The Laryngoscope
Lippincott Wil11 ams & Wilkins\ Inc., Phil adelphia
2000 The America n La ryngo ogical,
11:)
Rhinological and Otological Society, In c.
A Cost-Utility Analysis of Pediatric
Cochlear Implantation
iaran O'Neill, PhD; Gerard M. O'Donoghue, FRCS; Susan M. Archbold, MPhil; Charles Normand, DPhil
Objective/Hypothesis: The aim of this study was
to explore the cost-utility of pediatric cochlear im-
plantation, incorporating savings associated with ed·
ucation into the analysis. Methods: The costs of pedi·
atric cochlear implantation were based on the full
costs levied to purchasers, inclusive of complications
and maintenance, by a large pediatric cochlear im·
plant program in the United Kingdom. After implan-
tation, profoundJy hearing-impaired children have
been found to develop hearing threshold levels equiv·
alent to severely hearing-impaired children who
wear hearing aids. An independent study calculated
the educational costs for severely hearing-impaired
and profoundJy hearing-impaired children. From this
study, savings in ducational costs that would result
from enabling the profoundly hearing-impaired to
function as severely bearing-impaired were deter·
mined. Cost-utility was established conservatively by
applying to children the known gains in utility re·
ported by adults with cochlear implants. Results: The
discounted costs of creating a pediatric cochlear im·
plant user and of maintaining the child over the first
12 years were £48,757 ($78,011). The discounted differ·
ence in education costs associated with a profoundJy
hearing-impaired child (IIL >95 dB) as compared
with a sever ly hearing-impaired child (HL 70-95 dB)
over the same period was £26, 781 ($42,850). These rep·
r sent the potential savings in educational costs asso·
ciated with pediatric cochlear implantation. Assum·
ing implantation at age 4 years, the discounted net
average cost of pediatric cochlear implantation over
compulsory chool years (ages 4-16) was £21,976
($35,162). Cochlear implants have been shown to im-
prove the quaJity of life in adults by 0.23 points per
annum (where quality of life is rated on a scale from 0
to 1). Applying this weight to children r ceiving im·
plantation at age 4 years, and assuming a life expect-
ancy of 74 years, the quality-adjusted life-year (QALY)
From the Tr nt fn st.itute for Hea lth Services R search and Depart-
ment of Economics (c.o.) and tho Department of Oterhinola ryngology
(o.M.O.), Univ rsity of Notti ngha m, a nd the Nottingham Cochlear Implant
Programme (S.M .A.), Ropewalk House, Nottingham , and the Depa rtment of
Public Hea lth and Policy (c.N.), London Schoel of Hygiene and Tropical
Medicin , London , United Kingdom .
Editor's Note: This Manuscript was accepted for publication Septem-
ber 14 , 1999.
Send Reprint Requests to iaran O'Neill, Trent [nstitute for Health
S rvic Resea rch , Qu ns Medical entre, University of Nottingham, NG7
2UH , United Kingdom .
Laryngoscope 110: January 2000
156
gain is calculated to be 16.33. The cost per undis·
counted QALY gain was estimated to b e £1,345.70
($2153.12) and per discounted QALY gain to be £10,341
($16,545.60). Conclusion: This study provides evi-
dence, based on conservative assumptions, to support
the view that pediatric cochlear implantation is a
cost-effective health care intervention in profoundJy
hearing-impaired young children. Key Words: Pediat-
ric cochlear implantation, cost, utility.
Laryngoscope, 110:156-160, 2000
INTRODUCTION
Cochlear implants are electronic devices introduced
surgically into the inner ear. They directly stimulate the
auditory nerve in response to sound and are of benefit to
profoundly or totally hearing-impaired patients who de-
rive little or no benefit from hearing aids. 1 •2 Unlike hear-
ing aids, cochlear implantation necessitates a surgical
procedure and incurs substantial costs throughout the
lifetime of the recipient. These implants do not restore
norm al heari ng but make their recipients function at a
level similar to less hearing-impaired patients who are
successful hearing aid users. Young hearing-impaired· in-
dividuals differ from their adult counterparts in that they
depend on their implants to develop spoken language and
thus require more prolonged habilitation. The child whose
cochlear implantation is successful may be expected to
have enhanced scholastic attainment, improved employ-
ment opportunity, and less dependence on social services
in adulthood .3 Studies have determined the cost-
effectiveness of the intervention in adults who became
hearing impaired after acquiring spoken language. 4- 6 Un-
til now, in sufficient data existed to make robust estimates
of the value of the intervention in children, who are now
the major target group for this treatment. In this study we
report the results of a cost-utility study based on the costs
from a major pediatric implant center, the known out-
comes of the intervention in children, and the established
costs of alternative educational settings in the United
Kingdom .
MATERIALS AND METHODS
Cost data were based on those current from 1997 to 1998
and represent the full cost of implantation charged to health
authorities in th e Un.i ted IGngdom by the Nottingham Pediatric
Cochlear Implant Program. These a re inclusive of replacements,
O'Neill et al.: Pediatric Cochlear Implantation
where necessary; subsequent maintenance of the implant device, TABLE I.
and any complications (over the relevant time period), as well as Direct Costs to Purchasers of a Pediatric Cochlear Implant 1997
initial assessment, implantation, and rehabilitation . to 1998.
Cost Item Amount£($) Year'
Equivalent Hearing Loss
The effectiveness of the intervention may be defined in Assessment and implantation 27,500
terms of how well chHdren with cochlear implants perform in (44,000)
terms of hearing thresholds as compared with their expected Rehabilitation and maintenance 4,000 2
attainments in the absence of impl antation . Before implantation, Rehabilitation and maintenance 4,000 3
most subjects functioned as profoundly or totally hearing im-
(6,400)
paired (i.e., had hearing threshold levels > 95 dB ). Evidence from
a number of longitudinal studies suggests that children who Maintenance 2,300 4 onward
undergo implantation function at levels equivalent to 70 to 95 dB (3,680)
after 2 to 3 years of implant use.2.1.s Thus children with implants Total over first 4 years 37,800
are functionally equi valent to severely hearing-impaired children (60,480)
(defined as having hearing thresholds between 70 and 95 dB) who
wear hearing aids. We assumed that all children who successfull y Maintenance costs are recurrent per annum after implantation. Implan-
undergo cochlear implantation (i.e., who incur the full cost of tation is assumed to occur at age 4.
'Year_in which cost is incurred.
implantation) attain these thresholds. As noted, evidence sug-
gests that this is a reasonable assumption. 2 ·7 •8
calculation are based , are reported in Table II. Although
Education Costs education costs b etween authorities varied, those for chil-
Contingent on the level of h earing impairment suffered,
d ren with hearing loss in excess of95 dB were consistently
children may be located in a range of different educational set-
substantially higher than for those for heari ng loss from
tings. Education costs in these settin gs vary depending on the
intensity of personal contact between educator and child . Because 70 to 95 dB at both year 4 (age 8 years) and year 7 (age 11
cochlear impl antation may result in a child's being educated in a years). For comparative purposes, the dollar equivalent
setting requiring less intensive personal contact, education costs (based on an exchange rate of £1 = $1.60) values are a lso
may, as a result of implantation , be lower than would otherwise shown.
be the case. Such savings must be offset agai nst the cost of
implantation. In the United Kingdom, formal schooling is com- Discounted Educational Costs and Savings
pulsory for all children between the ages of 4 a nd 16 years. To compare costs incurred over an extended time, it is
Children receive 7 years of what is termed "primary school edu- n ecessary to discount such costs to a common point in
cation" (commencing usually around 4 years of age and finishing time. Thi s is done to account for time preference. For
at 11 years of age) followed by 5 years of what is termed "second-
example, a dollar bond , to be repaid in a year's time, could
ary school education" (commencing around age 11 and finishing
around age 16). Data relating to the cost of alternative educa- be borrowed against today. The amount that could b e
tional settings at both stages of education were derived from a borrowed , however, would be less than a dollar, as the
study conducted in 1998 on behalf of the Special Educational lender will require a return on h is loan. That is, the
Needs Initiative. 9 As one aspect of this study, local education present value of the dollar is l ess than that in a year's
authorities (responsible in the United Kingdom for the provision time. By the same token, expenditures in a year's time will
of education across defin ed geogra phic areas) provided data on be viewed as less important than expenditures today be-
the costs of educating children with differing degrees of hearing
impairment and communication needs. The overall cost of the
provision was calculated by including such factors as educational
setting (e.g., mainstream school, special unit in mainstream TABLE II.
school, independent special school), the nature of the provision Average Reported Annual Costs of Educating a Child With
Hearing Loss.
offered (e.g., the number of extra teaching staff as opposed to
nonteaching staff hours provided for the pupil), and any single or Average Cost Sample
recurrent cash allocations involved (e.g., for special equipment). £ ($) SD£($) Size•
The study identified separately the costs of education for a child Case 1 (hearing loss in
with hearing loss ranging from 70 to 95 dB and for a child with a excess of 95 db)
hearing loss in excess of 95 dB. Costs related to year 4 of the Year 4 10,088.57 4069.87 47
child's education (i.e., when the child would be in primary school
(16,141 .71) (6,51 1.79)
and aged approximately 8 years) and in year 7 (i.e., when the
child would be at secondary school and aged approximately 11 Year 7 12,264.81 5231 .22 48
years). (19,623. 70) (8 ,369.95)
Case 2 (hearing loss in the
range 70-95 dB)
RESULTS Year 4 7,762.43 3,777.63 47
A breakdown of implantation costs is provided in
(12,419.89) (6,044.21)
Table I , together with the period (i.e., year) in which these
were incurred . Average local authority education costs Year 7 7,881.40 4,692.03 48
associated with children with levels of h earing loss in (12,610.24) (7507.25)
excess of 95 dB and ranging from 70 to 95 dB, together 'Sample size refers to the number of participating educational
with standard deviations and sample sizes on which these authorities.

Laryngoscope 11 O: January 2000 O'Nei ll et al.: Pediatric Cochlear Implantation

157
 cause of this time preference. Using a di scount rate of6%,
the difference in compulsory education costs for a child
with hea ring impairment in excess of 95 dB and that of a
chi ld with hearing impairment between 70 and 95 dB
( xpress d in present value terms) was calculated. These
results are reported in Table III and represent the savings
in education costs associated with implantation expressed
in present value terms. Discounting the implantation
costs (reported in Table I) in a similar fa shion , it is possi-
bl e to calculate the net discounted costs of a pediatric
cochlear implant (i.e., wh ere the savings it will produce in
terms of education costs have been taken into account and
where all amounts are expressed in terms of their present
values). The m a n net cost of implantation a nd the 95%
confidence intervals associated with this a re shown in
Table IV.
Table IV indicates that, under the assumptions used,
we can b 95% confident that pediatric cochlear implants
have a n t cost associated with them expressed in present
value t erms over compulsory school years (i.e., up to age
16 years) in the range of £6,678 ($10,685) to £37,273
($59,637), the mean cost being £2 1,976 ($35, 162). Over a
70-year period, postimplantation (i.e., over a reasonable
lifi expectancy) costs range from £26,052 ($41,683) to
£56,647 ($90,635), with a mean of £41,350 ($66,160),
where compulsory education costs are the only monetary
saving offset against impl anta tion costs.
Cost· Utility
Quality-adjust d life-year (QALY) gains associated
with the implantation of adults have been calculated to be
5.98, if benefits are not discounted, or 2.99, if benefits are
di scounted.10 (Th ese are similar to values obtained by
other researchers worki ng in this area. 4 ) The QALY is a
TABLE Ill.
Discounted Value of Difference in Education Costs for a Child With Hearing Loss in Excess of 95 db Compared With That of a Child With
Hearing Loss Ranging From 70 to 95 dB.
Difference In
Education Costs
£ ($)
Mean 26,781 .35
~ [ (Mean education cost case
Li
t• O
(42,850.16)
Upper bound 42,078.80
~ [ (Mean education cost case 1 - Mean education cost case 2)1 + l.96SE 1]
Li
•• 0
(67,326.08)
Lower bound 11 ,483.94
~ [(Mean education cost case 1 - Mean education cost case 2), - l.96SE,]
L.,
t• O
(18,37 4.30)
SEi a standard error for period t difference In means.
Laryngoscope 11 O: January 2000
158
measure of health benefits that combines gains in terms of
both the additional quality a nd quantity of life. For exam-
ple, one QALY may be made up of 1 additional year of
full -quality life or 10 years in which the treatment in-
creases quality oflife from 90% to 100%. It is a widely used
measure, a nd reporting health improvements in QALYs is
now recommended in economic evaluations in major
health and medica l journals.
Among children the QALY gains, if only by virtue of
their greater life expectancy (and therefore the longer the
time period over which any improvement in life quality
will be enjoyed), are likely to be much greater, although
this remains to be proven. For example, the estimate of
5.33 QALYs in adults was based on a remaining life ex-
pectancy of 26 years. For children receiving cochlear im-
pl ants at the age of 4 years, the remaining life expectancy
is likely to be of the order of 71 years (inclusive of the year
of implantation). This suggest s a QALY gain of approxi-
mately 16.33 (the 0.23 improvement in life quality times
the remaining life expectancy of 71 years). Based on the
analysis conducted in the present study, this suggests a
cost per QALY gain of £1,346 ($2 154)-£41,350 divided by
16.33-if benefits are not discounted and of £10,341
($ 16,546) if benefits are discounted. It should be remem-
bered, of course, that these estimates are based on the
assumption that improvements in childhood quality oflife
are equivalent to those in adulthood. In practice, they may
be higher or, indeed, lower; further work is needed in this
area.
DISCUSSION
Cochlear implants represent the single most impor-
tant advance in the medical treatment of profoundly
hearing-impaired children this century. Their ability to
1- Mean educati on cost case 2),]
(1 +a)'
(1 + il)'
(1 + iJ) 1
O'Neill et al. : Pediatric Cochlear Implantation
 TABLE IV.
Net Discounted Value of Savings Attributable to Pediatric Cochlear Implantation .
Discou nted Value of
Costs Over Compulsory Discounted Value of
School Years Education Savings
£ ($) £ ($)
Mean 48,756.58 26,781 .35
(78,010.53) (42,850.16)
Upper bound 48,756 .58 42,078.80
(78,010.53) (67,326.08)
Lower bound 48,756.58 11,483.94
(78,010.53) (18,374.3)
provide material hearing benefits to these children, even
those who are born with no hearing, has been confirmed in
several studi es.2.11 A major obstacle to service provision
has been the cost of the intervention and the doubts that
persisted over its cost-effectiveness. As hearing impair-
ment neither causes loss of life nor reduces life expect-
ancy, health-care purchasers are likely to accord interven-
tions destined to alleviate it a low priority. In addition,
cochlear implants do not displace other expensive medical
treatments, as most candidates ar e even too hearing im-
paired to benefit from hearing aids. Thus the cost of im-
plantation cannot be offset by savings elsewhere in
health-care budgets. The gains from this intervention are
accrued outside the health-care arena and the wider ef-
fects of the intervention on educational attainment, com-
munica tion , and employability, as well as in the psycho-
logical and social domains, need to be considered.
The ability to undertake cost-utility studies on pedi-
atric cochlear impla ntation has, up to now, been ham-
pered by insufficient evidence of the efficacy of the inter-
vention in young children. The ability to perceive speech
and to develop effective oral communication skills does not
happen as an automatic consequence of the intervention.
Rather, these skills are developed over several years after
implantation, and prolonged follow-up is needed to make
the necessary determinations about effectiveness. Thus
only recently has it been possible to establish equivalent
hearing levels for children with cochlear implants and to
equate them with how less hearing-impaired children
with hearing aids function .7 •8 This equivalence was used
in the present study to determine the likely educational
placement of children with cochlear implants. A prospec-
tive longitudinal study confirmed the educational advan-
tage conferred, especially by early implantation. 12 Calcu-
lations of cost-utility have also been impeded by a paucity
of accurate data on the relative costs of educating pro-
foundly hearing-impaired (hearing losses > 95 dB) versus
severely hearing-impaired (hearing losses, 70 - 95 dB) chil-
dren. The Special Educational Needs study 9 provided one
of the most authoritative audits of contemporary educa-
tional costs for h earing-impaired children and permitted
the use of accurate costings in the present study.
Education costs potentially represent only part of
the costs associated with the greater degree of hearing
loss that could be offset against implantation costs. Th e
present study did not consider the cost s of the relatively
Laryngoscope 110: January 2000
Discou nted Net Discounted Value of Discounted Net
Cost Over Compulsory Costs Over 70 Cost Over 70
School Years Years of Life Years of Life
£ ($) £ ($) £ ($)
21,975.23 68,130.90 41,349.55
(35, 160.37) (109,009.4) (66,159.28)
6,677.78 68,130.90 26,052 .10
(10,684.45) (109,009.4) (41 ,683.36)
37,272.64 68,130.90 56,646.96
(59,636.22) (109,009.4) (90,635.14)
greater support required by parents of children with
greater degrees of h earing loss, nor did it assume any
additiori°"al benefits in terms of enhanced earnin g by
severely versus profoundly hearing-impaired subj ects.
In consequence, savings to set against the cost of im-
plantation based on educational savings alone are likely
to underestimate those actually achieved as children
with cochlear implants progress into adulthood. Only
when these longer-term outcome measures becom e
ava ilabl e can account be taken of gains in these other
domains. Nonetheless, the cost per QALY gain of be-
tween £ 1,345 ($2 152) and £10,341 ($ 16,546) determined
by the present study compares favorably with other
interventions including implantation in adults and of-
fers evidence to justify the continued funding of thi s
intervention.5 • 10 ·1 3
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