A Guide To Health Economics For Those Working in Public Health A concise desktop handbook

Prepared for Public Health Wales by Dr Joanna Charles and Prof Rhiannon Tudor Edwards, Bangor University

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Contents

Page

1. Purpose of this handbook 2

2.Definitionsofkeyhealtheconomicsterminology 2

3.Whatishealtheconomics? 5

4.Purposeofeconomicevaluation 6

5.Methodsofeconomicevaluation 6

6.SocialReturnonInvestment(SROI) 14

7.Criticalappraisalofeconomicevaluationsand decisionanalyticalmodels 17

8.Usefulhealtheconomicsresources 27

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1. Purpose of this concise desktop handbookThishandbook,writtenbyhealtheconomistsatBangorUniversityisintendedtoprovideanintroductionanddefinekeyeconomicterms,sothatthosewithouthealtheconomicsexpertisecanbetterunderstandandappraiseeconomicevidence.Inparticular,weareawarethatyoumayneedtofindandinterpreteconomicevidence;thishandbookisaquickreferenceguidetokeymethodsandterminology.

Boldkeytermsinthehandbookaredescribedindetailinthe“Definitions”sectionbelow.

2. Definitions of key health economics terminology ListcompiledfromBergeretal.,(2003);Passetal.,(1993)andtheBMJ(2012).

Allocative efficiency–allocationofresourcesbetweentypesofhealthservicesinawaythatresultsinmaximumgaintoallparties.

Cost-benefit analysis–comparesthecostsandbenefitsofanintervention,procedureorprogrammeinmonetaryterms.

Cost-consequence analysis–describesthecostsandoutcomesofaninterventioninadisaggregatedform.

Cost-effectiveness acceptability curve –thecurveillustratestheprobabilityof‘interventionA’beingmorecost-effectivethan‘interventionB’givenarangeofvaluesthatadecision-makermayattachtoanadditionalqualityadjustedlifeyeartoreflectuncertaintyintheestimates.

Cost-effectiveness analysis–costsarecomparedwithatreatment’scommontherapeuticgoal,expressedintermsofonemainoutcomemeasuredinnaturalunits(e.g.,improvementinbloodpressureorcholesterollevel).

Cost-effectiveness plane–agraphicrepresentationoftheIncrementalcost-effectivenessratio.SeeIncrementalcost-effectivenessratiodefinitionbelow.

Cost-minimisation analysis–amethodofevaluationutilisedwhentheintervention,proceduresorprogrammesareexpectedtohaveexactlythesameoutcome.Theanalysisthenidentifiesthelesscostlyoption.

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Cost-utility analysis–amethodofevaluationthatmeasureshealthbenefitsinpreference-basednon-monetaryunitssuchasQualityAdjustedLifeYears(QALYs)orDisabilityAdjustedLifeYears(DALYs).

Decision analysis–astructuredwayofthinkingabouthowanactiontakeninacurrentdecisionwouldleadtoaresult,constructedasalogicalmodeldescribingtherelationshipsbetweeninputsandresults.

Decision analytic modelling–amodellingtechniqueusedtoestimatethecosts,outcomesandcost-effectivenessofdifferentinterventionsandprogrammesinhealthcareandpublichealth.

Disability Adjusted Life Years (DALYs)–usedtogeneratehealthrelatedmeasuresofutilityforthoselivingwithadisabilitymeasuredintermsoftimelostduetoprematuredeath(mortality)andtimelivedwithadisability(morbidity).

Discounting–amethodofincorporatingpositivetimepreference(highervaluegiventocostsandbenefitsthatoccurnow,comparedtothoseoccurringinthefuture)intotheevaluationwhenthecostsandbenefitsdonotoccurinthesametimeperiod.

Discount rate–theratechosentoexpressthestrengthofpreferenceovertimingofcostsandbenefits.Since2003theTreasuryrecommendsa3.5%discountrate.TocheckthediscountrateconsulttheHMTreasuryGreenBook.

Direct medical costs–associatedwiththeservice/programmeunderconsideration.Theseareorganisationalandoperationalcostsbornebythehealthsector(e.g.,healthprofessionals’time,supplies,equipment,poweretc).

Direct nonmedical costs–incurredbypatient/familiesinthecourseoftreatment(e.g.,transportcosts,parking).

Health capital-definedbyGrossman(1972)asthepresentvalueofaperson’slifetimehealth.

Herd immunity–aformofindirectprotectionfrominfectiousdiseasesthatoccurswhenalargepercentageofthepopulationbecomesimmunetoaninfectionandconsequentlyprovidesameasureofprotectiontothosewhoarenotimmune.

Incremental cost–thedifferencebetweenthecostsofoneinterventionandthecostsofitscomparator/alternative.

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Incremental cost-effectiveness ratio (ICER)–obtainedbydividingthedifferencebetweenthecostsofthetwointerventionsbythedifferenceintheoutcomes,i.e.theextracostperextraunitofoutcome.

Indirect costs–lossesinproductionduetoabsencefromwork.Indirectcostscanalsofallonpeopleotherthanthepersonreceivingtreatment,forexample,othermembersofthefamilymayneedtotaketimeoffworktotakeafamilymembertothelocalGPclinicorA&Edepartment.

Intangible costs–non-physicalcoststothepatientandtheirfamiliesfromillhealthsuchaspainandanxiety.

Marginal costs–theadditionalcostincreasesorsavingsarisingasaconsequenceofsmalloutputchangeswithinahealthcareprogramme.Importanttoconsideraspartofresourceallocationalongsidewiderconsiderationssuchascapacity,staffingandequipment.

Opportunity cost–thevalueofbenefitsforegonebynotusingresourcesintheirnextbestalternativeuse.

Perspective–thepointofviewfromwhichananalysisisconducted(e.g.,publicsectororsocietal).

Positive externalities–abenefitthatisenjoyedbyathird-partyasaresultofaneconomictransaction(e.g.,herdimmunitythroughvaccinationprogrammes).

Quality Adjusted Life Years (QALYs)–calculatedbyaggregatingthenumberofyearsgainedfromadrugorhealthcareintervention,weightedbyaproportionthatrepresentstherelativevalueattachedtoagivenhealthstateofqualityoflifeinthoseyears.

Sensitivity analysis–analysisthatteststherobustnessofaneconomicmodelbyexaminingthechangesinresultswhenadjustingkeyparameters.

Social Return on Investment (SROI) –analysisthat resultsinaratioofbenefitstocosts,estimatingthevaluecreatedforevery£1invested.

Technical efficiency–theuseofhealthcareresourcesinsuchawaythatmaximisesoutputfromgivenresourcesorminimisesresourceuseforagivenlevelofoutput.

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3. What is health economics?Healtheconomicsisasub-disciplineofeconomics,whichisthestudyofhowsocietyusesscarceresourcestomeetitswantsandneeds.

Healtheconomicsviewshealthandhealthcareasaneconomicgood(asingoodsandservices)andispredominatelyconcernedwithhowsocietyusesscarcehealthcareresourcestomeetthesewantsandneeds.

Therearethreebasiceconomicquestions:

1. Whatgoodsandservicestoproduce?

2. Howcanweproducegoodsandservices?

3. Howshouldwedistributegoodsandservicesbetweenmembersofsociety?

Economicprinciplesareappliedtohealthandhealthcarebecause;

- Resourcesarefinite(e.g.thereareonlysomanydoctorsandlocalcommunityservicessuchasGPsurgeriesandpharmaciesthatareopengenerallyduringbusinesshours)

- Incontrast,demandforhealthandhealthcareisinfinite

- Tocreateabalancebetweenfiniteresourcesandinfinitewantsandneeds,choicesarenecessaryandconsequentlycostsandbenefitsmustbecompared

- Prioritisationisalsorequiredforinvestmentanddisinvestment(e.g.doyouutiliseyourscarceresourcestoimplementinterventionstoincreasephysicalexerciseorreducetobaccoconsumption?)

Publichealthandhealthcareisdifferenttohowothergoodsandservicesoperateinamarketbecause:

- Individualill-healthisunpredictable(individualsarenotabletocontrolwhentheywillfallill,howlongitwilltakethemtorecoverorhowserioustheillnessis)

- Thereareindirectconsequencestopublichealthandhealthcare,theseincludepositive externalities(wherebyabenefitisenjoyedbyathird-partyasaresultofaneconomictransaction)suchasherd immunitythroughvaccinationprogrammes

- Consumershavelimitedknowledge.Theyrelyuponproviders(e.g.doctors,nurses,socialworkers,etc)toprovidehealthcare,

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medicines,information,interventionsandreferralstospecialistservicesifrequired

- Doctors,nurses,socialworkers,etcactas“gatekeepers”,decidingwhorequiresandreceivestreatment,andwhattypeoftreatmenttheyreceive

- Thereareeducationalandfinancialbarrierstoentryintothemedicalprofession,thusmaintaininglimitedconsumerknowledgeinthegeneralpopulation

- Thedemandforhealthcareisaderiveddemand,createdfromthedemandforhealth.Consumerstypicallywantmorehealth capitalandinordertoachievethis,individualsallocateresourcesinordertobothconsumeandproducehealth(e.g.byengaginginhealthpromotionactivitiessuchaslifestylechanges)

4. Purpose of economic evaluationHealtheconomicsisinterestedintheinterplaybetweencostsandoutcomes/benefits.Economicevaluationtechniquesprovideaframeworkforidentifyingthecostsandbenefitsofdifferenthealthinterventions.Weconducteconomicevaluations,asweneedtoconsiderscarcityofresourcesandopportunity costs-thevalueofbenefitsforegonebynotusingresourcesintheirnextbestalternativeuse.

5. Methods of economic evaluationTherearefivemainmethodsofeconomicevaluation:

• Cost-Minimisation Analysis (CMA)

• Cost-Effectiveness Analysis (CEA)

• Cost-Utility Analysis (CUA)

• Cost-Benefit Analysis (CBA)

• Cost-Consequence Analysis (CCA)

Therearealsoalternativetechniqueswhichincludetheconsiderationofcostsandoutcomes,butgenerallythefivemethodslistedabovearemostcommonlyused.ArangeofmethodsarelistedinTable1.

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Method FullorPartialEconomicEvaluationCost-MinimisationAnalysis(CMA)

Cost-EffectivenessAnalysis(CEA)

Cost-UtilityAnalysis(CUA)

Cost-BenefitAnalysis(CBA)

FullEconomicEvaluations

Theycomparealternativeservices/procedures/interventionsintermsofboththeircostsandoutcomes/effects/benefits.Itisworthnotingthateachmethodmeasuresoutcomesdifferently

Cost-ConsequenceAnalysis(CCA)

Cost-analyses

Cost-descriptionstudies

Cost-outcomedescriptions

PartialEconomicEvaluations

Theyfocussolelyoncostsorresourcesused

Table1.Methodsusedinhealtheconomicscategorisedbywhetherornottheywouldbeconsideredfullorpartialeconomicevaluations.

Eachmethodofeconomicevaluationisdescribedinturnbelow,withlimitationshighlightedandanexamplepaperlisteddemonstratingthemethod.

5.1 Cost-minimisation analysis (CMA)

Cost-minimisation analysisisaformofeconomicevaluationusedwhenaninterventionorserviceanditsalternative(e.g.usualcareorcurrentpractice)achieveoutcomesthatarethesame(Brazieretal.,2007;Robinson,1993a).Underthesecircumstances,cost-minimisationanalysisaimstoidentifytheleastcostlyoption(Brazieretal.,2007,Robinson,1993a).

Limitationsofcost-minimisationanalysis

Inpractice,itisdifficulttofindinterventionsorserviceswiththesameoutcomes,asthereisoftenuncertaintyaroundtheoutcomemeasureofchoice(Brazieretal.,2007).Theuseofcost-minimisationanalysishighlightsquestionsaboutthegatheringofcostdatasuchas,whatperspectiveshouldbechosen.Forexample,apublicsectorperspectivewouldincludecostsaccruedbyprimarycareandNHSsecondarycare,personalsocialservicesandlocalgovernment.Asocietalperspectivewouldincludecostssuchasprovidercostsofequipmentandstaff,

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individualcostsoflostwages,travelandcoststorelativessuchaschildcarecostsortransport.Otherquestionstoconsiderincludeshouldcostsreflectopportunitycostsandshouldonetakeaccountoftheeffectsofinflationanddiscounting.Discountingisamethodofincorporatingpositivetimepreference(highervaluegiventocostsandbenefitsthatoccurnow,comparedtothoseoccurringinthefuture)intotheevaluationwhenthecostsandbenefitsdonotoccuratthesametimeperiod.

Exampleofcost-minimisationanalysisinpractice

JonesJ,WilsonA,ParkerH,WynnA,JaggerC,SpiersN,ParkerG.(1999).Economicevaluationofhospitalathomeversushospitalcare:costminimisationanalysisofdatafromrandomisedcontrolledtrial.BMJ,319(7224),1547–1550.

5.2 Cost-effectiveness analysis (CEA)

Cost-effectiveness analysiscomparesthecostsofalternativeprocedures,servicesorinterventionswithatreatment’scommontherapeuticgoal,expressedintermsofonemainoutcomemeasuredinnaturalunits(e.g.,improvementinbloodpressureorcholesterollevel)(Bergeretal.,2003).

Anincremental cost-effectiveness ratio(ICER)isusedinthismethod.AnICERcalculatesthedifferenceincostsbetweenoneinterventionandanalternative,dividedbythedifferenceinoutcomes(OHE,2008).Effectivenessdataistypicallycollectedfromeconomicevaluationsalongsideclinicaltrialsorrandomisedcontrolledtrials(Robinson,1993b).

AnICERcanalsobeillustratedgraphicallyusingadiagramnamedthecost-effectiveness plane, shown in Figure 1.

Thehorizontalaxisrepresentsthedifferenceineffectbetweentheintervention(I)andthealternative(A).Theverticalaxisrepresentsthedifferenceincostbetweentheinterventionandthealternative.

IfpointIfallsintheNorthEast(NE)quadrant,theinterventionismoreeffectiveandmorecostlythanthealternative(pointA).

IfpointIfallsintheSouthWest(SW)quadrant,theinterventionislesseffectiveandlesscostlythanthealternative(pointA).

IfpointIfallsintheSouthEast(SE)quadrant,theinterventionismoreeffectiveandlesscostlythanthealternative(pointA).Inotherwordsitdominates,(i.e.prevailsover)thealternativeandwouldbeconsideredcost-effective.

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IfpointIisintheNorthWest(NW)quadrant,theinterventionislesseffectiveandmorecostlythanthealternative(pointA).

IfpointAfallsineithertheNEandSWquadrants,thechoiceofwhethertoimplementtheinterventionorthealternativedependsuponthemaximumcost-effectivenessratiooneiswillingtoaccept.TheslopeofthelineIAgivesthecost-effectivenessratio.

Figure1.Examplecost-effectivenessplaneadaptedfromBlack(1990).

Anamendedversionofthecost-effectivenessplanediagramfromBlack,W.C.(1990)”.TheCEPlane:AGraphicRepresentationofCost-Effectiveness.MedicalDecisionMakingVol.10(3)pp.212-214.Copyright©1990bySocietyforMedicalDecisionMaking.ReprintedbypermissionofSAGEPublications,Inc

Cost-Effectiveness Acceptability Curves (CEACs)

CEACsillustratetheuncertaintysurroundingtheestimateofcost-effectiveness.ACEAC(Figure2)showstheprobabilitythataninterventioniscost-effectivecomparedwiththealternativeforarangeofceilingratiosorthresholdsthatadecision-makermightbewillingtopayforaparticularunitofoutcomes.CaremustbetakenwheninterpretingtheinformationprovidedbyaCEAC.Itsimplypresentstheprobabilitythataninterventioniscost-effectivecomparedwiththealternativeforarangeofvalues.TheCEACshouldnot beusedtomakestatementsabouttheimplementationoftheintervention(Fenwick&Byford,2005).

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Figure2.Examplecost-effectivenessacceptabilitycurve(CEAC).

Figure2demonstratesat£7,500perQALY,theprobabilityoftheinterventionbeingcost-effectiveis50%.

Awordofcautionregardingcost-effectivenessanalysis

Itisworthnotingthattheperspectiveofananalysisiskeywhenperformingcost-effectivenessanalysis.

Iftheperspectiveisrestrictedanddoesnotcoveralltherelevantstakeholders/payers,thenthiscanleadtocostshiftingfromonepartofthesystemtoanotherorfromoneagencytoanother,ratherthanprovidingacost-effectivesolution.Toreducethelikelihoodofthisoccurring,researchersshoulduseascomprehensiveaperspectiveaspossible(Bergeretal.,2003).Forpublichealthevaluations,theNationalInstituteforHealthandCareExcellence(NICE)recommendapublicsectorperspective(NICE,2012).

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Exampleofcost-effectivenessanalysisinpractice

EdwardsRT,CéilleachairA,BywaterT,HughesDA,HutchingsJ.(2007).Parentingprogrammeforparentsofchildrenatriskofdevelopingconductdisorder:costeffectivenessanalysis.BMJ,334(7595),682.

OwenL,MorganA,FischerA,EllisS,HoyA,KellyMP.(2012).Thecost-effectivenessofpublichealthinterventions.JournalofPublicHealth,34(1),37-45.

5.3 Cost-utility analysis (CUA)

Cost-utility analysisisanextensionofcost-effectivenessanalysis.Itisaformofeconomicevaluationinwhichhealthbenefitsareusuallymeasuredinpreference-basednon-monetaryunitssuchasQuality Adjusted Life Years (QALYs) or Disability Adjusted Life Years (DALYs). QALYsarecalculatedbyaggregatingthenumberofyearsgainedfromadrugorhealthcareintervention,weightedbytheproportionthatrepresentstherelativevalueattachedtoagivenhealthstate(utility)(Robinson,1993c).DALYsarecalculatedbyaggregatingthetimelostduetoprematuredeathandtimelivedwithadisability.

Healthutilityscorestypicallyrangebetween0(death)and1(perfecthealth).OneQALYisequaltooneyearoflifelivedinperfecthealth.Therearehealthstateswithnegativevalues,whichwouldbeconsideredworsethandeath.Therearemanymeasuresavailabletoproduceutilityscores,(e.g.EQ-5D,EuroQolGroup1990;SF-36,Brazieretal.,1992;HUI,Horsmanetal.,2003).Thechoiceofmeasureisbasedupontheresearchquestion,suitabilityforthepopulationunderstudyandpreviousliterature.Anindividualmaychoosetouseaparticularmeasureinordertoallowcomparabilitywithpreviouslypublishedstudies.

Limitationsofcost-utilityanalysis

ThereareequityissuesassociatedwithQALYs.Aslengthoflifeisusedintheequation,itisarguedthattheyounggainmoreQALYsduetothefacttheyhavemorelifelefttolivethantheelderly.Thus,resourceallocationbaseduponthemaximisationofQALYswouldcausearedistributionofhealthcareresourcesawayfromtheelderly,favouringtheyoung(Wagstaff,1991).Kellyetal.,(2005)andWeatherlyetal.,(2009)have

QALY=lengthoflifexqualityoflife

DALY=yearslivedwithdisability+yearsoflifelost

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arguedthattheQALYapproachmaybetoonarrowtocapturethefullrangeofbenefitsfrompublichealthinterventions.Thoughmultiplemeasuresexisttogenerateutilityscores,itisworthnotingthatdifferentmeasuresproducedifferentutilityscores,makingcomparisonswithotherstudiessometimesdifficult.Considerationofthepopulationandplanstocomparethestudywithotherpublishedstudiesshouldbeundertakenbeforechoosingaparticularutilitymeasure.

Exampleofcost-utilityanalysisinpractice

EdwardsRT,LinckP,HounsomeN,RaisanenL,WilliamsN,MooreLMurphyS.(2013).Cost-effectivenessofanationalexercisereferralprogrammeforprimarycarepatientsinWales:resultsofarandomisedcontrolledtrial.BMCPublicHealth,13(1),1021.

UseofICERsinEconomicEvaluationssuchasCUAandCEA

IntheUK,governingbodiessuchasNICEuseICERSapplyingaceilingratio/thresholdtodetermineifanintervention,programmeorserviceiscost-effective.NICEtypicallyusecostperQALYequationstodeterminecost-effectiveness.NICE(2008)statestheQALYshouldbeusedbecauseitisastandardisedandinternationallyrecognisedmethodtocompareandmeasureclinicaleffectivenessandcost-effectivenessacrossdifferenttreatmentsandpatientgroups.IntheUK,theceilingratiohasbeensuggestedat£20,000-£30,000perQALY(NICE,2008).IntheUSA,theceilingratioissetat$50,000perQALY,andbetweenA$42,000-A$76,000perQALYinAustralia(Eichleretal.,2004).

5.4Cost-benefit analysis (CBA)

Cost-benefit analysisplacesmonetaryvaluesonbothcostsandoutcomes.Itaimstoanswerthequestionisthebenefitworththecost(Morrisetal.,2007).However,itcanonlyvaluetangibleoutcomese.g.money.Itstrugglestovalueintangibleoutcomes,whichareyettobequantifiede.g.happiness,relieffrompain.Inevaluationsofhealthcareservicesorprocedures,theuseofmonetaryvaluesallowsyoutodetermineifaserviceorprocedureoffersanoverallgaintosocietyifitstotalbenefitssurpassitstotalcosts(Robinson,1993d;Brazieretal.,2007;McIntoshetal.,2010).

Benefitsinthismethodcanbevaluedusingthehumancapitalapproach,anapproachthatvaluesbenefitsintermsofproductivitygainsorbyindividual’spreferencesusingwillingnesstopay(Robinson,1993d)orwillingnesstoaccept(Drummond&McGuire,2007).

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Willingnesstopayrequiresaskingindividualshowmuchtheywouldbepreparedtopaytoobtainthebenefitsoravoidthecosts(e.g.,moneyornegativeeffects)ofillness(Robinson,1993d;Brazieretal.,2007;McIntoshetal.,2010).Willingnesstoacceptrequiresaskingindividualshowmuchtheywouldaccepttobepaidtoabandonagoodorputupwithsomethingnegative(e.g.,side-effectsfromamedicationthatreducedothersymptoms)(Drummond&McGuire,2007).Willingnesstopayandwillingnesstoacceptareoftendependentuponhowtheindividualvaluesmoneyitself,aswellastheirvaluationofbenefitsandnegativeeffects(Robinson,1993d).

Limitationsofcost-benefitanalysis

Byusingthesameoutcomemeasure(costs/money),themethodallowsyoutocompareinterventionsthatcanbeunrelated(e.g.smokingcessationinterventionandaphysicalactivityinterventionasbothaimtobenefitpopulationhealth)(Bergeretal.,2003).However,inordertoconvertnon-monetaryoutcomesintocosts,assumptionsarerequired.Dependingontheoutcome,theevaluationcouldbebasedonratherlargeassumptions.Inordertoperformtheanalysis,theseassumptionswillberequired.Researchersshouldbetransparentintheirassumptionsandtestthemthroughsensitivityanalyses.Cost-benefitanalysishasalsobeencriticisedforgivinggreaterweighttothepreferencesofthewealthy(Bergeretal.,2003).Itisworthnotingthataskingindividualstoapplymonetaryvaluestooutcomeswillberootedintheircircumstancesandrelativetotheirownearnings-whatisexpensivetoonepersonwouldnotnecessarilybeconsideredexpensivebyanother.

Examplepaperofcost-benefitanalysisinpractice

ReynoldsAJ,TempleJA,RobertsonDL,MannEA.(2002).Age21Cost-BenefitAnalysisoftheTitleIChicagoChild-ParentCenters.EducationalEvaluationandPolicyAnalysis,24,267-303.

5.5 Cost-consequence analysis (CCA)

Cost-consequence analysiscollects,categorisesandliststhecostcomponentsofachosenintervention(Brazieretal.,2007).Thistypeofanalysisliststhecomponentsofaninterventioninadisaggregatedformat,withoutmakingjudgementsoftheirrelativeimportance.Theverdictislefttothedecisionmaker(Brazieretal.,2007).Byprovidingtheinformationinthisformat,thedecisionmakercanfocusuponthe

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outcomesthataremostimportantorsalienttothem(Bergeretal.,2003).Thebiggestcriticismofcost-consequenceanalysisisthatithasnoweightingsystemtoappraisetheresults.Costsandconsequencesarepresenteddisaggregated,requiringthedecisionmakersthemselvestodeviseasystemtoappraisetheresults(Bergeretal.,2003).Thesedecisions,madeatanindividuallevel,maynotalwaysbeinthebestinterestofthepatientsorsociety.

Examplepaperofcost-consequenceanalysisinpractice

GageH,KayeJ,OwenC,TrendP,Wade,D.(2006).Evaluatingrehabilitationusingcost-consequencesanalysis:anexampleinParkinson’sdisease.ClinicalRehabilitation,20,232-238.

5.6Generalconsiderationsforallevaluationmethods

WhenreadingtheresultsoftheeconomicevaluationmethodsinSection5,therearefewkeypointstonote.TheDrummondChecklist(Drummondetal.,2015)highlightskeypointstobeawareofwhenreadinganeconomicevaluation-inaddition,wewishtoemphasisethefollowing:

Perspective–Theperspectiveshouldbestatedandyou-asthereader-shouldcriticallyappraiseifthisperspectivecoversallrelevantcostsandoutcomes.

Sensitivity analysis–Sensitivityanalysesshouldbeconductedtoexploretheextenttowhichassumptionsmadeintheanalysisareupheld,whilstadjustingkeyvariables(e.g.,dosageofinterventionreceived).

Discounting–Discountingincorporatespositivetimepreference–meaningbenefitsthatoccurnowarevaluedhigherthanthosethatoccurinthefuture.TheTreasuryrecommendsadiscount rate of3.5%.Costsandoutcomesthatoccurafter1yearshouldbediscountedbyapplyingthediscountratetoaccountforpositivetimepreference.

6. Social Return on Investment (SROI)Social Return on Investment (SROI)analysis,whichiscommonintheUSA,isbecomingofinteresttoUKpolicymakers,localservicecommissionersandcharities.Themethodresultsinaratioofbenefitstocosts,estimatingthevaluecreatedforevery£1invested.

ThecentralpurposeofSROIistoaddressthechallengeofmeasuringa

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widerconceptofvalue,capturingaspectsacrossthetriplebottomlineofeconomic,socialandenvironmentalvalue.SROIinvolvesastakeholderconsultationfromtheoutsetandthroughouttheprocesstohelpestablishboundaries,indicatorsandverifyassumptionsmadeintheanalysis.

TheCabinetOffice(2011)havepublished‘AGuidetoSocialReturnonInvestment’.Thisguideprovidesstep-by-stepinstructionsonhowtoconductanaccurateSROI.Itwasproducedtohelpthirdsectororganisationsbettercommunicatetheirimpacttothepublic,fundersandtheGovernment.

TheguideoutlinessixkeystagestoconductinganSROIanalysis,whicharepresentedbelow.

ThesixstagestoSROIasstatedbyTheCabinetOffice(2011).

Stage Briefdescriptionofactivityundertakenduringthatstage

1 Establishing scope and identifying key stakeholders

- Beclearaboutwhoisdirectlyimpactedbytheinterventionorservice

- Whatimpacthastheinterventionhad?

- Howwillthesestakeholdersbeconsultedduringtheprocess?

2 Map outcomes

- Engagewithstakeholderstodevelopanimpactmaportheoryofchangewhichisadiagramthatshowstherelationshipbetweeninputs,outputsandoutcomes

- Inputsarewhatastakeholderputsintoanintervention(e.g.timetoattendanexerciseclassaspartofanintervention)

- Outputsareevidencethatanactivityhastakenplace(e.g.numberofhoursconductingexerciseorsessionsattended)

- Outcomesareevidencethatachangehastakenplace(e.g.improvementsinphysicalhealthfromtheintervention)

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Stage Briefdescriptionofactivityundertakenduringthatstage

3 Evidencing outcomes and giving them a value

- Finddatafrompublishedsourcesorcollectowndatatoshowwhetheroutcomeshavehappenedandvalueoutcomes

4 Establishing impact

- Aftercollectingevidenceonoutcomes,assignamonetaryvaluetotheseoutcomes

- Alsoestablishwhatchangeswouldhavehappenedwithouttheintervention(i.e.whathappenedinacontrolconditionorasaresultofusualcare)

- Aretherechangesfromoutsidefactorsorotheractivitythatarenotdirectlyattributabletotheintervention?(e.g.istheimprovementseeninphysicalhealthjustfromtheinterventionorhastheparticipantbeenengaginginexerciseoutsidetheintervention–forexampledailywalks)

- Howlongareeffectslikelytolast?

5 Calculating the SROI

- Thisstageinvolvesaddingupallthebenefits,subtractinganynegativesandcomparingtheresulttotheinvestment.Thisisalsowherethesensitivityoftheresultscanbetested

6 Reporting, using and embedding

- Sharefindingswithstakeholdersandrespondtoanycommentsorsuggestions

- Beclearonyouraudience

- Createatechnicalappendixdetailingassumptionsandcalculations

- Verifyresultsthroughanassuranceprocessorworkwithanexperttoimprovecreditability

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7. Critical appraisal of economic evaluations and decision analytical models

7.1 TheDrummondetal.,(2015)ChecklistforaSoundEconomicEvaluation

Inordertoassesstheresultsofapublishedeconomicevaluation,Drummondetal.,(2015)developedachecklisttoidentifyelementstheyconsideredtodemonstrateasoundeconomicevaluation.Itisworthnotingthatitisunlikelythateverystudywillsatisfyallthepointsraisedinthechecklist.However,thechecklistprovidesaguidetothetypesofquestionsoneshouldbeaskingwhenreadingpublishedeconomicevaluations,sotheycanassessthestrengthsandweaknessesofthestudyandmaketheirownjudgementoftheusefulnessandrelevanceofthefindingsfortheirpurposes.Thechecklistquestionsarepresentedbelow.

TheDrummondChecklistcomprisesof10mainquestions(adaptedfromDrummondetal.,2015)

TheDrummondChecklistadaptedfromDrummondetal(2015)MethodsfortheEconomicEvaluationofHealthCareProgrammespp.42-44.Copyright©2015OxfordUniversityPress.ReprintedbypermissionfromOxfordUniversityPress.ThisreprintedOxfordUniversityPresscontentisexcludedfromtheHandbook’sCreativeCommonslicense.AnyonewishingtousethematerialoutsideofthishandbookneedstocontactOxfordUniversityPressforpermission(http://global.oup.com/?cc=gb)

1. Wasawell-definedquestionposedinananswerableform?

- Werebothcostsandeffectsexamined?

- Werealternativesconsidered?

- Wastheperspectiveoftheanalysisstated?Istheanalysisembeddedinanydecisionmakingcontext?

2. Wasacomprehensivedescriptionofthecompetingalternativesgiven?

- Wereanyalternativesthatwererelevanttoevaluationomitted?

- Wasado-nothingalternativeconsideredorshoulditbe?

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3. Wastheeffectivenessoftheprogrammesorservicesestablished?

- Wasthisdonethrougharandomisedcontrolledtrial?Didthetrialreflectwhathappensinusualcareorroutinepractice?

- Wasthisdonethoughasystematicreviewofevidencefromclinicalstudies?Ifso,wasthesearchstrategyincludinginclusionandexclusioncriteriaclearlydescribed?

- Wereobservationaldataorassumptionsusedwhenestablishingeffectiveness?Ifso,arethereanypotentialbiasesintheresults?

4. Werealltheimportantandrelevantcostsandconsequencesforeachalternativeidentified?

- Wastherangewide-enoughfortheresearchquestionathand?

- Wereallrelevantperspectivescovered(e.g.,community,NHS,patient)?

- Werecapitalcostsaswellasoperatingcostsincluded?

Capitalcostsareone-timeexpensestypicallyincurredtosetupaservice

Operatingcostsaretherecurrentdeliverycostsofaservice,e.g.staff

5. Werecostsandeffectsmeasuredaccuratelyinappropriatephysicalunits(e.g.,QALYs)?

- Weresourcesofserviceutilisationdescribedandacceptable?

- Wereanyitemsomitted?Ifso,whateffectdoesthishaveontheanalysis?

- Werethereanyspecialcircumstancesthatmademeasurementdifficult?Werethesedifficultiesaddressed?

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6. Werecostsandeffectsvaluedcredibly?

- Wereallsourcesofthevaluesclearlyidentified?

- Weremarketvaluesemployedforchangesinvolvingresourcesgainedordepleted?

- Wheremarketvalueswereabsent(e.g.volunteerlabour)ormarketvaluesdidnotreflectactualvalues(e.g.equipmentgivenatareducedrate),wereadjustmentsmadetoapproximatemarketvalues?

- Wasthevaluationofeffectsappropriateforthequestionposed?Wastheappropriatetypeofanalysis/analyses(e.g.cost-effectiveness,cost-benefitorcost-utilityanalysis)undertaken?

Market valueisthepriceanassetwouldfetchinthemarketplace

7. Werecostsandeffectsadjustedfordifferentialtiming?

- Werefuturecostsandeffectsdiscountedtotheirpresentvalue?

- Whatwasthediscountrateusedandwasthejustificationforthisratespecified?

8. Wasanincrementalanalysisofcostsandeffectsofalternativesperformed?

- Weretheadditional(incremental)costsgeneratedbyonealternativeoveranothercomparedtotheadditionaleffects,benefits,orutilitiesgenerated?

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9. Wereallowancesmadeforuncertaintyintheestimatesofcostsandeffects?

- Wereappropriateanalysesundertakenonpatient-leveldataofcostsandeffects?

- Ifsensitivityanalyseswereundertaken,werethejustificationfortherangesanddistributionofvalueschosen(forkeyparameters)specifiedandexplained?

- Wereconclusionsdrawnsensitivetouncertaintyfromthestatisticaland/orsensitivityanalyses?

10 Didthepresentationanddiscussionofstudyresultsincludeallissuesofconcerntousers?

- Wereconclusionsoftheanalysisbasedonanindexorratio(e.g.cost-effectivenessorcost-benefitratio)?Wasthisratiointerpretedintelligentlyorinamechanisticfashion?

- Weretheresultscomparedwiththoseofotherswhohaveinvestigatedthesamequestion?Ifso,wereallowancesmadeforpotentialdifferencesinmethodology?

- Didthestudydiscussthepotentialofgeneralisabilityoftheresultstoothersettingsorpatient/populationgroups?

- Didthestudytakeinaccountotherimportantfactorsinthechoiceordecisionunderconsideration(e.g.ethicalissues,limitedstaffnumbersorwiderpolicycontextandrelevance)?

- Didthestudydiscussissuesofimplementation(e.g.feasibilityofadoptingrecommendations)?Arethereanypotentialissuesregardingfinanceandresources?Couldresourcesberelocatedfromotherareastoassisttheimplementation?

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7.2 Philipsetal.,(2004)checklistforcriticallyappraisingdecisionanalyticmodels

Decision analytic modellingiswidelyusedinthefieldofhealtheconomicsasameansofestimatingthecosts,outcomesandcost-effectivenessofdifferentinterventionsandprogrammesinhealthcareandpublichealth.Alogicalmodelispresentedwithmathematicalrepresentationoftherelationshipsbetweeninputsandresults.Thesemethodsareoftenusedtopredicthealthoutcomesandcostswhentheinterventioncannotbeevaluateddirectlyorthescopeoftheevaluationfallsoutsideoftheexistingevidencebase.Thechecklistquestionsarepresentedbelow.

ThePhilipsetal.,(2004)checklistforcriticallyappraisingdecisionanalyticmodels(adaptedfromPhilipsetal.,2004)

PermissiontoreproducethePhilipschecklisthasbeengrantedbytheauthorsandthepublishersofthechecklisttheNationalInstituteforHealthResearch(NIHR)

Dimension of quality

Questions to ask

Statementofdecisionproblem/objective

- Isthereaclearstatementofthedecisionproblem?

- Istheobjectiveoftheevaluationandmodelspecifiedandconsistentwiththestateddecisionproblem?

- Istheprimarydecision-makerspecified?

Statementofscope/perspective

- Istheperspectiveofthemodelstatedclearly?

- Arethemodelinputsconsistentwiththestatedperspective?

- Hasthescopeofthemodelbeenstatedandjustified?

- Aretheoutcomesofthemodelconsistentwiththeperspective,scopeandoverallobjectiveofthemodel?

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Dimension of quality

Questions to ask

Rationaleforstructure

- Isthestructureofthemodelconsistentwithacoherenttheoryofthehealthconditionunderevaluation?

- Arethesourcesofdatausedtodevelopthestructureofthemodelspecified?

- Arethecausalrelationshipsdescribedbythemodelstructurejustifiedappropriately?

Structuralassumptions

- Arethestructuralassumptionstransparentandjustified?

- Arethestructuralassumptionsreasonablegiventheoverallobjective,perspectiveandscopeofthemodel?

Strategies/comparators

- Isthereacleardefinitionoftheoptionsunderevaluation?

- Haveallfeasibleandpracticaloptionsbeenevaluated?

- Istherejustificationfortheexclusionoffeasibleoptions?

Modeltype - Isthechosenmodeltypeappropriategiventhedecisionproblemandspecifiedcausalrelationshipswithinthemodel?

Timehorizon - Isthetimehorizonofthemodelsufficienttoreflectallimportantdifferencesbetweenoptions?

- Arethetimehorizonofthemodel,thedurationoftreatmentandthedurationoftreatmenteffectdescribedandjustified?

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Dimension of quality

Questions to ask

Diseasestates/pathways

- Dothediseasestates(statetransitionmodel)orthepathways(decisiontreemodel)reflecttheunderlyingbiologicalprocessofthediseaseinquestionandtheimpactofinterventions?

Cyclelength - Isthecyclelengthdefinedandjustifiedintermsofthenaturalhistoryofdisease?

Data identification

- Arethedataidentificationmethodstransparentandappropriategiventheobjectivesofthemodel?

- Wherechoiceshavebeenmadebetweendatasources,arethesejustifiedappropriately?

- Hasparticularattentionbeenpaidtoidentifyingdatafortheimportantparametersinthemodel?

- Hasthequalityofthedatabeenassessedappropriately?

- Whereexpertopinionhasbeenused,arethemethodsdescribedandjustified?

Datamodelling - Isthedatamodellingmethodologybasedonjustifiablestatisticalandepidemiologicaltechniques?

Baselinedata - Isthechoiceofbaselinedatadescribedandjustified?

- Aretransitionprobabilitiescalculatedappropriately?

- Hasahalf-cyclecorrectionbeenappliedtobothcostandoutcome?

- Ifnot,hasthisomissionbeenjustified?

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Dimension of quality

Questions to ask

Treatmenteffects

- Ifrelativetreatmenteffectshavebeenderivedfromtrialdata,havetheybeensynthesisedusingappropriatetechniques?

- Havethemethodsandassumptionsusedtoextrapolateshort-termresultstofinaloutcomesbeendocumentedandjustified?Havealternativeassumptionsbeenexploredthroughsensitivityanalysis?

- Haveassumptionsregardingthecontinuingeffectoftreatmentoncetreatmentiscompletebeendocumentedandjustified?Havealternativeassumptionsbeenexploredthroughsensitivityanalysis?

Costs - Arethecostsincorporatedintothemodeljustified?

- Hasthesourceforallcostsbeendescribed?

- Havediscountratesbeendescribedandjustifiedgiventhetargetdecision-maker?

Qualityoflifeweights(utilities)

- Aretheutilitiesincorporatedintothemodelappropriate?

- Isthesourcefortheutilityweightsreferenced?

- Arethemethodsforderivationfortheutilityweightsjustified?

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Dimension of quality

Questions to ask

Data incorporation

- Havealldataincorporatedintothemodelbeendescribedandreferencedinsufficientdetail?

- Hastheuseofmutuallyinconsistentdatabeenjustified(areassumptionsandchoicesappropriate)?

- Istheprocessofdataincorporationtransparent?

- Ifdatahavebeenincorporatedasdistributions,hasthechoiceofdistributionforeachparameterbeendescribedandjustified?

- Ifdatahavebeenincorporatedasdistributions,isitclearthatsecondorderuncertaintyisreflected?

Assessmentofuncertainty

- Havethefourprincipaltypesofuncertaintybeenaddressed?

- Ifnot,hastheomissionofparticularformsofuncertaintybeenjustified?

Methodological - Havemethodologicaluncertaintiesbeenaddressedbyrunningalternativeversionsofthemodelwithdifferentmethodologicalassumptions?

Structural - Isthereevidencethatstructuraluncertaintieshavebeenaddressedviasensitivityanalysis?

Heterogeneity - Hasheterogeneitybeendealtwithbyrunningthemodelseparatelyfordifferentsubgroups?

Parameter - Arethemethodsofassessmentofparameteruncertaintyappropriate?

- Ifdataareincorporatedaspointestimates,aretherangesusedforsensitivityanalysisstatedclearandjustified?

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Dimension of quality

Questions to ask

InternalConsistency

- Isthereevidencethatthemathematicallogicofthemodelhasbeentestedthoroughlybeforeuse?

ExternalConsistency

- Areanycounterintuitiveresultsfromthemodelexplainedandjustified?

- Ifthemodelhasbeencalibratedagainstindependentdata,haveanydifferencesbeenexplainedandjustified?

- Havetheresultsofthemodelbeencomparedwiththoseofpreviousmodelsandanydifferencesinresultsexplained?

7.3 StandardsofReportingforEconomicEvaluations

TheConsolidatedHealthEconomicEvaluationReportingStandards(CHEERS)statementwasdevelopedtoprovideconsistencyinthereportingofeconomicevaluations.ThechecklistissimilartotheConsolidatedStandardsofReportingTrials(CONSORT)formatandprovidesconsistencywithotherapproaches.TheCONSORTstatementandchecklistsareanevidence-based,minimumsetofrecommendationsforreportingrandomisedtrials.Theyweredevelopedtocreatestandardisationinreporting,tofacilitatetransparencyandaidcriticalappraisalandinterpretation.The24itemCHEERSchecklistdescribesthekeyrecommendationsoftheinformationthatshouldbeincludedunderheadingsforexample:title,abstract,background/objectives,targetpopulation,studyperspective,comparators,timehorizon,studyparameters,incrementalcostandoutcomes,limitationsandgeneralisability.Forthefullchecklist,seeHusereauetal.,(2013).

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8. Useful Health Economics Resources Health Knowledge

Anonlineresourceforanyoneworkinginhealth,socialcareandwell-being.Thewebsiteoffersabroadrangeoflearningmaterials,dividedintofourdifferentlearningstyles:

•APublicHealthTextbookorganisedinrelationtotheFacultyofPublic HealthPartAsyllabus.

•Textcourseswithtext,questions,answersandfeedbackonarangeof topics.

•PodcastsandVideoPowerPointswithsupportingresources.

•ManagementtrainingwithPowerPointslides,workbooksandtrainer notesinfourclinicalareas:diabetes,coronaryheartdisease,strokeand childhealth.

Thisonlineresourcehasaspecificsectiononhealtheconomics. www.healthknowledge.org.uk/public-health-textbook/medical-sociology-policy-economics/4d-health-economics

Service Utilisation and CostsDatabase of Instruments for Resource Use Measurement (DIRUM)

DIRUMisanopen-accessdatabaseofresource-usequestionnairesforusebyhealtheconomistsinvolvedintrial-basedeconomicevaluations.FundedbytheMedicalResearchCouncilNetworkofHubsforTrialMethodologyResearch,DIRUMoffersaunique(andpermanent)webaddressforeachresourceusemeasureforcitationinpapersandreports.DIRUMalsoprovidesarepositoryofmethodologicalpapersrelatedtoresourceuseandcostmeasurement.

http://www.dirum.org/

Unit Costs of Health and Social Care

AdownloadablePDFcontainingunitcostsofhealthandsocialcarecontactsandcaredevelopedbythePersonalSocialServicesResearchUnitattheUniversityofKentatCanterburyandtheLondonSchoolofEconomicsandPoliticalScience.Thisdocumentisusedineconomicevaluations,quantifyingandapplyingacosttoGPappointmentsandcommunitycare.

http://www.pssru.ac.uk/project-pages/unit-costs/

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NHS reference costs

AdownloadableExcelfilecontainingaverageunitcoststotheNHSofprovidingsecondaryhealthcaretoNHSpatients.Itisusedineconomicevaluationstoapplyacosttotreatmentreceivedbyparticipantstocalculatethecostofsecondarycare.

https://www.gov.uk/government/collections/nhs-reference-costs

Systematic Reviewing

Shemiltandcolleagues(2013)reflectonthevalueanddesirefortheconsiderationbyendusersforcoverageofaneconomicperspectiveinaCochranereviewandoutlinestwopotentialapproachesandfuturedirections.Thispaperprovidesagoodintroductiontoeconomicperspectivesandconsiderationswhenconductingsystematicreviews.

http://www.systematicreviewsjournal.com/content/2/1/83

Useful Databases containing economic evidence

TheHealthTechnologyAssessmentDatabase http://www.crd.york.ac.uk/CRDWeb/

NHSEconomicEvaluationDatabase http://www.crd.york.ac.uk/CRDWeb/

RePEc(ResearchPapersinEconomics) http://www.repec.org/

EconLit https://www.aeaweb.org/econlit/

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McIntoshE,ClarkeP,FrewE,LouviereJ.(2010).AppliedMethodsofCost-BenefitAnalysisinHealthCare.OxfordUniversityPress

MorrisS,DevlinN,ParkinD.(2007).EconomicAnalysisInHealthCare.WileyandSons,Chichester,UK

NationalInstituteforHealthandCareExcellence(NICE)(2008).Measuringeffectivenessandcosteffectiveness:theQALY. http://publications.nice.org.uk/how-nice-measures-value-for-money-in-relation-to-public-health-interventions-lgb10b/nices-approach-to-economic-analysis-for-public-health-interventions

NationalInstituteforHealthandCareExcellence(NICE)(2012).MethodsforthedevelopmentofNICEpublichealthguidance(3rdedition). http://www.nice.org.uk/article/pmg4/resources/non-guidance-methods-for-the-development-of-nice-public-health-guidance-third-edition-pdf

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OwenL,MorganA,FischerA,EllisS,HoyA,KellyMP.(2012).Thecost-effectivenessofpublichealthinterventions.JournalofPublicHealth,34(1),37-45.

PhillipsZ,GinnellyL,SculpherM,ClaxtonK,GolderS,RiemsmaR,WoolacootN,GlanvilleJ.(2004).Reviewofguidelinesforgoodpracticeindecision-analyticmodellinginhealthtechnologyassessment.HealthTechnologyAssessment8(36),1-158.

Robinson,R.(1993a).EconomicEvaluationinHealthCare.Costsandcost-minimisationanalysis.BMJ,307,726-728.

Robinson,R.(1993b).EconomicEvaluationinHealthCare.Cost-effectivenessanalysis.BMJ,307,793-795.

Robinson,R.(1993c).EconomicEvaluationinHealthCare.Cost-utilityanalysis.BMJ,307,859-862.

Robinson,R.(1993d).EconomicEvaluationinHealthCare.Cost-benefitanalysis.BMJ, 307,924-926.

AcknowledgementsTheauthorswishtothankDrChristopherJohnson,PublicHealthWales;LizGreen,WalesHealthImpactAssessmentSupportUnit;andDrSamGroves,SwanseaCentreforHealthEconomics,SwanseaUniversitywhoprovidedfeedbackondraftsofthehandbook.

This Handbook is published under a Creative Commons Attribution-Non Commercial-No Derivatives 4.0 International License and

may be downloaded and shared as long as the authors are credited, but adapting the handbook’s content or using it for commercial purposes is not permitted.

Centre for Health Economics and Medicines EvaluationArdudwy Hall, Normal Site, Bangor University, Bangor, Gwynedd, LL57 2PZ

Phone: 01248 382153

ISBN Number 978-1-84220-144-2October 2016

Joanna Charles is a Research Fellow at the Centre for Health Economics and Medicines Evaluation at Bangor University. She has an interest in the use of health economic techniques for evaluating public health interventions, evidence synthesis and micro-costing methodologies.

Rhiannon Tudor Edwards is Professor of Health Economics and Co-Director of the Centre for Health Economics and Medicines Evaluation at Bangor University. She is an Honorary Member of the Faculty of Public Health, a Fellow of the Learned Society of Wales and a Health and Care Research Wales Senior Investigator. Her interests centre on the economics of prevention and the application of health economics to the evaluation of public health interventions.

Funded by Public Health WalesPublic Health Wales is an NHS organisation providing professionally independent public health advice and services to protect and improve the health and wellbeing of the population of Wales. Production of this report was funded by Public Health Wales. However, the views in this report are entirely those of the authors and

should not be assumed to be the same as those of Public Health Wales.