Sarah Karlsberg Schaffer, Jon Sussex, Dyfrig Hughes and Nancy Devlin

EuHEA Conference, Hamburg • 14th July 2016

Opportunity costs and local health servicespending decisions: A qualitative studyfrom Wales

Background

• In UK, decisions to approve/reject new health care technologies taken by Health Technology Assessment (HTA) agencies:• National Institute for Health and Care

Excellence (NICE) in England• All Wales Medicines Strategy Group (AWMSG)

in Wales• Scottish Medicines Consortium (SMC) in

Scotland

Background

• HTA decisions made by comparing incremental cost-effectiveness ratios (ICERs) against ‘threshold range’ of £20,000-£30,000 per quality-adjusted life year (QALY) gained• Opportunity cost is QALYs obtainable by alternative use of

resources• Figure is based on little empirical evidence

• Various attempts in literature to estimate ‘true’ value, e.g.• Claxton et al. (2015)• Appleby et al. (2006)• Karlsberg Schaffer et al. (2015)

Background

• Underpinning previous attempts to estimate threshold – and HTA process itself – is key assumption:• Approval of new, cost-increasing services will

displace funds from existing health care services• Explicit in NICE decision-making (Methods Guide)

• If this holds, opportunity cost of NICE recommendation is ICER of displaced service

• This paper investigates validity of “displacement” assumption & discusses alternative responses to cost-increasing TAs

Methods

• Semi-structured interviews with Medical and/or Finance Directors of all 7 Local Health Boards (LHBs) in NHS Wales

• Key interview sections:1. Procedures, policies & guidelines for prioritisation

at LHB2. How in practice LHBs found funds to comply with

NICE TAs issued in study period (Oct 2010- March 2013)

3. How LHBs accommodated other financial “shocks”

Results• Financial impact of TAs generally planned for in

advance• Majority of LHBs have contingency funds

• Efficiency savings (reductions in costs with no assumed reductions in quality) = source of funds for cost pressures of all kinds, incl. NICE TAs• Most common response to question of how TAs were

funded• Note distinction between:

• Reductions in x-inefficiency (“slack”), e.g. switching to generics

• Efficiency savings where health effects are more complex, e.g. leading to increased waiting times

Results• Service displacements not linkable to particular TAs

• Any displacements were result of cumulative cost pressures of all kinds• More likely to be delayed investment than actual disinvestment• Two interviewees highlighted absence of guidance on how displacement

could be achieved• General lack of prioritisation activities

• “The level of clarity … is not yet such that decision-makers assess the marginal benefit of various procedures versus those which NICE is recommending”

• Welsh Government, on occasion, acted as funder of last resort• Example: age-related macular degeneration (AMD) drug

• Welsh Government contributed towards infrastructure and unit costs• Considered it an “irrefutably beneficial technology”• Disinvestment within ophthalmology not seen as an option due to demand

for other services

Discussion/conclusions

• Implicit in displacement assumption is that:• LHB budgets are fixed and fully deployed• Providers are not x-inefficient

• Evidence in this paper that both of these do not hold• Opportunity cost is not wholly felt in terms of

displacement of other NHS services• Opportunity cost falls at least in part:

• Outside the NHS (other areas of public spending)• By increased efforts to improve x-efficiency

Thank you

• Contact details:• Sarah Karlsberg Schaffer• Office of Health Economics• sschaffer@ohe.org

• Paper citation:• Schaffer, S. K., Sussex, J., Hughes, D., & Devlin, N. (2016).

Opportunity costs and local health service spending decisions: a qualitative study from Wales. BMC Health Services Research, 16(1), 1.