Académique Documents
Professionnel Documents
Culture Documents
Course Details
Instructor: Sakine Batun (IE 333, sakine@metu.edu.tr)
Class Meeting: Mondays 13:40 16:30, IE 301
Prerequisite: Knowledge of basic probability theory and operations research
techniques.
Course Web Page: https://odtuclass.metu.edu.tr/
Reference Books:
Drummond, M.E., OBrien, B., Stoddart, G.L., and Torrance, G.W., Methods for the
Evaluation of Health Care Programmes, Oxford Medical Publications, 2005.
Gold, M.R., Siegel, J.E., Russell, L.B., and Weinstein, M.C., Cost-Effectiveness in
Health and Medicine, Oxford University Press, 1996.
Hunink, M.G.M., Glasziou, P.P., Siegel, J.E., Weeks, J.C., Pliskin, J.S., Elstein, A.S., and
Weinstein, M.C., Decision Making in Health and Medicine: Integrating Evidence and
Values, Cambridge University Press, 2001.
Brandeau, M.L., Sainfort, F., and Pierskalla, W.P. (Eds.), Operations Research and
Health Care: A Handbook of Methods and Applications, Kluwer Academic
Publishers, 2004.
Course Details
Tentative Course Outline: IE/OR applications in healthcare
Introduction Introduction to decision making under
Economic evaluation of healthcare uncertainty
interventions Markov Decision Processes
Dynamic models
IE 492 February th
20 , 2017
Today
Introduction
Economic evaluation of healthcare interventions
Motivation
Basic types of cost-outcome studies
Purpose and foundations of CEA
Elements of CEA
Healthcare System
Healthcare system is the organization of people,
institutions, and resources to deliver healthcare services to
meet the health needs of target populations.
Service provision
public vs. private
History of IE/OR in Healthcare
History of IE/OR in Healthcare
Time and motion studies for Nurse scheduling algorithms (Warner,
1911-18 1972
surgeries (F. Gilbreth) Wolfe)
1920-40 Basic process and capacity analysis Perishable inventory theory applied
1970-72
to blood banks (Pierskalla)
Management engineering invented
1945
and applied to nursing (L. Gilbreth) 1972-73 Simulation planning models (Rising)
Advance in technology
Resources are limited and should be carefully
allocated
More money does not necessarily mean more health
What is it?
Two features characterize economic analysis:
Inputs and outputs = Costs and consequences
Choices
Comparative analysis of alternative courses of action
in terms of both their costs and consequences
Our focus: Cost-Effectiveness Analysis (CEA)
In healthcare setting: An analytic method designed
to inform decision making regarding both the
economic and clinical consequences of various
possible actions
Types of cost-outcome studies
Cost Minimization/Identification
Efficacy is assumed to be the same, and the costs of the various
possibilities are determined to find the least expensive
Common in pharmacy and therapeutic committees
Ex: Suppose Drug A (Cheapocillin) and Drug B (Cephokillumall)
have the same cure rates in pneumonia. Which drug should the
hospital have on formulary?
Cheapocillin Cephokillumall
Drug cost/dose $0.50 $22.00
Administration cost/dose $11.00 $8.50
Doses/day 4 1
Laboratory costs $0 $10.50
18 Deaths 10 Deaths
22 Strokes 55 Strokes
$120,000 $195,000
Types of cost-outcome studies
Cost-Effectiveness Analysis
Measures both the costs and outcomes, but assures
that all of the outcomes are measured in the same
metric across all alternatives
cost per infection prevented
cost per life saved
cost per life-year saved
Each outcome measure has its own pros and cons
cost/life saved vs. cost/life-year saved
Can you compare the life of a 2-year old with the life of an
80-year old?
Types of cost-outcome studies
Cost-Utility Analysis
Measures outcomes in terms of the value placed
on the outcome, not the outcome itself
Requires an ability to place numeric comparisons
of various outcome states
We all know that life in different health states is
not valued equally:
a year of life in full health
a year of life after a stroke
a year of life in severe pain
Types of cost-outcome studies
Cost-Utility Analysis (continued)
But by how much?
1 year of life w/stroke = 70% of full health?
1 year of life w/stroke = 80% of full health?
1 year of life w/stroke = 90% of full health?
Whose values should you use?
Patients?
They are the ones living through it.
Societys/Societies?
Everyone is affected by the use of resources.
Types of cost-outcome studies
Cost-Utility Analysis (continued)
People value these states differently
The basic idea is that years of life need to be
quality adjusted to make the comparisons
equivalent
Utility analysis allows outcomes to be measured in
Quality Adjusted Life Years (QALYs)
Types of cost-outcome studies
Cost-Benefit Analysis
Much more common in economics and policy than
in healthcare
Measures both costs and outcomes in monetary
values
Has the advantage of being able to compare
programs across a wide variety of social needs
Housing, defense, healthcare
Has the problem of placing monetary value on
human life
Types of cost-outcome studies
All cost-outcome studies measure the costs in
monetary values; it is the benefits that are measured
in different metrics
Type of Cost Benefit
Analysis Measure Measure
Even so, the new advice could add a million or more women a year to those who need
breast magnetic resonance imaging -- a demand that radiologists are not yet equipped to
meet, researchers say. The scans require special equipment, software and trained
radiologists to read the results, and may not be available outside big cities.
Breast M.R.I. costs $1,000 to $2,000, and sometimes more -- 10 times the cost of
mammography -- so a million more scans a year would cost at least $1 billion.
Ex: MRI in Breast Cancer
Is $1 billion too much?
The real issue is what we are willing to pay for
Suppose that MRIs are better than mammograms
even in women at low risk
How much better?
How many extra lives for $1B?
How much more expensive?
The real issue is what are we getting for what we are
spending?
Ex: MRI in Breast Cancer
The MRI found 30 of 969 women (3.1%) who had
breast cancers that were negative on mammogram
It had 91 false positives (-mammogram, -biopsy)
(9.4%)
The study is not able to predict how may of the 30
would have been found on routine follow-up
So, is it worth $1 billion to find 30 cancers per 1000
women some number of months earlier than we
would have found them under standard care?
Other Examples
Coverage decisions
Should the use of a new drug for the treatment of Acute MI
(heart attack) in the emergency room be approved?
Should hepatitis vaccination in children be covered by the
government?
Choose: ?
Pareto optimality
Social Theory
healthcare is not solely a personal good
fairness
Economic Foundations of CEA:
Law of Diminishing Returns
For any given disease/condition, initial resources
affect outcomes more than later efforts law of
diminishing returns
A straightforward example is to look at screening
intervals:
Cervical cancer
is a slowly progressive disease with a reasonably
predictable natural history
has an asymptomatic phase in which it can be detected
and cured
What is the appropriate screening level?
Every year? Every 6 Months? Every month?
Economic Foundations of CEA:
Law of Diminishing Returns
What is happening as more resources are thrown at
cervical cancer screening?
50
Days of life saved per
1-yr interval
Health
Decreasing marginal return
Potential detrimental
effect of more resources
H
More Expensive
Net Incremental Costs
between cost and
effectiveness
No CEA
Worse Better
Less Expensive
The most difficult part in Existing Program
Determination of effects
Elements of CEA
Strategies/options being compared
CEA requires a comparison between two or more options
An option can only be cost-effective relative to other
options
Cost-effectiveness depends on the comparators chosen
Comparators should include all clinically relevant options
At minimum, current standard of care and other usual options
Comparison of a new strategy to a strategy that is not typically used
is not helpful
Strategies should be described in sufficient detail so that
the strategy could be implemented in another setting
Elements of CEA
Perspective of the analysis
Determines the costs to be considered in the analysis
Societal perspective: all costs
Patient perspective: only costs incurred by the patient
Other perspectives include third-party payer (insurance),
health system, hospital, or health agency