Welcome back. We will now start Health Service Management, System-Based Practice with Dr. Mirzra Rahman. Thank you, Lauren. Good afternoon, everybody. Welcome to this presentation on Health Services Management. My name is Mirzra Rahman. I'm the Global Pharmacovigilance Officer at Pharmaceutical Development. I'm in Philadelphia and I bring to you love from the city of love. We are all across the country in today's meeting and it's certainly different than the meetings we've had before, where we met usually in Baltimore or in Crystal City. But these are different and challenging times and I'm sure that we will still be able to cover the material well. We will take questions at the end. I will leave about 10 minutes at the end to take questions. So talking about Health Services Management. The purpose of healthcare has been defined as ensuring adequate access, quality care at a reasonable price. So that's the universal goal of healthcare systems. And according to the Institute of Medicine, healthcare should be safe, effective, patient-centered, timely, efficient, and equitable. Ideally, a systems approach helps to ensure that all of these things take place. So what do we mean when we talk about a system? According to the IOM, it's a set of connected or interdependent parts or agents, doctors, patients, hospitals, et cetera, that are bound by a common purpose in acting on their knowledge. The advantages of systems are many. You've got a broader range of clinical and managerial skills. It enhances efficiency. You've got better opportunities for cost control and access. There's increased influence, capital, and human resources, so you can bargain better. You have more political and marketing clout, and you're better able to develop solutions to problems related to information systems, material management, plant, and equipment maintenance. So there's significant advantages to systems. The American healthcare system, however, is one that is challenging. It can be described in several ways. That is the population served by the system. They're either insured or uninsured. There are a variety of payers, private versus public, and there are healthcare delivery system components that are hospitals, clinic, extended care facilities, and so on. And it's a combination of resources that come together to create this healthcare system. We talk about facilities, personnel, and technology. So these are organized in the U.S. by financing mechanisms to try and produce services for consumers. So let's go through the organization of the U.S. healthcare system. Let's look at the role of government and the types of service delivery. So there's a unique role that the federal government plays in healthcare service. It serves as a regulator and as a purchaser of healthcare services. It is in and of itself a healthcare provider. It sponsors research, and it is also an educator and trainer of healthcare professionals. And the role of government in healthcare is complicated. The organizational structure of the Department of Health and Human Services alone is quite complex, as indicated in the next couple of slides. You can see here, you've got a secretary of health, and then within the secretary of health, within the secretary of health's department, you've got all of these various groups. So you have a variety of offices in the secretary of health's section. So you have the one we are probably most familiar with is the Office of the Assistant Secretary for Health. So that's the senior medical person. And then you've got a number of operating divisions, as you can see on the right, some of which you may be familiar with, obviously, such as AHRQ, the Agency for Healthcare Research and Equality. And of course, the CDC. You also see the Centers for Medicare and Medicaid Services is also here. And then there are a variety of other types of offices and other types of divisions, including the FDA and HRSA. So when we talk about how the HHS is organized, you can look at program management versus service delivery. So some departments are involved in only financing or managing programs that deliver healthcare services, whereas other departments actually deliver healthcare to people. So various departments, not only at HHS, but across the federal government are involved in the direct delivery of personal and community health services. And amongst these are the Department of Health and Human Services, of course. We also have Department of Veterans Affairs, Department of Defense, Department of Agriculture, and Department of Labor. So as a direct service provider, there's ownership of healthcare institutions. There's also employment of various members of the healthcare workforce. And you have management and operations of comprehensive healthcare delivery systems. The government provides healthcare for veterans, for military personnel and their families, and for Native Americans. It also serves as a model for healthcare organization and delivery. And it may do this through funding and oversight. So it can fund things it wants to develop and grow, and it can stifle various things it may not want to develop and grow, and it won't provide funding for those things. In the Department of Agriculture, it provides funding for the Women, Infants, and Children Program through the Food and Nutrition Service. This is also where federal grants are provided to states for supplemental food, for healthcare referrals, and for nutrition education. For low-income, pregnant, breastfeeding, and non-breastfeeding postpartum women and infants of children up to age five who are found to be at nutritional risk, WIC is provided to them as a supplement to help ensure that they can be healthy. Now, the government serves as a regulator. It sets the standards for minimally acceptable performance, or there may be minimal qualifications for licensure, whether it's healthcare organizations or practitioners. And there are a variety of agencies that play a significant role as regulatory bodies. Everybody is familiar with the Food and Drug Administration. It is said that the FDA controls about a quarter of all commerce in the United States. You also have groups like HRSA, Health Resources and Services Administration, and they have the Bureau of Health Professions, which actually runs the Physician Data Bank, and we'll come back to that. But the Physician Data Bank is where, when there are lawsuits, that they're stored in that Physician Data Bank. So the FDA, the FDA protects the public from food, drug, and medical devices and product hazards. So when you have safe food on the table, when you have safe drugs or medical devices, this is a direct result of the work that the FDA does. It regulates prescription and over-the-counter drugs, biological products, and human blood and its components. It also ensures that drug potency, effectiveness, and safety is set before approval. And then after approval, the focus is on assuring quality. Additionally, it regulates radiological equipment, efficacy, and the radiation exposure that may happen. HRSA is responsible for a variety of things, but there's research that is conducted or supported by HRSA. They also set the responsibilities through the federal-wide assurance that there's appropriate research protections in the human research group. So the agency has its own policy, Program Protection of Human Subjects Participating in Research Programs. And obviously, this comes out of the Tuskegee experiment in the United States and other programs to try to protect human subjects who are undergoing or participating in research programs. And the protections apply to studies conducted internally by HHS staff, and it applies to external studies conducted by grantees and contractors. Now, the federal government also serves as a purchaser. It's the largest purchaser of healthcare services in the United States. It institutes payment policies that, as I said earlier, either stifle or encourage innovations. And its payment policies can influence access to various services and the delivery of services. It serves as a research sponsor, seeks to create more efficient delivery of high-quality, cost-effective healthcare services, and that's in health services research. And we'll hear more about that when we talk about this after lunch. And that's the health services research. And it improves or seeks to improve the health of the nation through funding and promoting high-quality, basic medical and clinical research. So this is a part of what the federal government does. It's also sponsored research. And in the AHRQ, the Agency for Healthcare Research and Quality, they're charged with improving the quality in healthcare in this country. The agency conducts research intramurally and funds it extramurally through grants. And you have a variety of biomedical research biomedical and clinical research groups that help to fund research to try and improve the length and the quality of life here in the US. And these include the National Institutes of Health, the National Science Foundation, the Centers for Disease Control and Prevention, Substance Abuse and Mental Health Services Administration, and then the Department of Defense. Now, the government also has a role in education and training. The government funds education and training of healthcare providers through grants, through HRSA, and physicians, nurses, physician assistants, and dentists are usually helped in their training by this. There's also funding for graduate medical education, residency training in medicine, and fellowship training to enhance skills of primary care faculty and community preceptors in academic medical centers. As we look at the healthcare delivery, there are a variety of models that are used for medical management, business management, and then for utilization management. You can see when we talk about the various ways in which service is delivered as primary care, secondary care, and tertiary care. So primary care refers to activities concerned with the prevention and treatment of common medical problems in outpatient settings. So care is delivered by primary care practitioners, and they can be responsible for 2,000 to 3,000 patients of the overall care. Secondary care refers to treatment of disorders that require specialist opinions or hospitalization. So this is when a primary care physician or provider refers a patient to a specialist. So you can go from the family doctor to neurologist, for example, or you go from a local hospital to a more specialized hospital. And then tertiary care is a very small sliver of care, very important, but that's, for example, when you have an inpatient setting where you have collaboration between multiple specialties or a super specialized, or where you have things such as a neonatal intensive care unit, or you have neurosurgical operations that are being done. Those are very small standalone groups in a tertiary care hospital. Usually we refer to these as the university hospitals. So how is all of this paid for? Well, you can have prepaid healthcare, and this is a managed care organization such as HMOs. There's fee for service, so private insurance, but that's really going away. The only way you have this is mostly in employer-based systems, and even those are going to various managed care systems. And then there's public insurance. We'll talk a lot more about Medicare and Medicaid, but TRICARE is what the most common and TRICARE is what the military uses. And then there are things in the VA, Indian Health Service, and then there's worker compensation. So what do prepaid healthcare plans seek to do? Their administrative goals are to standardize processes, to reduce unnecessary expenses, and to improve the overall quality of care. Their financial goals tend to be to shift risk to physicians, to do curious expenditures, and to put a per patient per month where a primary care physician may be paid the same whether the patient is seen or not. And there's strong incentives to keep patients at the least costly level of care. So treat them in the local hospital versus sending them to the university hospital. See if the primary care physician can manage it as opposed to referring to the gastroenterologist or the neurologist. And then try to enforce an in-network physician group that can be maintained to try and lower costs. So what is managed care? Managed care is a system of administrative controls. It looks to manage healthcare costs, improve healthcare quality, and increase access to healthcare. It's applied to an enrolled set of customers. It emphasizes wellness and preventive care. It seeks to reduce costs to a primary care physician or gatekeeper, and it involves prepaid healthcare. There are three broadly defined categories of managed care systems. There are HMOs, there are PPOs, or preferred provider organizations, and then there are points of service. So these are hybrids that you can have. The HMOs offer a standardized benefits package to prepaid members, and you may all be familiar with this depending on where you get your healthcare. It requires members to use specific physicians. It requires the use of primary care physicians to coordinate and handle referrals. And it can be open where you offer a point of service option, and it can be closed where there's no point of service option. So the point of service option is akin to an indemnity type option for HMOs or PPOs. So you've got primary care physicians typically refer patients to other providers within the network, but the patients may refer themselves outside of the network to get some coverage they want with a specific physician or a specific hospital. If the physician refers the patient out of the network, the plan may still pay as most of the cost, but if the patient self-refers, they may pay a coinsurance fee. So they pay extra to have that option that they want. And fee-for-services, as I said, are really going away, and really it's the uninsured folks who have self-paid that end up paying the most for their care. PPOs are where you have physicians, hospitals, and other providers of care agreeing to accept lower fees from an insurer so they get a discounted service, the PPO. And then the physicians, hospitals, et cetera, have a guaranteed flow of patients. So when we talk about managed care organizations, what are we referring to? So I'll let you take about 30 seconds to read this, and then we'll go to the answer. Okay, what has happened, okay. So managed care organizations are systems of administrative control aimed at managing the cost of health care, access to health care, and quality of health care in defined populations. Okay, let's talk a little bit about utilization management. So utilization management refers to a cost containment strategy that limits health care expenditures by limiting reimbursement. It was one of the first attempts to control costs through the Social Security Amendment of 1972. So what was set up there were various professional standard review organizations, and today we know them as PROs, or Professional Review Organizations. And disease management programs are a comprehensive effort to help clinicians plan and deliver evidence-based care to help patients play an active and informed role in caring for themselves. So what you'll see with disease management programs, particularly since there were changes in how hospitals are reimbursed, if a patient got readmitted in under 30 days, then the hospitalization was just considered a continuation of the previous hospitalization, and the hospital didn't get any additional payments. So it was in their best interest to make sure the patient didn't, as we say, bounce back into the hospital. And so the disease management programs were when somebody was discharged who would have had a diagnosis, for example, of congestive heart failure, we wanted to make sure that the patient was doing everything necessary to prevent them getting readmitted. So that may entail a disease management program where a nurse goes out and visits the patient in their home to help them make sure that they're eating appropriately, they're taking appropriate measures to be active, low-salt diet, etc. So that's how disease management programs are working. Let's take a look at finance and economics. So as we look at the healthcare economics, that will be the hour and a half after lunch. And here we're going to cover various services, payments, and financing and financial management. So when we talk about finance, you have to figure out who the primary payer of the insurance system is. Is it the government? Is it some sort of indemnity? Is it managed care? Or is it self-pay? The question is, where do the dollars come from? Well, all of the money for healthcare comes from the people, but they come through different ways. So you may have taxes to pay for things like Medicare and Medicaid, there may be insurance fees, there may be co-payments and there are deductibles, but all of the money does come from the people. And managed care organizations are primarily funded through employer-employee payments. So most Americans are covered by some type of an insurance, and most of this is provided by some type of managed care package of benefits. So if you're employed, it's true in an accident of history, that in the United States, most people get their healthcare coverage through their employer. So the problem we're facing now in this country is because of the COVID-19 pandemic, a number of people, millions of people have lost their employment. And they've also then lost their healthcare coverage for the most part. And so you've got people not only are now unemployed, but they'd have to pay on average about $16,000 for a family of four. And when you're unemployed, you can appreciate that that becomes almost impossible to do. And that's where there have been a number of states that have had people join their Medicaid programs, just because they're unable to get healthcare through their usual place of employment. And employers provide healthcare dollars for their employees through paying for indemnity insurance. And this provides private health insurance for about 70% of Americans. And the health insurance of the employees and their families constitute about 70% of Americans getting their health insurance in this manner. So just here are some examples, Blue Cross Blue Shield, not for profit in most areas, and folks like Aetna, Metropolitan Life, for profit insurance companies. And then you've got the government, which finances healthcare by three primary mechanisms. It pays for its own programs to provide care. It pays for provisions of care by non-governmental agencies. And it does indirect payment through providing grants to states. And these are all supported by tax revenues, and the government-sponsored healthcare programs are primarily financed through tax dollars, as I said earlier. And these funds have to be authorized through the national budgetary process on an annual basis. So when we look at how do you fund healthcare for people who are socioeconomically challenged, the government provides programs to aid families, especially those considered to be more vulnerable, such as women and children, and we talked about the WIC program earlier. And this is present at the federal, state, and local levels. So primary source for funding are at the federal level, and much of this funding is authorized through legislation resulting from the Social Security Act. So this is really an entitlement program. So what do we mean by entitlement program? So assistance to families is often provided by the federal government in partnership with state and local governments, or in partnership with a community health center of primary care providers who accept public insurance reimbursement. So somebody who is getting perhaps Medicaid, they can go to a community health center, or they can go to a primary care provider, and that is an entitlement program that entitles them to get healthcare. So many of the programs to aid families and children are funded at the national level, and these social welfare programs are typically made up of entitlements. And entitlements are government benefits with eligibility requirements that have been set by Congress. Eligibility requirements for entitlements may be age, income, retirement, disability, or unemployment. And so those people who meet these requirements are entitled to these benefits. So let's say you're over 65, and you're entitled to Medicare. Let's say you're disabled, or you have some specific kidney disease, kidney dysfunction, you're entitled through Medicare to get the healthcare through that. And so this is the way entitlements work. So they're basically of two types. There's a social insurance, there's non-means tested. So you can claim it based on age, such as Medicare and Social Security, or you're previously employed in the government or the military, or you've lost unemployment, or you've lost employment. So you now have unemployment benefits that you can get. And so the public assistance is the other one that's means tested. So benefits are limited to low income recipients. And this can be Medicaid, food stamps, or cash welfare assistance. So a lot of this connects back to the Social Security Act of 1935. And it's got 21 amendments that have been put in place since. So the Social Security Act resulted as a response to the Great Depression, which started in 1929. It created and provides for several programs to help families that need assistance. It creates entitlement programs to aid families. And Congress has to reauthorize the funding of these programs annually in the federal budget. So one of these amendments in 1965, dramatically expanded the role of the federal government in health care. This created Medicare and Medicaid. And the purpose of Medicare was to fund health care for all persons over 65. The purpose of Medicaid was to fund health care for persons receiving cash welfare assistance or aid to families with dependent children. So it was the elderly and the poor that under President Johnson's Great Society, they were looking to help. In 1996, there was something called the Personal Responsibility and Work Opportunity Reconciliation Act. And that ended welfare under President Clinton, as it had been known in this country for the previous 60 years. And it ended the entitlement program, AFDC, that I just referred to, and replaced it with state programs called Temporary Assistance to Needy Children. Then in 1997, you had the Balanced Budget Act. And that created Medicare Choice. So this was a managed care option for Medicare. It created greater restrictions on hospital and physician payments. Greater restrictions on hospital and physician payments. And the idea, in part, was to try and decrease physician payments for services by about $115 billion over five years. And it created also Title 21 of the Social Security Act, which was the S-CHIP. And you've heard about this, the Children Health Insurance Program. Here you can see a variety of these entitlement programs, the 21 programs that are part of the Social Security Act. And some of these I've highlighted and you know about and we've talked about. But one of this, Title 5, is just Maternal and Child Health Services Block Grant. You can see Administration for Health Professions Training. Family Planning, Title 10. So there are a whole variety of amendments that have been put into place. And you can see for Title 18, for health insurance for the aged and disabled, Medicare. And Title 19 is Medicaid. Title 21 is S-CHIP. So let's talk a little bit more about Medicare, Title 18. So this is the nation's health insurance program. There are about more than 55 million people who get their health insurance through this program. And it provides insurance for people who are 65 years or older. Those who are disabled and who receive Social Security. And those with permanent kidney failure, end-stage renal disease. It has four parts, Parts A, B, C, and D. And it costs almost $650 billion in 2015. So what is Medicare Parts A, B, C, and D? And this, I'm sure, is just a refresher for you all. But Part A is for hospital payments. Part B is for medical and practitioner expenses. Part C, as I just mentioned, is for Medicare choice or managed care product. And then Part D came about when President Bush II was the president. Part D was a prescription drug benefit plan. And this came about in the Medicare Modernization Act of 2003. It went into effect on January 1, 2006. So Part A talks about hospital inpatient services and its partial payment. Provides some monies for skilled nursing facilities and certain conditions apply. It does provide for some home health care services immediately after discharge from acute care hospitalization. Provides for hospice care. And it's funded through payments to the Social Security Trust Fund by employed workers. Part B is fee-for-service. It is partial payment for physician services. There's hospital outpatient services, medical equipment, and supplies. And it's funded with premiums paid by beneficiaries if they elect to participate. Part C is the Medicare choice, managed care. And Part D is for drugs, the prescription drug. Then Medicaid is Title 19, also in 1965. It funds health care services for low-income and the needy. It comes from general tax revenues of the state and the federal government. It's the largest health insurance program in terms of the number of people who it covers, but not in terms of monies. And it's federally and state jointly funded. And these services are delivered at the community level by all types of health care providers and all types of health care institutions. Medicaid funding priorities follow broad national guidelines. So they're national guidelines. And then you've got each state setting up its own eligibility standards. It determines the type, amount, duration, and scope of services. And it sets the rate of payment for services. And each state administers its own program. So what happens in New York and California and some of the wealthier states may be different than what happens in some of the poorest states, such as Kentucky and Alabama, and so on. So it varies significantly from state to state. As I said, while Medicare covers about 55 million people, Medicare, Medicaid covers about 70 million people. And they have children, the aged, blind, disabled, and those eligible to receive federally-assisted care. And those eligible to receive federally-assisted income maintenance payments. The medical expenses are about $545 billion in 2015 for hospital and physicians. And they also pay for long-term nursing care. So after you come out of the hospital immediately, you may get some nursing care funding from Medicare. It's provided by Medicaid. And it's only after a spend down. And patients have had to spend all of their resources except a few thousand dollars. And they may keep a home if a spouse is living in it. So let you take a read of this. So Medicare and Medicaid programs are administered by So centers for Medicare and Medicaid services. So the State Child Health Insurance Program, or S-CHIP, Title 21 of the SSA, was established by the Balanced Budget Act of 1997. The aim was to provide health insurance to low-income children. Every state and Washington, D.C., they have all established this program and they get matching funds from the federal government. They have greater flexibility in using those funds in S-CHIP, and they may be used simply to expand existing Medicaid-supported healthcare programs. And it includes monies for drugs, glasses, vision, hearing, et cetera, mental health. And then in 2010, we had the Patient Protection and Affordable Care Act, or Obamacare, as you've heard it called. This is in 2010, and this is a number of, these titles were amended in the Social Security Act. In 2012, the U.S. Supreme Court upheld the constitutionality of the ACA's individual mandate. However, the court held that states could not be forced to participate in the ACA's Medicaid expansion under penalty of losing their current Medicaid funding. What has happened since with COVID-19 is you've seen that a number of states have gone now to try and expand their Medicaid programs given the burden that this COVID-19 has levied on the United States and the world. But on each state, they're looking at huge unemployment figures, and with those unemployment figures are people who are unable to access healthcare. So what is the Patient Protection and Affordable Care Act of 2010 do? Well, in terms of coverage, it ended pre-existing condition exclusions for children. So healthcare plans can no longer limit or deny benefits to children under 19 due to pre-existing conditions. It kept young adults covered. So if you're 26 and under, you could get covered under your parent's healthcare plan. It ended arbitrary withdrawals of insurance coverage. So they couldn't cancel your coverage if and when you'd made an honest mistake with the disease, and it guaranteed your right to appeal. So it's still onerous, but it makes sure that there are some protections for people who are seeking care. In terms of costs, it ended lifetime limits on coverage. So whereas people were reaching lifetime limits of up to a million dollars if they had certain very specific diseases, there are no lifetime limits now. It reviews premium increases that insurance companies have to justify on what are called unreasonable rate hikes in various state commissioners. And it helps you to get the most from your premium dollars because it says a certain amount must be spent on healthcare, not on administrative costs or profits. And then in terms of the care that's provided, it covers preventive care at no cost to the people who are enrolled. So you may be eligible for recommended preventive healthcare services without any copayment. It allows you to choose your doctor from the primary care doctor you want from your plans network. And then it removes insurance company barriers to emergency services. So before, if you were in an accident, let's say in Maine and you lived in New York seeking emergency care, if you didn't call in, the healthcare plan was happy to say that you didn't call in and we're not covering that. And you then were then stuck with a huge bill. And prior to some of these changes with Obamacare, the number one reason for bankruptcy in the United States was because patients had been either through lacking health insurance coverage or getting stuck with a bill for something like this. That was the number one cause of personal bankruptcy, healthcare bills. So the financing of healthcare by the government in America is handled through the Department of Health and Human Services. The Medicare, Medicaid, those are the two biggest programs that they run. The two primary pairs for government sponsored healthcare in the United States are the Centers for Medicare and Medicaid Services and the HRSA. So they pay for a lot of the training, medical education in the United States. Okay, financial management. As we look to these next few slides, the idea is not to necessarily focus in on the numbers, but to get trends from the graphs that are shown. You can see subsequent to 1960, there's been this huge increase in the expenditures per capita in this country. And the main reason for that obviously has been Medicare and Medicaid in that there is a way that we're able now to provide for care and people can now access care and it allows them to live healthier lives and longer lives. So when we look at this increase, it's not simply an increase because people can now tap into a source of money. It's an increase because people can now use money to get access to healthcare where before they may not have gotten access to healthcare. And this access to healthcare allows them to live longer, healthier lives. And you can see that the healthcare costs as a percentage of GDP has been growing from about 13, 14%, 20 years ago to now it's about 18, 19% as we hit the year 2020. And the healthcare costs per capita have gone up also from $4,900 in 2020 to $8,700 in 2011 to over 10,000 per person in 2016. And it's gone up since then, of course. So if you look at from where we've come in the last 20 years, it's more than doubled in terms of what is the per capita healthcare costs. And then you can see here a shift in terms of the percentage distribution of national healthcare. They've gone from 30%, 32% government to about 45% government in 2011. And you'll see in the next slide that has continued on to the point where by 2010 they crossed and you have now more public funding of healthcare than you have private funding. So about 52% of US healthcare comes from public funding. So whereas about 48% is from patient or consumer or private health insurance. So here you can see where the money is going in this pie chart. But if you look at it in terms of spending about a third of this is for hospital care. Physicians and clinical services are about 20%. Prescription drug costs are about 10%. Nursing care facilities about five and growing rapidly. Personal care services about 5%. And the others relate to dental, medical equipment, et cetera. It's about 28%. And in terms of payment to providers, you've got rising costs have resulted in many cost containment strategies over the years. And typically what you see is a combination of regulation and payment strategies. But these have been largely ineffective in controlling healthcare costs. We have had in terms of cost containment strategies, various prospective payment programs have been put into place. The DRGs or diagnostic related groups for hospitals. Resource-based relative value scale for physicians. Managed care, various co-payment schemes. Now patients share in the cost of hospital expenses that exceed some sort of a maximum payment. Or deductibles to try and say, do you really wanna go and see the doctor or not? If you go, you've gotta pay 10, 20, $50, whatever it may be. And then the shift from costly hospital care to less costly outpatient care. All of these cost containment strategies have been successful to limited degrees. Without these, we'd have a much worse situation, but they've only met with limited success. So the strategies are based on efforts to increase resources that can be utilized to decrease costs, decrease demand. So limits how much people access care. Increase efficiencies to try to automate things versus using people. And then to try and increase quality and decrease errors. Errors are a significant problem in the healthcare system. But as you can see here, the bottom is the US inflation rate and the top is the medical inflation rate. So it's about double, almost double or more what it is for the inflation rate for the United States. So at a time when you have in 2000, inflation rate of 3.4%, the medical expenditures were increasing at about 7.1%. In 2002 is about 1.6% was inflation and medical expenditures went up at a 9.7% increase. And then even in the years where we had the downturn, the recession in the economy in 2009, we had a deflationary period where prices actually did not go up. They went down by about 0.4%. And even with that, you still had an increase of almost 4% in medical costs. And so as we look at this, we can see the costs have gone down and the Patient Protection Act certainly has had something to do with that. So let's take a look at organized structure and development. We'll go through a variety of these things in terms of bureaucracies, strategy planning, program assessment, quality and patient safety, and then organizational development and effectiveness. Bureaucracies exist in the federal state and local and this is not a pejorative, it's just that bureaucracies exist to serve large organizations. So in the federal government, the budgetary process is one where the Congress or the legislative brand is responsible for determining the allocation of healthcare dollars, whether you're providing direct healthcare services, you're funding numerous other programs to improve health, or you're funding education and training programs. Whatever Congress approves, they are subject to the approval of the executive branch. It can either be signed off and approved or rejected by the executive branch president, and then it comes back to Congress and they'd better rework it. And then once it's approved by the president, then it can be reviewed if there's a legal challenge and the judicial branch gets involved in. Now, state governments are primarily involved with programs aimed at determining the distribution of federal monies, and then the promulgation of laws and regulations governing healthcare, health services, organizations, and providers, and it partially funds and manages Medicaid. So if you wanna get licensed in a particular state, there's certain laws you've gotta go through. So you've gotta go to the State Department of Health and you've gotta apply for a license, show them that you've completed med school and you may have completed a residency or at least one year of training. And then you apply for a license and they'll grant it to you. So there are certain rules that you have to follow and that's what state governments do. We don't have a national license in the United States. You get 50 states and various territories that license you to practice medicine there. And as I talked about earlier, states co-manage or co-manage with the federal government. They get monies from the federal government and then they decide what they're gonna do and how they're gonna fund their Medicaid programs. So there are 50 unique Medicaid programs around the country. Every state does something. And then local governments get involved in the delivery of healthcare services through local public health departments. So they provide the core function of public health and essential health services. So one is the clinical delivery of healthcare. So community health centers, et cetera. Although more and more local governments are getting out of the business of providing healthcare. And that is having a negative impact on patients whose insurance may not be accepted by the local physicians. And then the other core functions from a public health standpoint is assessment, assurance, policy development. So things like food safety or water purity. These are the kinds of things that the local governments get involved in. And you can have strategic planning and policy development. So the basic principles involve planning for maintaining and improving the health of the population level. This includes planning for health services and their delivery. And it occurs on two levels. There's a macro level and a micro level. The macro level is at the level of the health services system of a region. And it may entail one or more states or it may encompass the nation. And then the micro level planning is when you do it at the institutional level. So you have planning that's defined health problems and unmet needs. So you're looking at, you start by saying, what is the unmet need we have to fix or solve for. And then you look at the resources that are available or that may be potentially available. You've got to establish various priority goals to match the needs to the resources. You may want to do 100 things, but if you only have $10, it may not be able to do all of those things. And then you've got to develop a plan to achieve those goals. And you've got to relate the results to the goals through evaluation. So that constant feedback that you need to get involved in. And the assumptions underlying healthcare planning are that resources are scarce. Even in the richest country in the history of the world, we still don't have unlimited resources to pour into our healthcare system. So the first assumption is that resources are scarce. And we must get optimum value for the allocated resources. And healthcare serves a social purpose, and should be valued more than activities aimed at economic gain or social ends unrelated to health. So this is one of the things we view that for the most part, healthcare services are provided on a not-for-profit basis. But that is something that is being challenged as more and more managed care companies profit. So an effective healthcare system must be responsive to its customer needs. And it's got to require accountability to society. So it's a social good that should be regulated, and not be necessarily a capitalist commercially driven for profit enterprise. So health planning requires attention to clear identified goals and objectives. So the planning success is linked to what are your stated goals and objectives? What are the goals? So the goals and objectives should be clear to all parties. And they must be understood and agreed to by all parties. And they must be measurable. So these goals are generally broad, long term statements that have an ideal desired outcome. The objectives refer to specific attainable, measurable outcomes that can be accomplished in a specific time. So we hear about SMART goals. That's what it relates to with these objectives. And I talked about the feedback. So the goals and objectives should be continuously monitored through feedback and data analysis. And this may lead to changes in the goals and objectives, because if you're getting feedback that tells you what you're doing is not working well, then you're not going to just continue doing that, right? You've got to adjust and make changes so that you can try to meet those unmet needs that you defined at the beginning. And then you've got to measure the outcomes as an important part of the evaluation. So this planning process is where you have program evaluation of existing programs. You've got evaluation of the need for a new program. And it's a continuous feedback loop, right? You collect data as a baseline measure to use in assessing program quality or the need for that particular program. You assess the degree to which goals and objectives of existing programs are accomplished, or assess the need for a new program by utilizing collected data. You have this continuous feedback. So do you need to change anything or as you implement the program? What do you need to do as you reassess these things? So that's part of the planning process. Now, national health planning has taken place in the United States for a long time, is Hilberton and Healthy People. So the Hospital Survey and Construction Act, or the Hilberton Act of 1946, was the first federal attempt to enact global health planning legislation. So it aimed to improve hospital bed ratio in rural areas, and to increase the number of physicians in those areas. So it was a bricks and mortar program. It required states to designate a single agency to plan and implement hospital construction. So this is what I mean by bricks and mortar program. They're looking to implement hospital construction. There were limited outcomes because the end result was a state-based focus on beds rather than services. So this was when we talked about Donabedian's structure process outcome. This was more structured. You're building hospitals for people. And there's no integration between this and other legislatively mandated programs. Now, the other thing that you, I'm sure, know about is setting the nation's agenda, Healthy People 2020. In fact, Healthy People 2020 was based on the accomplishments of four previous Healthy People initiatives. In 1979, the Surgeon General released a report on health, promotion, and disease prevention. And then in 1990, 2000, and 2010, we had other Healthy People programs being released. And then Healthy People 2020 is what we're coming to the end of now. Back in June of 2018, a framework was put together for Healthy People 2030. And you will hear about this more. But essentially, it laid out a framework of what Healthy People 30 would be focused on. But essentially, the Healthy People program is where you set out objectives that have been specified by Congress as a measure for assessing the progress of these various block grants or services that are provided. So Healthy People 2020, and then it'll be Healthy People 2030, set various objectives for the improvement of the nation's health. So you can see here for Healthy People 2020, their motto was a society in which all people live long, healthy lives. So there are a variety of determinants that will get you to the health outcomes. So the physical environment, social environment, health services, individual behavior, and biology and genetics, this all funnels in into the various health outcomes. And you can see that Healthy People 2020 had several overarching goals. These four are to attain high quality, longer lives, free of preventable disease, disability, injury, and premature death. So how can we have people live longer, healthier lives, and there's certain things that they recommend. And then in terms of achieving health equity, and eliminating disparities, how can you do that to improve the health of all? And then it's thought to create social and physical environments that improve good health for all. So in the suburbs, for the most part, you don't have pavements. And there are a variety of reasons for this. But one of the consequences is that people don't walk anymore. So they don't walk down to the neighborhood store. And as a result, it's contributed to the obesity epidemic that has impacted the United States. And then it looks to promote the quality of life, healthy development and healthy behavior across all stages of life. So these are the four overarching goals of the Healthy People 2020 program. And Healthy People 2020 also put in a lot of new topics, adolescent health, blood disorders, and so on, you can see here. So a lot of new things are added. And you can imagine in Healthy People 2030, still more will be added. So this is available on the website at healthypeople.gov. And you can go take a look at it. If you're doing research, this is worthwhile, you start with this, particularly in government funded research. What is it that it says if you're looking to work in diabetes or high hypertension or kidney disease or teenage pregnancy, this lays out various data points that will help you as you get started. So as we look at quality and patient safety, quality management refers to the need for the delivery of quality healthcare services. And it's driven by many factors. So industry wide, you've had various efforts related to CQI and TQM. And TQM means total quality management. And CQI is continuous quality improvement. And it was pioneered by a variety of experts such as Joseph Wan and Edwards Deming to try to find ways to improve the healthcare industry. These things have been tried in various other places. In Japan, Edwards Deming is very famous for improving the quality of their products. And so you've got the CQI and TQM, where it's a concept of the organization, setting expectations that it can and will achieve, and that they're going to be set at a slightly higher level each year. There are four attributes to this. So quality includes meeting customer expectations. So it's customer driven. The monitoring and evaluating quality of retrospective and prospective. So what did we do before? And what do we do in going forward? Quality is organization wide. It's not just the people in the quality department. It's organization wide and involves institutional employees at all levels. And quality and quality improvement focuses on both the processes and the outcomes using measurable indicators. So here are some of the key concepts in defining quality of healthcare. Are you delivering appropriate healthcare? Are the expected health benefits, do they exceed the negative consequences? Efficiency, is there maximization of the quality of a comparable unit of healthcare that's delivered for a given unit of health resources used? Economy, you're looking at the total level of expenditure. And then performance, how the planner provider is functioning with regard to certain standards and benchmarks. So you know the NCQA has various benchmarks that they put out in HEDIS, and those are benchmarks that they expect the various managed care organizations to meet. So where do the data come from? So administrative data may come from billing records, and may come from routine departmental records and data. So for example, looking at laboratory quality statistics, patient schedules, charge vouchers, these are all the kinds of things you can find. And then routine medical records, looking for patient descriptions, various orders, medical notes, nursing notes, etc. And there's a trend more and more to gathering these quality data through automation. So how do you operationalize quality of care? So Donabedian proposed that quality can be measured by three categories, structure, process, and outcome. That's an old article from JAMA, where he laid this out. So what are structural measures? So these are the attributes of the setting in which care occurs. So when you talk about Hilbertin Act being a bricks and mortar program in building hospitals, that's structural. So it provides a basis for most current regulations. It's often required by government programs, true for accreditation, licensure, etc. And it ensures a minimal capacity for quality. Process relates to what is actually being done in giving and receiving care. So patient activities in seeking care, patient activities in carrying out the recommended care, physician activities in making a diagnosis or recommending or implementing treatment. So patient comes in, it's two months from now. One of the things the physician should ask about is whether or not they are eligible for a flu shot. You know, are they allergic to eggs or something as specific as that? And getting a flu shot or, you know, a woman comes in, she's 63 years old, you know, do you talk to her about the flu shot and a mammogram? When was the last time she had one? And so these are kinds of things that you're looking at process measures. And then additional things you quantify in process measures is delivery of procedures or services. So, you know, what percent of women who are eligible for a mammogram actually get one? So does the physician, in fact, recommend them and do the patients follow through and get them? That's a challenge. So are these things that you do in the process correlated outcomes? So you go get the mammogram, does it lead to decreased numbers of cancers? Or even if they get cancers, it leads to earlier detection because of the screening that's being done. And you need data to develop process measures that are typically obtained from medical records, claims data, and patient surveys. So that's where you get the data to check on these things. And then process measures should be easily measured and documented. They shouldn't be controversial and they're specific for the event measure. The outcomes are assessing the quality of the final product. So we talk about structure, bricks and mortar hospitals, process, what is actually being done, was the mammogram ordered or not? And then now we get to the outcomes. So what's the quality of the final product? It can be used to capture the effect of an intervention in the health status. So there's control of a chronic condition. They're very specific clinical findings. And then you've got to include the patient's perceptions of care. Gone are the days when whatever the doctor said rule, you've got to incorporate patient's perceptions and care, the quality of care, the delivery of care to the outcome measures. And the outcome measures may be subjective. You know, you feel cured, you're improved, you're stable, or a patient may be terminal. These are subjective things. Objective measures relate to scales of physiologic function or things you're able to do or not do. So their quality of life adjusted, their quality of life adjusted years. And then, you know, you've got other things that you can measure. So the difference between process and outcome measures are. So process measures would include such things as quality of physician charting, lab tests ordered, outcomes would be reflected in the status of the patient upon discharge from the hospital. So this is how you operationalize quality of care. You've got structural measures, indicates the potential that appropriate services provided by experienced providers will be available when needed by patients. So that's the structural part. Process looks at the degree to which services are available and provided according to the best evidence available. And then outcomes refer to indicators of actual change in the health status and functioning. So we talked about some screening measures, but maybe you can talk about vaccines for the influenza virus in the fall. So what percent of patients actually got the vaccine and then of those who got it, what percent developed the flu versus those who didn't get it. And then you need to incorporate, as I said, customer experience. The customers or patients are becoming more demanding. They want certain things. And if you're not gonna serve them, they'll go elsewhere. So customer experience and acceptability. So one of the big things is to get colorectal cancer screening. There have been attempts to do a blood test to check for the antigens in colorectal cancer or use drinking a pill with a small camera to take a picture of the GI, the gut as it flows through the gut. So these are the kinds of things, is it better, easier, simpler, more palatable as it were than getting a colonoscopy? So these are some of the lead government agencies for improving the quality of care. I talked about CMS centers for Medicaid and Medicare services. Most of the work to ensure quality of care has begun, has been conducted in recent years as a scope of work are these quality improvement organizations or QIOs. And you can go take a look at this website. And then AHRQ provides evidence-based guidelines for clinical prevention diagnosis and treatment. And fourth, while taking a look at AHRQ's website. There are also many private organizations that are involved in the efforts to improve the quality of health care. There are other quality management trends. We talked about the evidence-based medicine. We wanna make decisions based on data and make the right decision. Practice guidelines generally incorporate evidence-based medicine. We wanna be careful that we don't say that what a bunch of people think is the right thing. We wanna make sure that we look at how the practice guideline was put together, that it was driven by data and appropriate statistical techniques were used to pull the story together. There are various variety of things called clinical paths, paying for performance. And we talked about disease management. You go and check on the patient, see if she or he is eating a bag of salted potato chips after they came out with CHF. So the IOM's definition of quality is, the degree to which health services for individuals and populations increase the likelihood of desired health outcomes and are consistent with current professional knowledge. So quality is where you have these health services going to individuals or populations that need them and then increase the likelihood of the desired outcomes. You wanna get to the outcome structure and process is important, but outcomes is the final arbiter whether you're doing a good job or not. Legal and ethical considerations. Ethics refers to the study of standards of conduct and moral judgment. And when applied to professions, ethics is a system or set of principles and a code for that profession. And you may know that the ACPM has its code for the profession. And if you don't have it, you can reach out to them. There's a philosophical basis for ethics that ethical theories are based on four principles. Respect for persons, beneficence, non-maleficence and justice. Respect for persons, what is it that those various people are doing? Beneficence, you're looking out for the greater good. Non-maleficence, don't do any harm. And then justice, various people should be treated equitably. So the ethical summary is where you have it's useful in defining relationships amongst patients and managers and organizations and clinicians also. It may be different weights and it may have different precedents depending on the issue. And it is important to know that justice requires ethical principles and must be applied consistently when similar problems are encountered. So that consistency that needs to be applied. Now, this is an important slide just because the relationship between law and ethics. Law attempts to reflect the society's view of justice and fairness. Laws typically represent the minimal performance standards expected of members of society. And the main thing here is that all things legal may not be ethical. So we've got to be very careful about what we do. We may be on the right side of the law but it may not be the right thing to do. And then the National Practitioner Bank which I referred to earlier, the idea was to improve the quality of health. And the purpose was to facilitate the comprehensive review of professional credentials and the quality of health. What had been happening was that people would skip off from one state to another or one institution to another because of poor medical practice. And because nothing was being checked in terms of their ability to deliver care, they'd get hired in a different hospital setting or in a different state. And this posed a risk to patient safety. In 1996, the Healthcare Quality Improvement Act. And now you have this National Practitioner Data Bank. If somebody is looking to hire you in a new hospital or in a hospital when you were newly minted as a graduate, your employer will likely tap into this National Practitioner Data Bank to get information. And this is run by the Bureau of Health Professions at HHS. So the National Practitioner Data Bank is... So it's intended to improve health care and it's administered by the Bureau of Health Professions, a division of HRSA and a branch of HHS. Now there are private regulations of health care providers and so you've got health system organizations of hospitals, managed care organizations, others. You've got the joint commission that participates in that, AMA, AHA, et cetera. You've got insurance companies that say you must do certain things and then you have various medical societies, AOA, AMA, et cetera, state and county medical societies that look to regulate health care providers in their areas. And government regulation of health care is widespread. You've got to be able to participate in Medicare and Medicaid. These are, depending on the managed care, can be prospective payment and you're going to have joint commission certification. There are also things called certificate of need. If you want to go build a CAT scan next door, you might not be able to because even though it's next door to a hospital and it's making a lot of money, it could make you a lot of money. If there are six other CAT scanners nearby, then there isn't that need. And so the government regulation comes through federal, state and local policy and law. Okay. About 1.13, but we'd end about a few minutes earlier. And I'm happy to take any questions if anybody has them. Lauren, anything? Hey, Doctor, I don't think I see any questions in the chat, so I think we might be all right. Okay, and I don't know if people can speak. One just came in. Okay. One second. Doris, what does the preventative health and health services block grant cover or do? So I don't know that. I think you'd have to look that up in terms of it's a very specific thing and may likely change. So in terms of looking that up, you'd have to look at HHS's website and take a look at that. Anything else? I don't believe so. Okay. Then we'll, I guess, reconvene at 2.30. Enjoy lunch. You get an extra 15 minutes. Thank you. Good. Welcome back, everybody. We're going to talk now about health economics and outcomes research. The objectives of this are to become familiar with the basic principles and applications of health economics and outcomes research, and to understand the role of economic evaluations in decision making. We've got a long agenda. We're going to look at health economics and outcomes research, take a bit of an international perspective. We'll touch on some of the various types of studies that can be done. Those are the ones that are in red. And then we'll cover cost-effectiveness analyses in detail, along with cost-utility analyses. So why is health economics so important? This slide shows the life expectancy, and it's mapped with the per capita spending in international dollars. And you can see here the United States and Cuba have essentially the same average life expectancy, but the juxtaposition of these two countries and the difference in per capita spending is quite staggering. And health outcomes research allows us to understand the end results of particular health care practices, along with the various interventions. And these end results include effects that people experience and care about, such as the change in the ability to function. It includes studying clinical, economic, and humanistic consequences of specific health care interventions or treatment plans. As we look at these various definitions, health outcomes is the end result of medical care measured in clinical, economic, and humanistic terms. Economics is the study of what goods and services to produce, how to produce them, and who to produce them for. Economic evaluation is the main decision-making aid. And for health economics, you're looking at the economics of health care and applying economic principles to health care systems. Pharmacoeconomics is a specific set of principles as applied to drug therapy. So when we talk about health economics, we're identifying, measuring, and comparing the cost, that is the resources consumed, and the consequences, economic, clinical, and humanistic of health care products and services. So who cares? Who uses health economics? Well, consumers, when they're looking to become educated and to have some autonomy. Physicians, when they're making individual prescription decisions. Institutions, as they put protocols and formularies together. Managed care companies also look at protocols and formularies. And then various governments, as they look at pricing, approval, and formularies. And then the pharmaceutical industry, and their medical affairs and R&D organizations. And with health economics, we will quickly learn that there are many parts of the story. Whether you work in an emergency room, or in an inpatient or outpatient part of a hospital, as a primary care physician, or as a specialist in a laboratory, or prescribing drugs, there are many parts of the story. And the reason why health economics is needed is these are tough economic times. Government health budgets are going down. There's a need to help health planners make informed decisions as it is related to resource allocation and services. So how do people who make these decisions at state or national levels plan to use the resources that they have? Also, the cost of new drugs and devices, they're increasing. There's a limited amount of economic studies as it relates to new treatments or healthcare interventions. Then you also have the societal costs in terms of absenteeism from work, decreased productivity while at work, called presenteeism, and then the increased caregiver burden. And you want to try and determine factors that could help contain the increase in healthcare costs for payers. So these are all amongst the reasons why health economics is needed. So as we look at the various types of economic outcomes, there are several that we will consider. The first, and it's simply direct medical costs. How much is the cost for items such as drugs, laboratory tests, hospitalizations, etc. And then there's direct non-medical costs. So to bring somebody from their home to a center that does dialysis, there's transportation costs, or lodging for family members during a patient's hospitalization if they live far away from a university hospital and they've got to be there. So these are the kinds of things when you're looking at direct non-medical costs you have to consider. And then there are indirect costs. So this includes days lost from work or reduced productivity. So lots of folks now are working at home, but they're working at home and the kids are home for the summer. And how do you then account for those hours of reduced productivity as you have to care for children, particularly younger children, as you also have to work. And then there are the intangible costs, things such as pain and psychological harm. These costs are not measured directly in health economics, but they may be included in quality of life measurements. So a lot of this is a matter of perspective. Whose perspective do you take when you're looking at medical costs, when you're looking at outcomes? Is it the perspective of the patient, the employer, the insurer, the government, healthcare professionals, the pharmaceutical industry, society, or the hospitals? So it's a lot of different perspectives that may come into what is most important and what is most valuable. And at times, these can come into conflict with one another. Because if you're a government paying for all of these services, you may not be able to cover everything for everybody. And so patients may demand more things because it obviously is relevant to them 100% of the time, because they're asking for something that they necessarily need. Whereas a government or a managed care organization may have a different perspective, looking at it from a financial one. So these are some of the types of health economics and outcome research analyses I'll just touch on. We won't go into these in great detail. But cost of illness, you will have seen these in almost every study that you read, where it says the impact or the cost of illness of a particular disease is X number of dollars. So the cost of schizophrenia in the US on an annual basis is X number of dollars. And then there's a cost consequence. So listing all the relevant costs and all the various consequences without imposing a point of view. And then cost minimization is what is sometimes frequently used in that you're looking for the least costly intervention to accomplish an identical result. And the challenge here, though, is sometimes there's an assumption of equal efficacy. So let's say that one is looking at tablet A and tablet B from two different companies, they both reduce cholesterol. One may be more potent, but you're looking at this as a cholesterol reducing agent. And you're going to assume that they're equal efficacy, you can go up and down on the dosage, and you go for the least costly intervention, and that's cost minimization. The major types of health economic analyses that are used are cost benefit, cost effectiveness analysis, and cost utility. So cost benefit is to determine if the monetary valuation of the consequences of an intervention exceeds its cost and by how much. This is useful in comparing costs between different programs, because everything is reduced to a financial perspective. Cost effectiveness analysis uses natural units. And it determines the intervention that leads to the greatest improvement for the smallest increase in cost. And the cost utility analysis is health related. So it determines the intervention that leads to the best improvement, that is in cost for quality adjusted life year again, and we'll go through these last two in more detail. So one of the challenges in this part of the course is that for people who don't necessarily engage in health economics research, at the end of the course, there's a request to evaluate the course to say, you know, which of these things will be valuable to you. And if you don't do health economics, this may not necessarily give you the greatest value. But I wanted to show you that in different areas in the field of public health, health economic analyses are used and are used broadly. So here is a study that was done looking at the economic evaluation of a community water fluoridation program. So this was some study that was done and published by the Community Preventive Services Task Force. Another one here looked at cost effectiveness of community-based physical activity interventions. So this is a cost effectiveness analysis, right? Another one is looking at cost utility analysis of cancer prevention, treatment and control. So this, this article published in the AJPM was a cost utility analysis. Take a question. So the main methods of conducting a health economics study are cost effectiveness analysis, cost benefits and cost utility. So health economics focus on augmenting decisions by establishing value. The most appropriate health economics study design is grounded in the most relevant outcome measure, the perspective. So just like in public health, health economics study design is grounded in the most relevant outcome measure. So just like in epidemiology, whether you use a case control study, a cohort study or a randomized clinical trial, it depends on what you're looking to study. And similarly in health economics, the study type that you will use is grounded on what it is that you're looking to measure. So there are obviously advantages and disadvantages for each. Cost effective may not be indicative of least expensive and expertise is warranted in diverse levels. So health economics and outcomes research goals, you're trying to augment decision making among multiple options. It is not going to be a decision maker. It is however, evidence based in terms of the opinions or the data that it generates. And it can be used to guide policy. In the end, there are people, most often politicians or people appointed by politicians, whether it's health and human services secretary or department of health, you know, secretaries who make decisions. But the health economics and outcomes research work generates data to help to make those decisions in the data driven. So what is the health economics and outcomes research? It's a scientific inquiry, evaluating the results of medical intervention and healthcare services in a real world setting. And this is where it is differs a lot from epidemiological studies. Health economics is based more in the real world setting. And it establishes the value of healthcare by assessing clinical outcomes. It's outcomes driven, including patient quality of life and satisfaction. And the outcomes data are direct measures of whether medical treatment interventions or education are beneficial. Outcomes research collects information on which drug intervention, etc, works best, which patients benefit, and when to treat. So what stage of the disease process, and then the cost of treatment. So there are a variety of things that you need to consider when conducting outcomes research. And here are some of the measures, you can have economic outcomes, we talked about these before, direct medical costs, direct non-medical costs, indirect costs, resource utilization, length of stay, these are the kinds of things that you can measure. The clinical outcomes include both morbidity and mortality. And your other clinical indicators that can be defined according to the condition under study. So depending on the type of study, there might be different things you would be looking for. If you're doing a psychological study on patients for schizophrenia or depression, or you're doing a study looking at Crohn's disease, the types of outcomes measures will vary significantly. And then there are humanistic outcomes, the perceived outcomes, this gets the quality of life, this is patient input. So you're asking patients to give feedback on their functional status, their ability to return to work, and then also their satisfaction. Healthcare providers, including physicians, hospitals, the interaction, and these are things that are different or unique. In the world now, 20, 30 years ago, these were not common. Now they're becoming more common. And patients are having a greater input into the kinds of things that they are willing to undergo. Question here. If a patient has to take time off from work in order to have a routine screening test, what is the cost classification for the time lost from work? And so it's indirect, right? You're taking time off from work. And so that's an indirect cost. And then outcomes of medical care are generally divided into the following three categories. And it's clinical, economic, and humanistic. So these are the three categories when you talk about outcomes research that you're looking at. Clinical, economic, and humanistic. Okay, let's go through some things before we get into this study. So discounting. This is a concept that you need to understand because it's the value now of a dollar received in the future. Basically, do you want to get $100 now or do you want to get $100 in many years? Well, first of all, if you get the $100 now, you have it in your hands, right? But if you look at discounting, what does inflation do to $100 20 years from now? It decreases the purchasing power. So you can see with a 3% annual discount rate versus a 7% annual discount rate, that in 20 years, if you were to get that $100 at a 7% discount rate, it's worth only about 20 years. So you can see that the first only about $20 or $30, where the 3% discount rate in 20 years, it's worth about $55, $60. And so that's why you need to understand what discounting means, if you're going to do an economic evaluation of a particular program. And the reason I'm sharing this with you is that these types of questions have come up on the exam. So a formula for discounting is the present value of the amount of money over 1 plus R, which is the discount rate. So we said 3% or 7% here, it could be 5%. And time is the time in years. So $100 at a 5% discount in one year is worth a little bit over $95. And in 20 years, it's worth about $38. Okay. So when conducting a health economic study, future costs and benefits are discounted to current values because discounting current values allows for direct comparison of all equivalent costs and benefits regardless of when they occur. So when we talk about expenditure versus value, so expenditure is how much you have to pay if you're buying one pill, or 10 pills or 100 pills, the cost, what you're going to expenditure is going to be the price per pill times the number of pills, right? The value is the expenditure over the unit of outcome. So if you're taking a pill, A versus pill B, does it reduce your cholesterol count by X number of units, right? Milligrams per deciliter. And so that's what you're looking at in terms of value. And there may be other ways to increase value, the value versus price. The price, price is a part of the value calculation. So when you look at value, you're looking at price, economic outcomes, clinical outcomes, and humanistic outcomes. And price may be the only variable that can be altered to change the value calculation because you may not be able to change the clinical outcomes or the humanistic outcomes. And the economic outcomes are part and parcel reflection of the clinical outcomes. So price may be the only variable you're able to change. And when we look at cost, price and reimbursement, sometimes they're used interchangeably, but they're not necessarily interchangeable. So cost is the magnitude in terms of monetary value of resources that are consumed in producing a good or service. Price is what a consumer is asked to pay for a good or service. And reimbursement is what the payer provides for the service. So say for example, somebody is in the hospital and they're given a particular tablet. The reimbursement for that may be a dollar from the payer. The price that the consumer may be asked to pay is $2. And the cost of making that may be 50 cents. So you can see the cost, price and reimbursement are not equal. Opportunity cost is a concept that is worthwhile knowing. It's the amount that a resource could earn in its highest valued alternative use. So if you have $1,000 or $10,000 to invest, what will you do? Will you buy a pot of gold and keep it under your bed? Will you invest it in mutual funds in the stock market? Will you put it into a business where you can look to get a return on that business? So we talk about opportunity costs in the sense of what is the best or highest value that you can get for the money you're looking to invest. And it's the best measure of a value of a resource. So in a health economics study of a potential intervention, it is important to consider using the concept of opportunity costs because because in a healthcare marketplace, prices are set by mechanisms other than perfect competition. Healthcare markets are inefficient pricing mechanisms. So you need to think about this in terms of if you had money to spend, you're looking for the greatest value. And in healthcare marketplaces, you don't have that perfect competition because if you, going back to the example we used earlier, if you break a leg or get into a car accident in Maine, you can't say, well, I'm gonna come back to New York where I am and get a better price there. You need care immediately. And so this is what makes that a bit of a challenge in the healthcare marketplace. The concept of a sensitivity analysis is that you're allowing for variables in the outcome of interest to be looked at. So what if the effectiveness in real life is X percent better or worse than being in clinical trial? What if price fluctuates plus or minus X percent? So for example, when you have a number of clinical trials, let's use oral contraceptives as an example. Oral contraceptives work almost 100% in terms of effectiveness when used in clinical trials. When used, however, in real life, they may be only about 90, 93% effective. That doesn't mean the pills have become any less effective. What it means that they're the variables of human life that come into play. People travel, they forget to take their pills and this then makes it less effective. So whether it's blood pressure medicines, cholesterol, oral contraceptives, they're not as effective as they are in perfect conditions. So this sensitivity analysis allows for that variability in the outcomes of interest. It's very important to do sensitivity analysis. And part of the reason is that you can say there's a robustness to the model that you're preparing because you said we varied the various outcomes by three or 5% either way. So if it's more effective or less effective, these are the parameters that you can expect to be within these boundaries given this variety. Let's take an international perspective. A picture I took many years ago with my kids in former East Berlin with folks who recognize this as two international economists, Marx and Engels. And then years later when they were both taller than me. We're looking at health expenditures as a percent of GDP. You can see the United States is by far way ahead of other Western countries. And we have looked at this as a percent of GDP earlier, 18% and growing. And you can see here health expenditures is a percent of GDP in number of the OECD countries. So these are basically a lot of the Western or industrialized countries. And you've got the United States by far ahead of anybody else. And you see Switzerland, France, Germany, Belgium, Portugal, et cetera. They spend a lot less than we do. And the question is, what do they get for their money that they spend? What's the bang for the buck in terms of the outcomes that they generate? Similarly here again, looking at life expectancy is started off this chart with life expectancy and spending. You can see for a number of these countries their life expectancy is much greater than the United States. And we spend a lot more. Why do we have these differences? And it comes down to how the systems are organized. A lot of these wealthy countries have a universal healthcare system where the government is in charge for paying for it. And so they then have things that are uniform all across the country. And that has allowed them to do two things. One, it sets national standards. And two, they have economies of scale where they can bargain price controls for medicines, for what healthcare professionals are paid, for hospital charges, because they run the entire system. So you don't have a variety of healthcare organizations making a profit on this. This is run as akin to a public utility, but you can see here, even with limited expenditures, if you change the system completely, you can have better outcomes. Longevity as measured here by longevity compared to the amount of money that is being spent. And we saw this earlier, 10,000 and growing in the United States. So let's take a look at the United Kingdom. So in the United Kingdom, there is a group called NICE that appraises the clinical benefits and costs of interventions. Doesn't necessarily set the price or reimbursement level. However, it does it on its own analyses. And then there are national collaborating centers that do these analyses and make recommendations to NICE, which issues the final recommendations. So you've got to consider both the clinical effectiveness and the cost effectiveness. So in the United States, to get a drug approved, it needs to be safe and effective. In much of the Western world, it has to be safe, effective, and cost effective. And that's that third part that will determine whether or not it gets added to the national formulary. Similarly in Canada, the first guidance was published in 1994. It said something called a price ceiling at the federal level, but provinces can set an actual price. And there's the Canadian Coordinating Office of Health Technology that's responsible for setting national standards. And they do their own pharmacoeconomic analyses. The Ontario Guidelines was actually the first one that was issued. And these type of pharmacoeconomic analyses are not limited. You've got to provide financial implications for three years post-launch. And if you launch a particular product and it ends up costing the government more, they'll come back to you and say, look, you need to give us a refund. So this is how Canada works in terms of how they take on new pills, products, et cetera. In Australia, they were the first country to implement pharmacoeconomic guidelines all across the nation. That was in 1993. So they regulate over 90% of outpatient prescriptions and they use pharmacoeconomic analyses in what they call major submissions. So you've got to list a new drug with them to request change in a current listing, request change in price to list new formulation. You've got to submit a health economic analyses. And they allow for economic modeling. Could include sources of information for establishing various model parameters. If you have to talk about the population in which your study was based, you've got to take a perspective in terms of a time horizon. You need to do a sensitivity analysis. And there's got to be justification of the outcome variables that you chose to model. So the feedback that their group makes a decision based on a societal perspective. So it is not that, you know, let's say you're a large company like Exxon that pays for your employees' healthcare and you decide what you want. The Australian government makes a decision based on a societal perspective what's good for all of Australia. It discourages this cost benefit analysis and inclusion of indirect costs and benefits. It recommends use of final outcomes such as quality adjusted life years, that's prevented, et cetera. But surrogate outcomes may be used, but it must be linked to the final outcome. So surrogate outcome is if you're taking something to reduce cholesterol, you can then have a decrease in cholesterol. But the final outcome that you're really interested in is there a decrease in heart attacks or in stroke. So what percentage of people taking a particular statin may have a decrease in MIs or CVAs, right? And the outcome must be related to the main indication of the product. And it must include an incremental analysis to determine the cost for additional unit of outcome. And this is where you have the cost effectiveness analysis. But the United States, as we talked about earlier, is not considered a single payer market. It is a hodgepodge of many different types of payers. Manufacturers don't need to provide health economic assessments for pricing or reimbursement. They can choose simply to raise prices. The Department of Defense, however, generates its own pharmacoeconomic analysis and the Veterans Affairs Group publishes their own drug class reviews. In time, we will likely get to this in the United States with AHRQ publishing more and more of these types of drug class reviews. And then down the line, you can imagine Medicare Part D will be changed so that the government, Medicare, can in fact bargain for better prices because right now with Medicare Part D, when it was changed in 2003 and it went into effect in 2006, it was written into the law that Medicare could not bargain with the pharmaceutical company. Now the FDA is setting the same standard for economic claims as for safety and efficacy claims. So you have to have two well-controlled clinical trials. This is difficult and expensive, but in time, these may be the requirements also. And then there's a whole new area of health services research that will likely open up with a lot of funding there. So you can see it is almost asymptotic curve in terms of the rising costs in the United States of expenditures for healthcare. And we spent about $3.35 trillion, 18% of the GDP. It's expected to go up to 20, 21% in the years 18 and 20 and beyond. And the American Recovery and Reinvestment Act or the stimulus bill of 2009, seems like a long time ago, but it's only 11 years ago when the economy was in the doldrums and there is this bill that was passed and it will cost $787 billion or it costs over the last 10 years. It allocated $1.1 billion for a comparative effectiveness research on drugs, devices, et cetera. And the Agency for Healthcare Research and Quality, they got control of $700 million of that 1.1 billion on top of their usual budget of $300 million. So you can see the comparative effectiveness evidence generation will be key. And so for anybody who is, you look to take the boards and go out into the workforce, if you're interested at all in health services research, that should be a booming area of research and study in the years to come. And then subsequent to the Recovery and Reinvestment Act, you had the Patient Protection and Affordable Care Act of 2010, Obamacare. And that cost the country $850 billion over the last 10 years. But what it did was allow another 10% of the population, maybe another 30 million people to have access to quality, affordable healthcare. It's still not 100%, so we still don't have universal healthcare, but about 95% of Americans, up from 85% of Americans now have access to quality, affordable healthcare. And the thought does that it would bend the healthcare cost curve and reduce the deficit by about $143 billion. What it also did was to create a new patient-centered outcomes research institute called PCORI. And the job of PCORI was somewhat like AHRQ, but it was more specific to generate comparative effectiveness evidence of the best and most economical drugs, devices, et cetera. So here I pulled from the PCORI website. Their mission, you can see here, was to help people make informed healthcare decisions and to improve healthcare delivery and outcomes. And the vision was that patients and the public should have the information they need to make decisions that reflect their desired health outcomes. That's one of the challenges in an incomplete marketplace. You don't get the choice. You don't get to make the right choices if you don't have the right information. And so what this was looking to do was to create this outcomes research institute that would generate evidence to allow for better choices. Now, something that's called an AMCP dossier. This is used by most managed care organizations. And while this is in the United States, it's a managed care pharmacy. So various methods of pharmacoeconomics are not specified, but the orientation is disease-based. You've got to evaluate the impact of the product and costs and clinical and humanistic outcomes for a planned population. So here we go from the differences that in Australia they took a societal perspective and they looked at the whole country. But if you're UnitedHealthcare or Kaiser, your only interest really is on your plan. There may be public health issues that may impact your plan, such as COVID-19, such as tuberculosis, HIV. But for the most part, you want to take the perspective of your plan because that's who you're responsible for from a financial perspective. And it requires costs and consequence tables or cost-effectiveness ratios. You need to do a sensitivity analysis. And clinical and economic data must come from clinical trials and be modified to be realistic to that plan's population. So this is where if you're in a plan, you're looking at your particular data. So it's a bit of sharing information. Who are the people in your plan? It's a million people. How many are male? How many are female? What is the breakdown in terms of age? So this way, a particular product can be modeled for your particular plan. Okay. So when conducting a health economics study of a proposed intervention that will be funded by Medicare, the most appropriate perspective of the study would be a societal perspective because while Medicare has a limited population, you could argue that it's for payer. The reason it's societal is the tax monies that go into this pay for this in a societal level. When doing a health economics study from a societal perspective, which costs and benefits are actually discounted. So you're looking at all of the outcomes, right? All the costs and benefits, even if the outcomes can be readily valued in monetary terms. Okay, let's take a look at what is a cost-effective analysis and how you do it. So here again are some examples that have been published in the literature, again, from the American Journal of Preventive Medicine. Looking at cost-effectiveness of a sugar, sweetened beverage excise tax in the United States. So you've seen a number of these taxes come far, just like you had taxes on tobacco and alcohol. There are some states and cities that are imposing a tax on sugar, sweetened beverages. And this was a cost-effective analysis that was done. Another one looked at the cost-effective analysis of the first federally funded anti-smoking campaign. And this was a cost-effective analysis looking at childhood obesity intervention. So it looked at evidence and methods for choices and programs in place. In terms of the definition, you've got to use a method to define, assess, and compare resource consumption at the inputs with consequences of care, the outputs or the outcomes between two alternatives. When you're looking at cost-effective analysis, the basics, you're used to, it's used to compare all of the costs and all the benefits of the treatment or intervention in order to determine whether it is a sufficient value to reimburse it. The costs are measured in physical units and valued in monetary units. The effectiveness is measured in natural units of health improvements, of clinical outcomes, years of added life, prevention of disease, et cetera. And it's the most popular health economics analysis in terms of life year of state. So the advantages of a cost-effective analysis, one of the inconvenient or challenging things is to put value on the life. So in a cost-effective analysis, unlike others, you don't have to place a monetary value on a clinical outcome or human life. You can compare treatments when monetary outcomes cannot be used, and you can compare different treatments that have the same treatment goal. So decision makers are more comfortable with this when the outcomes are in natural units. The disadvantages of a cost-effectiveness analysis is that you can only compare treatments and interventions that have the same outcome. And only one outcome can be measured at a time. And not all treatments have the same intermediate outcomes. So the results can be showed mathematically. So there's a statement of cost and consequence. So you can do a simple cost-effectiveness ratio, but the one that is used most frequently is the incremental cost-effectiveness ratio, and there are others that show non-monetary. So we'll talk mostly about the incremental cost-effectiveness ratio. And then graphically, when you show an ICER, you're looking at a cost-effectiveness plane. You're looking at the economics of what is called the efficiency frontier. And you can talk about a cost-effectiveness acceptability curve. So this is the ICER, and we'll talk about this and then go through an example and then come back to it. So you can set it up in the northern end, you've got higher costs, and the southern end, you've got lower costs. In the west, you have lower effectiveness. On the east, you've got higher effectiveness. And if you've got higher costs and higher effectiveness, that's where you need to make a trade-off. Or if you've got lower effectiveness and lower costs, that's also where trade-offs must be explored. Nobody will choose a worse outcome at a higher cost. So that choice is dominated. You can put an X through that. And then if you're getting a higher effectiveness at a lower cost, then that dominates the others. So that's the one you would choose. You don't need to be a health economist to choose that, right? But the two in the upper right and the lower left corners are the ones you've got to make some decisions and to calculate what the value is that you're looking at. So first you need to, just like in an epidemiological study, define the problem, select the right research objectives and choose the right perspective. You then need to identify alternative interventions and describe various production relationships between inputs and outcomes, itemization and resource consumption estimation. You need to identify and measure costs and outcomes of interventions. And then you need to interpret and present those results. So here we're looking at the cost-effectiveness ratio. So you're looking at interpreting the average cost per outcome. You look at one input and output in isolation to the other. So this way, you can't make a head-to-head comparison if you're doing a cost-effectiveness ratio. If you wanna do an ICER, that's the thing on the right where you do treatment one versus treatment two and then effectiveness one over effectiveness two. And then effectiveness one over effectiveness two. An ICER is where you have the change in the cost and the change in the effect. And that's what is shown here. So it's interpreted as a cost to achieve one more unit of increase in the outcome. So one more year of lifespan between alternative and incorporates changes in costs and effects in relation to one another. And this does allow you to make a head-to-head comparison with these two products. So say, for example, you have drug A and drug B. The total cost for a hundred patients is $5 and the effectiveness is 95%. You've got a 95% cure rate. For drug B, the cost is to say it's a new drug. Drug B is a hundred patients get treated for $750. And the effectiveness is a little bit better than drug A. So where drug A is the gold standard and drug B is a new drug attempt in the market, you can say, well, it costs on average $526 for a cure. Whereas the average cost of B is 773. Remember, you're treating 2% more patients, right? But the differential is 247. So the difference in the average cost for cure is 247. So if you look at it, you go, wow, it's a, you know, you say almost 50% more, but you better remember you're curing, again, an additional 2%. So how do you take this into effect? Well, you do this by doing an ICER. And this is just a standard accepted procedure in the health economics world. New treatments on the left, old treatments on the right. And essentially what you have based on this is $12,500 per additional cure. And anything under about 30 to $40,000 was deemed or is deemed appropriate. Now that number is going down, but in general, 12,500 per additional cure would be considered worthwhile to implement. In addition, you need to think of what is the severity of that particular disease. So if it's a common cold, maybe it's not such an import, but if it's something that is potentially lethal, then yes, it makes sense, right? This next point of willingness to pay is the threshold at which an agency is willing to pay for an additional benefit. So I like to tell the story, my kids, when they were younger we went and, you know, they each had their pocket piece of summertime in New York and we went to a store and they put some things on the conveyor belt that they wanted, cookies or candy, something like that. And when it came time to pay, I said, well, where's your money? Like, oh, we thought you were buying it. I said, hold on, you have your money. Do you want it? And they both took it back and put it back on the shelf. And that's something that we need to consider, the willingness to pay. If it's your money that's being spent, you may or may not be as easy to part with your money as if it's, well, it's covered by the insurance company or it's covered by work or it's covered by the government. And it's that threshold that one needs to think about that is this willingness to pay. Now an agency will consider a technology cost-effective if the ICER is less than a particular threshold. And as I talked about that, that $12,000 threshold is low in terms of what is considered. So it's usually anything, initially it was about 40,000 but now you're looking at a threshold of about 25 to $30,000. So let's come back to this now. So if you're looking at ICERs, you're looking at trade-offs, you make those trade-offs based on the cost and the various threshold that you're looking to be beneath. So in what circumstance or circumstances is it best to use a cost-effectiveness methodology? So it's when you're comparing different interventions and they produce the same health outcome. So life saved among the same population group. If you're looking at different pills, different surgical type things, and then in the same population. Cost-effectiveness analysis is different from other pharmacoeconomic assessments in that. Natural units are used. So you're not making this based on dollars. And incorporating patient preferences is cost utility, which is what we come to next. So cost utility analyses are used quite frequently, and it pulls into these types of studies, patient preferences. So this is a cost utility analysis of the patient preferences. So this is a cost utility analysis of the National Truth Campaign to prevent youth smoking. Another is a cost utility analysis of clinical preventive services. Here is one on a cost utility analysis of lung cancer screening. The cost utility analysis, the basics are that you're looking to assess efficiency of healthcare interventions. Utility is the value that is placed on a level of health status as measured by preferences of individuals or society. And the outcomes and benefits are measured in quality-adjusted life years. So it incorporates both morbidity and mortality. So quality of life and quantity of life. So when would you wanna use a cost utility analysis? When quality of life is the most important or one of the most important outcomes. When treatments affect both quantity and quality of life. And when treatments have a wide range of outcomes. So here in a very simple pictorial, you can see what all our complicated lives could be, how it could be represented. At some point you're born, perhaps in perfect health, not always, but born, you assume it's probably as good as health you're gonna have. You know, you're, let's say in the fifth grade, you fall down, you break an arm, and there's some morbidity associated there. You get better. You're involved in a minor car accident when you're in your 20s. Then when you're in your 60s or 70s, you have some diagnosis of the disease. It gets progressively worse. You have some treatment and there's some remission and then long, then you pass away. So not to be morbid or to be too simple with this, but this is how, when you're taking a look at it from the cost utility analysis, you can have a representation of a life. And here you see, in the next few slides, you'll see things as it relates to a particular slice of life as you get older. So you've gone from this perfect health or a particular snapshot in time when you got a particular disease. And the standard of care is in the green line and there's a new treatment. And you can see in this new treatment, you have not only, you have an increase in the quality, but not the quantity of life. So your quality of life is better, but you die at the same time, right? Here's another one where you've got a new treatment. It increases the quantity of life, but it decreases the quality of life. So you have some type of a cancer and you don't get any chemotherapy, you will die at some point and you will die earlier than if you get the chemotherapy. And while the chemotherapy may allow you to live a longer life, your quality of life may be much worse than if you chose not to get that treatment. So this gets to, what are the choices that you will make knowing the information that you have? So the advantages of a cost utility analysis is include patient preferences. You've got a single measure that incorporates morbidity and mortality. It allows for comparison across different treatment options. And here you don't have to place a monetary value on human life. The disadvantages of a cost utility analysis is that it can be time consuming. It's difficult to do. It relies on specific instruments being used and the specific population may not be generalizable. Clinicians may not necessarily understand the methods even as they read the results. And the FDA will not allow quality of life statements in packaging or marketing messages unless a survey is developed and validated at the beginning of phase two trials. So assessing the utility, these are the rating scales. So rating scales are your assigning a numeric value to certain objects. They can be categorical or analog type scales. And these are widely accepted and used. So as we take a look at this, you're assessing utility. There's some sort of a magnitude of estimation. So a specific case is selected as a standard and assigned a number and other cases are rated in relation to that standard. So is it valid or is there only face validity? So meaning the scores are not linked to the decision. So meaning the scores are not linked to the decision process. So you get to conduct these types of measurements to see whether they are giving you the right numbers in terms of what people think. So in assessing utility, there's something called a standard gamble. You're choosing between two alternatives. So living with certainty in a healthy state X or taking a gamble with a new treatment and an uncertain outcome. So that's like the green and the blue things, blue lines we saw representing a standard of health and then a new outcome that may give you a decreased quality of life, but a longer life. So treatment B's probabilities of a perfect health and death are varied until the subject is indifferent. So utility is at that point of indifference and it's applicable to treatment of chronic conditions. So think of this at some level when you go to the optometrist and for those of you who wear glasses. So when the optometrist is going through this, it's sort of, does this look better or does that? And he or she will keep changing various options until there's no difference. So that's when you say, okay, this is where you are and that's what you end up with. So this is the standard gamble that you go through. There's also a time trade-off, right? The subject is offered a choice between living in a healthy state X for time B or perfect health at time A. And it may not be perfect health, it may be better health at time A. So you may live a shorter time in a better health or a longer time in a lower state of health. And people will make these trade-offs. They say, look, I know what I'm choosing. I wanna live the best quality of life even if it may be shorter and not have to go through what may be an onerous treatment. And then there are person trade-offs that compares the number of people helped in different states, different health states, but this isn't used a great deal. So similarly to conducting a health economics study like we did in the CEA, the CEA describes the health state. You choose the right instrument. You better administer that instrument, have a rating scale, whether you use a standard gamble and trade-off, determine the utility and calculate the quality adjusted life year. So here is a set of scales that are used for people with Crohn's disease. So perfect health is that. You've got remission of disease and they say, well, it's 0.92. Mild disease, 0.74, moderate, 0.55. Severe, the quality of life is about 0.35. And then death is zero. There are some skills, particularly with people who are undergoing long-term dialysis, where they say that there's a negative. So living with dialysis is for those folks that it's worse than death. But we'll use this Crohn's disease example. So when you're calculating a quality adjusted life year in an implantable defibrillator, it may extend life by 20 years at a utility of 0.76. So then what are the quality adjusted life years? So you do the life expectancy, 20 years, times the quality of the life, 0.76. So if you implant this defibrillator, while it extends life for 20 years, the quality of the life is equivalent to 15.2, as it were, perfect years of health, okay? So now you've got ablation surgery and that costs $25,000. And it extends life for 10.45 years at a utility of 0.65. And if you have an implantable defibrillator costs 40,000, it extends life by 10.52 years with a utility of 0.75. So now what's the ICER and the incremental cost utility here comparing these two treatments? Well, if you simply compared it, looking at the years, you would see that the ICER is $214,000 for life year gain. And that would not be funded by any health technology agency. But if you look at the incremental cost utility ratio, you take the incremental cost utility. This is the life years multiplied by the quality of that life year. And you see it's $13,600 per additional quality adjusted life years. So let's just go through that again. So what you have here is the number of years at that utility and the number of years at that utility. So there's a difference in the utility as its value. So here it was just looking at years without the utility built into it. But when you do an incremental cost utility ratio, it's the number of years, which is what you have above, where you're also now multiplying it by the value that's placed on that utility of life with this intervention. So then you come down to $13,600 per additional quality adjusted life years. And this is where the incremental cost utility ratio is what. And as I said, while this was started at above 40,000 was too expensive, 100,000 is unattractive. Anything that's 20,000 or below is attractive or very attractive. They're trying to push this down the health technology agencies that are evaluating these like NICE, PBAC, et cetera, to 30, 25,000. Try to decrease the cost that they're willing to pay for. Now, these numbers were gathered on the treatment of end-stage renal disease done in the 1970s. The figures first emerged in the 1990s. They haven't taken into account. So what you have to do is become more and more cost-effective in meeting these hurdles. So when you come up with a new treatment, a new pill, a new way of working, you've got to become more cost-effective than previously had been done to become accepted. And it's just like manufacturing. You make things faster and cheaper. You've got to be able to do this at a cheaper way than before. And it does not differentiate between types of disease or life. You're just looking at cost utility analysis, less than 20,000, great, we'll do it. Greater than 50,000, we're probably not going to do it. Now, this changes depending on the severity of a particular disease, whether there are alternatives for that, et cetera. So as we take a summary of this, the health economics and outcomes research methodologies, there are a variety of them. You better incorporate the times whether there's a meta-analysis. You need to do sensitivity analyses. There can be things like conjoint analysis, decision analysis, and Markov models. And these are all types of things that go into play. We looked at these various types of studies. We didn't consider all of them in detail, but just to review the major health economics and outcomes research methodologies. Cost minimization is where you look at the least costly intervention to accomplish identical results. Cost effectiveness is looking at natural units to determine the medical or healthcare intervention that leads to the greatest improvement for the smallest increase in cost. Cost utility is health-related. It determines the intervention that leads to the best improvement. That's a cost-per-quality adjusted life-year gain. And cost-benefit is to determine if the monetary valuation consequences of an intervention exceeds its cost and by how much. And again, this is useful to compare costs between different programs. So here, as in a simple table, cost of illness is about dollars at the input. Cost consequence, input in dollars, and all relevant outcomes reported separately. Cost minimization is a cost, and then you assume equal outcomes. Cost effectiveness looks at dollars and then natural units. Cost benefit is where you value the outcomes monetarily. And cost utility incorporates the preferences of patients. For people interested in health economics and outcomes research, I'll share with you there's something called the International Society for Pharmacoeconomics and Outcomes Research. It's four. They're founded in 1995, and this is about 25 years they've been around. They have comments and policies. They educate about research, probably folks. And they're all over the world, and they have a journal value in health. If you're doing health services research, this might be something to look into. So let me come back to this, because I know we have time. It's only 3.34. We've got another 25 minutes. Let me go through some of the supplementary material since we have some time. So you've got cost of illness. We talked about these cost definitions, direct and indirect costs. Fixed costs, they don't change with a change in output. Variable costs, varies the increase or decrease in output. Average costs is the resources consumed per unit of output. And then the marginal cost is the change in the total cost of producing one additional unit of change. Cost of illness is medical plus non-medical plus indirect costs. So you're just tallying up all of these various costs, and that's the cost of illness, the cost of diabetes per year, cost of hypertension per year. It's a medical, non-medical, and indirect cost. Cost benefits we talked about is just the money and money, right? So it's a method for comparing the value of all resources consumed of costs in providing a program or intervention with the value of the outcome. And there's a monetary yield of an investment. So the resources that are consumed and the health outcomes are measured in monetary units. The goal is to identify if a program's benefit exceeds the cost. And it can be controversial because the CBA puts a dollar value on human life. And CBA advantages, you can compare very different types of outcomes. So cardiac defibrillator versus a vaccine program versus a food safety or a water quality program. If you're at a health department, it's easy to understand the concepts and it provides an absolute worth of a therapy or intervention. The disadvantage is obviously is how do you put a value? How do you assign a dollar value for human life? You can't use intermediate outcomes, you better use final outcomes. And the value assigned to an outcome may be subjective, right? So are rich people's lives worth more than poor people's lives? And it's not widely accepted in healthcare. And so this gets to, how do you assign costs to human life? And the human capital approach is the value of human life at 150 to 200,000 per year. So when do you wanna use a CBA? Only when it's possible and appropriate for your outcomes in terms of monetary value. To do a CBA well, you need to take a societal perspective. However, most CBAs take an institutional perspective in the United States because you've got healthcare systems. They're only interested in their perspective. So the benefits to include are direct, indirect and intangible costs. And these are the kinds of things that you're gonna have to put and look at for money. And similarly to CUA and CEA, you identify interventions, treatments or search questions. You've got to identify and evaluate all the resources consumed along with the costs. To identify and value all of the benefits. To sum up the costs and benefits and compute the net benefits or the benefit cost ratio. And I'll let you go through this, but when discounting, use a rule of three to 5% on costs and one to 5% on benefits. And you can see this benefit cost ratios laid out here. So if you get treatment costs $100 per patient and treatment benefits, and similarly to 1,000 and 5,000, as you do the calculations, you can see that the net benefit approach is $900 versus 4,000. But then when you start to look at the cost ratio, you're gaining treatment B, that the benefit ratio is much better than for benefit one. So what's the better treatment? Well, you've got to look as you look to vaccinate healthy working adults against the flu, the perspective, the cost, the benefits and results and doing a sensitivity analysis to see what does it mean? So if you're looking at direct costs, there's a vaccine, there's side effects, there's indirect vaccination and side effects, you can say this all costs $16 plus. And then the benefits are $30. So physician visits, hospitalization, presenteeism, absenteeism, future earning. And the benefit here of cost versus benefit, the $30 versus the 16 gives you a net benefit of $13. But if you do it as a benefit to cost ratio, you see for every $2 you spend, you get about $2 return. For vaccines, this is actually about 10 to one. I'm just using numbers to share here. And then the health related quality of life. This is a person's subjective assessment of the impact of the health of their functioning and well-being has not been viewed with equal importance in clinical outcomes, but support for quality of life is grown as it incorporates patient's perspectives. So there's been a third year increase in lifespan from 1900 to 2000, although we've seen some decrease in US lifespan in the last couple of years. As we've shifted from an acute to chronic conditions, as we shift from limiting mortality to limiting morbidity, you're more likely that the disease will negatively impact the quality rather than quantity of life. And so, as we look at these components of quality of life, there's biological functioning, there's general wellbeing, and there's behavioral mental health. And the quality adjustment made with health state preferences is the quality adjusted life years. So we talked about this earlier where one is perfect health and zero is death. And you may use various expert opinion, rating scales, time trade-off, standard gamble, all used to elicit these health state preferences. And so here you'll see a variety of graphs that show you that here, as an example, you have not only the quality of life is better, but the quantity of life is greater. So this would be something you'd look to implement. And there's various things, you may have something that shows things get worse in the short term, but over the long term, they get better. So what do we measure? We measure a variety of things, physical functioning, ability, limitation, social and various roles, mental health, anxiety, depression, psychological wellbeing, emotional control, cognitive function. These are all very important things as we think about COVID-19, where in many parts of the country, employees have now been working from home, those that can work for 24 weeks or more. So it's been a long time working at home. What does that do to people's mental health? When we come back, quote unquote, to work, if there is a vaccine that's successful, will people come back to work every day of the week? Will they be happy working at home? So how does this play into this? So these are the kinds of studies though, that will need to be done before you can do any type of cost utility analysis, because you've got to get these quality of life measures or scales generated before you can do a cost utility analysis. And these things can be measured and they're applicable across all disease conditions and various interventions. And there are various specific tools that can be used as in the SF-36 or EQ-5D or Health Utilities Index. These are all different types of tools that can be used. And they're very specific measures, as I talked about, there's one for Crohn's disease, but you can see there's something called a PERT score for MS. There are various types of pain indices that are used, various functioning scales for fatigue, sexual dysfunction. And the SF-36 looks at general health, physical functioning, social functioning, physical and emotional role function, mental status, energy fatigue, bodily pain. The SF-36 is widely used, it's reliable, it's valid, it's well-established. It can be used in a large number of cultural settings and it's used in more diseases than any other instrument. It's called the SF or short form 36. And there are many administrative choices you can do touch screen, pencil and paper, touch tone, et cetera. But it doesn't provide an overall score. There's something called an SF-60 and it's not sensitive to changes in all diseases. So that's why you may need a specific measure for specific diseases. Sometimes wording of some of the items makes it hard to translate. And sometimes some of the scales are similar. Similarly EQ-5D used more in Europe, I won't go through that, but there are different types of things that are used. And then the decision analysis gets to looking at the Markov model. I'll just go down to, there are decision trees that are used and most studies are not head-to-head comparisons. And this is basically what I mean by decision. You start with something and you may have certain decisions and then this is what a Markov model is used to create this. And then it's a decision analysis where the advantages may be explicit. You have structure. It allows diverse data to be combined. It explicitly allows use of patient preferences. It can examine soft data. It separates large problems and smaller manageable ones like you can see here. And then it provides documentation for the reasoning. Now the disadvantages is while it can be explicit, it encourages oversimplification. So magically you get a number and that's the be all and end all. Recognizing that these types of things are only used to help augment decision-making. They're not the end of any sort of thought that would be required. And then it requires data. People may be unfamiliar with how to generate these, but that's why you let people who do this, do these types or generate these types of modeling. Just as how, if you're not an expert in statistics, you wouldn't go ahead and do statistical analysis for your particular study. Similarly, developing a model decision analysis, you wouldn't go ahead and do it by yourself. And then the sensitivity analysis, we talked about this looking to make it more robust and using multiple parameters in different ways. So I will stop and get about 15 minutes left where I'm happy to take any questions if they are. And for those of you who will not be coming back to the Wednesday program, I wish you good luck. And there's a phrase, seek knowledge, you've gone to China. Lauren, Mark, I'm happy to take any questions if there are any. I don't know if Lauren or Mark are there. See if there are any questions. Yes, Doctor, if you look in the Zoom chat, I think I just pasted a question that just came in from Damon. Okay, great. Yeah, so what's the difference between indirect and indirect medical costs? So an indirect cost is something that is not necessarily related to the actual delivery of medical care. And the indirect medical costs is in some way related to that. Let me see if I pull up the slide again. So when you're looking at making these types of decisions, the, let me just pull it up here. So the indirect costs, when you're talking about somebody staying home, and lost work. And indirect, so a direct medical cost is where you're paying for something. And indirect medical costs may be something like when you've got some type of cost that is not necessarily related to lab tests or something specific to that. But you may have, let's say, bandages or some other type of thing you need to care for that. So you're talking about drugs, lab tests, hospitalizations, but you still have to care for a wound or something. In some places you may have that as a direct medical cost. And some you'll say, you know what, that's outside of the direct medical cost. It's just sort of ongoing care. So that's what that may be in terms of looking at it. Okay, any other questions? Okay, well, if that's it, thank you. I wish you all who are taking the exams good luck. And for those of you who are doing the public health and preventive medicine program, I'll see you all on Wednesday. Thanks everybody, bye-bye.

Global Pharmacovigilance

Health Services Management

systems approach

healthcare access

quality care

American healthcare system

insured populations

uninsured populations

Department of Health and Human Services

healthcare costs

Medicare

ethical considerations

patient safety

Health Economics

cost-effectiveness