Economic evaluation in healthcare
College 1 – Introduction to HTA and economic evaluation in health
care
Define Health Technology Assessment (HTA) and Health Economics
Explain why health economic evaluations are performed
Explain the basic concepts of health economic evaluation
Compare the different types of health economic evaluation
What is HTA?
“HTA is a multidisciplinary process that uses explicit methods to determine the value of a health
technology at different points in its lifecycle. The purpose is to inform decision-making in order to
promote an equitable, efficient, and high-quality health system.”
Evaluation of health technology from a variety of perspectives in order to inform health policy. The
perspectives: social sciences, medicine, epidemiology, demography, economy, health law, medical
ethics, organisational science.
What is Health Economics?
Evaluation of health technology in terms of costs and health outcomes; more specific: health
economics (HE)
Goal of health economics (HE)
Goal of HE is
o Balance care demand and care provision
o Support decisions on investment, designing, research, pricing, market access and
introduction into the benefit package
By means of objective evaluation of health technology
o Prevention, diagnostics, therapy, recovery, palliative care,…
o Safety and efficacy
o (Future) impact on (clinical) outcomes
o (Future) impact on non-clinical patient outcomes
o (Future) costs (cost savings)
Why do we need economic evaluation in health care?
Budgets in health care are constrained
o Funded by government mostly
o Insurers – related to health care insurance
o Out of pocket payments of patients (e.g. birth control)
Every Euro can only be spent once
o Money spent on individual A cannot also be spent on individual B
Central theme in health care economics:
o How do we get the “biggest health bang for our buck”?
,Health care innovations new high cost medical products
Health care spending does not show it all
It is not just about how much we spend; budgets are limited in any case
It is also how we spend it (on what); efficiency, “doelmatigheid”, cost-effectiveness
Health economic evaluation
History and theoretical background
A brief history of economics in health care:
1963: Kenneth Arrow’s paper “Uncertainty and the Welfare Economics of Medical Care”
American Economic Review, 53 (5), 941-73
70s: international as part of health technology assessment
80s: introduction of expensive treatments such as heart and liver transplants and IVF
o Dunning’s funnel
o Report ‘Ziekenfondsraad’ 1985: “Grenzen aan de groei van het verstrekkingenpakket
90s: Fund for the development of medical care (36M guilders, 1988)
o Systematic studies into cost-effectiveness of advanced expensive new medical
technologies
2005: lawful obligation for pharmaceutical company to submit an economic evaluation when
requesting reimbursement for a new technology
o Show added value
Relevance: to inform choices
Development of new health care technologies, balancing health care demands and health
care provision
o Health care budgets are limited
o Care demands and expectations of patients are unlimited
Optimal use of scarce health care resources
o Economic evaluation assumes efficient and fair allocation of constrained resources to
maximise (societal) health benefits
o Assume individual people and society are utility maximisers (relative satisfaction,
health outcomes) and aim to achieve the greatest benefit for the greatest number
Pareto Principle
PARETO efficiency: any change in resource allocation leads to losses and gains. In the
30’s,compensation principle added to the theory, the people who lose are compensated by
the gains of others.
Many health economists assume the pareto efficiency to be a criterion. That is, the loss of
some people is compensated with gains of others. From a societal perspective! Not an
individual.
To measure the net benefit we need one measure of utility across diseases and
interventions.
Opportunity costs; What do we forgo when we make that choice?
In microeconomic theory, the opportunity cost of a choice is the value of the best alternative
forgone, in a situation in which a choice needs to be made between several mutually
exclusive alternatives given limited resources.
Assuming the best choice is made, it is the "cost" incurred by not enjoying the benefit that
would be experienced by selecting the second-best choice available.
,Every euro counts
Increasing the national healthcare budget will reduce budgets for: education, social welfare,
infrastructure, military defense,…
In any case, there will never be enough budget to fulfil all individual care needs
Suboptimal use of the healthcare budget means a loss of money = loss of health
Fundamentals and types of economic evaluation
Health economic evaluation = systematic evaluation of costs and effects
Comparative analysis (≥ 2 alternatives: interventions, strategies, policies)
Incremental (cost-effectiveness) analysis
Extra cost per extra unit of benefit
Goal: systematically identify, measure, value, and compare costs and effects (consequences)
of different alternative policies/interventions.
Within a certain health problem (usually) or over different health problems
Timing
Ideally after proof of efficacy in research setting
Ideally before large scale implementation of technology
Impact on decision making optimal
Typical questions
Should GPs check the blood pressure of all patients coming in for consultation?
Should all women get vaccinated against HPV?
Should all men with prostate cancer receive new and very expensive chemotherapy?
Should we use new biomarkers in screening for individuals at high risk for CVD?
Should we use robots for gastrectomy instead of laparoscopic (minimally invasive)
gastrectomy?
Underlying research question
Is this particular intervention (drug, technology, device, service, healthcare delivery strategy)
valuable when compared with other interventions that could be paid for with the same
budget?
In other words: are we happy to spend our healthcare Euros on this particular intervention
instead of on something else?
, Comparator and perspective
Comparators: systematic identification of all relevant alternative interventions
o Including: ‘do-nothing’/ ‘watchful waiting’ / ‘active surveillance’
o For example, stop smoking counselling program as alternative to chemo in
lungcancer patients
Perspective: determines the outcome of the economic evaluation
o Patient, hospital, insurer, society
o For example, telemonitoring health failure compared to regular hospital check-ups:
costeffective from societal perspective, not cost-effective from hospital perspective
Different types of studies to answer different questions
Cost of illness (COI) study & budget impact analysis (BIA)
COI: identify and measure all the costs of a particular desease.
Outcome: total cost burden of a particular disease (to society).
o Sometimes called burden of illness (BOI), but this implies also health burden.
BIA: Analysis of the financial consequences of the use of an alternative
intervention compared to the current situation for a certain budget holder (for
example: hospital, health insurer, the Ministry of Health)
What extra money is required?
Two main approaches
Trial-based analysis (empirical study)
o Costs and effects are measured simultaneously in a (randomized) clinical trial
Model-based analysis
o Synthesis of evidence on costs and effects from a variety of sources in a decision-
analytic model
o Explanation of the choices, evidence and uncertainty, and their consequences
Types of economic evaluation
Cost Minimisation Analysis (CMA)
o Assumption: there are no differences in effectiveness, effects are considered to be
exactly the same for all patients (no heterogeneity)
o If true, comparison of costs across interventions to determine the cheapest
o But: this is hardly ever a valid assumption
o Costs and effects should be analyzed simultaneously not in sequence
o So: CMA is not the analytical technique of choice!
Cost Effectiveness Analysis (CEA)
o Can express effects in any measure of interest for the intervention under study.
o Stop smoking campaign: number of quitters
o Obesitas prevention program: weight loss in kg
o Vaccination: cases of infectious disease averted
College 1 – Introduction to HTA and economic evaluation in health
care
Define Health Technology Assessment (HTA) and Health Economics
Explain why health economic evaluations are performed
Explain the basic concepts of health economic evaluation
Compare the different types of health economic evaluation
What is HTA?
“HTA is a multidisciplinary process that uses explicit methods to determine the value of a health
technology at different points in its lifecycle. The purpose is to inform decision-making in order to
promote an equitable, efficient, and high-quality health system.”
Evaluation of health technology from a variety of perspectives in order to inform health policy. The
perspectives: social sciences, medicine, epidemiology, demography, economy, health law, medical
ethics, organisational science.
What is Health Economics?
Evaluation of health technology in terms of costs and health outcomes; more specific: health
economics (HE)
Goal of health economics (HE)
Goal of HE is
o Balance care demand and care provision
o Support decisions on investment, designing, research, pricing, market access and
introduction into the benefit package
By means of objective evaluation of health technology
o Prevention, diagnostics, therapy, recovery, palliative care,…
o Safety and efficacy
o (Future) impact on (clinical) outcomes
o (Future) impact on non-clinical patient outcomes
o (Future) costs (cost savings)
Why do we need economic evaluation in health care?
Budgets in health care are constrained
o Funded by government mostly
o Insurers – related to health care insurance
o Out of pocket payments of patients (e.g. birth control)
Every Euro can only be spent once
o Money spent on individual A cannot also be spent on individual B
Central theme in health care economics:
o How do we get the “biggest health bang for our buck”?
,Health care innovations new high cost medical products
Health care spending does not show it all
It is not just about how much we spend; budgets are limited in any case
It is also how we spend it (on what); efficiency, “doelmatigheid”, cost-effectiveness
Health economic evaluation
History and theoretical background
A brief history of economics in health care:
1963: Kenneth Arrow’s paper “Uncertainty and the Welfare Economics of Medical Care”
American Economic Review, 53 (5), 941-73
70s: international as part of health technology assessment
80s: introduction of expensive treatments such as heart and liver transplants and IVF
o Dunning’s funnel
o Report ‘Ziekenfondsraad’ 1985: “Grenzen aan de groei van het verstrekkingenpakket
90s: Fund for the development of medical care (36M guilders, 1988)
o Systematic studies into cost-effectiveness of advanced expensive new medical
technologies
2005: lawful obligation for pharmaceutical company to submit an economic evaluation when
requesting reimbursement for a new technology
o Show added value
Relevance: to inform choices
Development of new health care technologies, balancing health care demands and health
care provision
o Health care budgets are limited
o Care demands and expectations of patients are unlimited
Optimal use of scarce health care resources
o Economic evaluation assumes efficient and fair allocation of constrained resources to
maximise (societal) health benefits
o Assume individual people and society are utility maximisers (relative satisfaction,
health outcomes) and aim to achieve the greatest benefit for the greatest number
Pareto Principle
PARETO efficiency: any change in resource allocation leads to losses and gains. In the
30’s,compensation principle added to the theory, the people who lose are compensated by
the gains of others.
Many health economists assume the pareto efficiency to be a criterion. That is, the loss of
some people is compensated with gains of others. From a societal perspective! Not an
individual.
To measure the net benefit we need one measure of utility across diseases and
interventions.
Opportunity costs; What do we forgo when we make that choice?
In microeconomic theory, the opportunity cost of a choice is the value of the best alternative
forgone, in a situation in which a choice needs to be made between several mutually
exclusive alternatives given limited resources.
Assuming the best choice is made, it is the "cost" incurred by not enjoying the benefit that
would be experienced by selecting the second-best choice available.
,Every euro counts
Increasing the national healthcare budget will reduce budgets for: education, social welfare,
infrastructure, military defense,…
In any case, there will never be enough budget to fulfil all individual care needs
Suboptimal use of the healthcare budget means a loss of money = loss of health
Fundamentals and types of economic evaluation
Health economic evaluation = systematic evaluation of costs and effects
Comparative analysis (≥ 2 alternatives: interventions, strategies, policies)
Incremental (cost-effectiveness) analysis
Extra cost per extra unit of benefit
Goal: systematically identify, measure, value, and compare costs and effects (consequences)
of different alternative policies/interventions.
Within a certain health problem (usually) or over different health problems
Timing
Ideally after proof of efficacy in research setting
Ideally before large scale implementation of technology
Impact on decision making optimal
Typical questions
Should GPs check the blood pressure of all patients coming in for consultation?
Should all women get vaccinated against HPV?
Should all men with prostate cancer receive new and very expensive chemotherapy?
Should we use new biomarkers in screening for individuals at high risk for CVD?
Should we use robots for gastrectomy instead of laparoscopic (minimally invasive)
gastrectomy?
Underlying research question
Is this particular intervention (drug, technology, device, service, healthcare delivery strategy)
valuable when compared with other interventions that could be paid for with the same
budget?
In other words: are we happy to spend our healthcare Euros on this particular intervention
instead of on something else?
, Comparator and perspective
Comparators: systematic identification of all relevant alternative interventions
o Including: ‘do-nothing’/ ‘watchful waiting’ / ‘active surveillance’
o For example, stop smoking counselling program as alternative to chemo in
lungcancer patients
Perspective: determines the outcome of the economic evaluation
o Patient, hospital, insurer, society
o For example, telemonitoring health failure compared to regular hospital check-ups:
costeffective from societal perspective, not cost-effective from hospital perspective
Different types of studies to answer different questions
Cost of illness (COI) study & budget impact analysis (BIA)
COI: identify and measure all the costs of a particular desease.
Outcome: total cost burden of a particular disease (to society).
o Sometimes called burden of illness (BOI), but this implies also health burden.
BIA: Analysis of the financial consequences of the use of an alternative
intervention compared to the current situation for a certain budget holder (for
example: hospital, health insurer, the Ministry of Health)
What extra money is required?
Two main approaches
Trial-based analysis (empirical study)
o Costs and effects are measured simultaneously in a (randomized) clinical trial
Model-based analysis
o Synthesis of evidence on costs and effects from a variety of sources in a decision-
analytic model
o Explanation of the choices, evidence and uncertainty, and their consequences
Types of economic evaluation
Cost Minimisation Analysis (CMA)
o Assumption: there are no differences in effectiveness, effects are considered to be
exactly the same for all patients (no heterogeneity)
o If true, comparison of costs across interventions to determine the cheapest
o But: this is hardly ever a valid assumption
o Costs and effects should be analyzed simultaneously not in sequence
o So: CMA is not the analytical technique of choice!
Cost Effectiveness Analysis (CEA)
o Can express effects in any measure of interest for the intervention under study.
o Stop smoking campaign: number of quitters
o Obesitas prevention program: weight loss in kg
o Vaccination: cases of infectious disease averted
