Economic Evaluation

Limitations and Methodological Issues

• The quality and availability of data on costs and outcomes can be a major limitation, particularly for complex interventions or rare conditions
  • The use of modeling techniques, such as decision-analytic modeling, can help to synthesize evidence from multiple sources and extrapolate beyond the available data
  • However, models are only as good as the data and assumptions that inform them, and they should be validated against empirical data when possible
• The choice of perspective, time horizon, and discount rate can have a significant impact on the results and should be justified based on the research question and decision-making context
  • A narrow perspective or short time horizon may exclude important costs or benefits, while a high discount rate may disadvantage interventions with long-term benefits
• The valuation of health outcomes, particularly in CBA, can be challenging and may not fully capture the non-health benefits of interventions
  • Assigning monetary values to health outcomes requires making assumptions about the value of life and health, which can be controversial and may not reflect individual or societal preferences

Contextual and Implementation Challenges

• Economic evaluations may not adequately consider issues of equity, such as the distribution of costs and benefits across different population subgroups
  • An intervention that is cost-effective on average may not be cost-effective for all subgroups, and decision-makers may need to consider targeted interventions or equity weights to address distributional concerns
• The transferability of economic evaluation results across different healthcare systems and populations may be limited due to differences in resource use, unit costs, and epidemiology
  • An intervention that is cost-effective in one setting may not be cost-effective in another, and decision-makers should consider the local context when interpreting and applying economic evidence
• The conduct and reporting of economic evaluations can be subject to bias, particularly if funded by interested parties or not adhering to established guidelines
  • Economic evaluations should be conducted and reported transparently, following established guidelines (e.g., the Consolidated Health Economic Evaluation Reporting Standards [CHEERS])
• The use of economic evaluations in decision-making can be challenging due to the complexity of the methods, the uncertainty surrounding the results, and the political and organizational barriers to implementation
  • Decision-makers may lack the technical expertise to critically appraise economic evaluations or may face political pressures to prioritize other factors over economic evidence
  • Implementing the findings of economic evaluations may require changes to current practice, budgets, or incentives, which can be met with resistance from stakeholders