How To EE 1

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Concepts in
Economic Evaluation
Lecture 1
Kevin Frick
THE FOLLOWING WILL BE
DISCUSSED BETWEEN 1:30
PM AND 2:50 PM
Is Economic Evaluation
as Exciting as 24?
It can be
Have to pull together lots of pieces of
information and perform careful analysis
Results are not always obvious in advance
New information can substantially change
results and their interpretation
Results guiding treatment guidelines and
reimbursement decisions can affect millions
What do we need to make this a reality?
Instructor investment and student participation
Graphic derived from 24 Hours by _underscore. Some rights reserved.
Outline
Introductions
Motivations for taking the class
What does economic evaluation mean
Areas of interest in applying economic
evaluation
Myths about economic evaluation
Types of economic evaluation
Reasons for different types
Instructor
Formal trainingeconomic theory and health
services research
Teaching economic evaluation10 years
Research using economic evaluationlarge part
of what I do
Objectiveshare my knowledge and make
learning about economic evaluation as
interesting as possible
Interesting factI play the piano, guitar, and
electric bass and my music was used as
background for my online course
Motivations for Taking the Class
Particular skill
Particular clinical area
Read
Critique
Use results
Be part of a research team
Conduct analyses
What Does Economic
Evaluation Mean?
Do not confuse evaluation and analysis
Evaluation involves placing a value on
things
Motivating a re-allocation of resources
Cost-benefit or cost-effectiveness
Separate from economic analysis in which
economic theories are tested and
predictions of change are made in
response to resource re-allocation
Myths
No science
All driven by assumptions
Meant to take over decision making
No Science
Actually there are all kinds of science involved,

although some of the science may already have
been conducted
Quality of the end product is only as high as the
weakest science involved
Developing science of cost-effectiveness
Field could benefit from scientists with
presence who can make the topic
understandable to large audiences
Scientists Who Brought Their
Sciences to Large Audiences
Carl Sagan
Stephen Hawking
Results are Driven by Assumptions
Almost all economic evaluations involve some
modeling
Even when linked to a randomized trial
This is a distinct possibility that assumptions
could drive results
Peer review process is intended to eliminate this
possibility
Requires that journal editors know of reviewers that
have the capacity to critically evaluate economic
evaluations and that reviewers with such capacities
are willing to perform reviews
Ideally, reviewers would include one CEA expert and one
clinical or intervention relevant expert
Opportunities for Peer Review
Not Just at the Manuscript Stage
Many opportunities for review and participation by an
economic evaluation expert
Seeking funding
Planning research
Conducting research
Professional responsibilities
CEA expert
Learn something about clinical or intervention area
Other investigators
Need to learn something about economic evaluation
All researchers must remember that economic
evaluation results may eventually be used for advocacy
but that, first and foremost, this is a science
Economic Evaluation Experts Want
to Take Over Decision Making
Tears for Fears sang Everybody Wants to Rule
the World
Do economic evaluation experts?
Isaac Asimov wrote a story in which computers
were able to predict so well that by choosing
one US citizen to survey a computer could
predict all winners in all elections in November
Do economic evaluation experts seek this level of
policy determination based on results of a computer
program?
Economic Evaluation
and Decision Making
Occasionally someone will suggest a larger
than life role for economic evaluation
A few economic evaluation limitations
Not able to quantify decision makers or publics
feelings regarding equity and distribution of benefits
Not able to capture any sense of family quality of life
Focused on health-related quality of life when QOL is
driven by a lot more than health
Economic evaluation provides structured
information but is not intended to be the only
information used in decision making
Types of Economic Evaluations
Concreteness of constructs being measured
Immediate impact on decision making

Cost
Cost minimization
Cost consequence
Cost effectiveness
Cost utility
Cost benefit
Aspects of Economic Evaluation
Concrete constructs Impact on decision
Makes process and making
results easy to Some analyses
understand directly imply a
decision while others
leave decision maker
to individually and
subjectively weigh
outcomes
Cost Analysis
Basic assessment of resources being
used
Concreteness of constructs
Resources valuation is a concrete construct
(except for individuals time)
Decision making
Unless only criterion is fitting within a budget
constraint it does not help
Cost Minimization
Choose least costly outcome
Among options with similar outcomes
Similar to simple cost analysis
Outcomes do not need to be very concrete since
(however they have been defined) they are similar
Decision making
Immediate impact for a decision among a limited set
of alternatives
No basis for comparison outside that set
Cost Consequence
Describe costs and consequences
Resources similar to all previous
Outcomes left in natural units
Decision making
If there are multiple outcomes of interest this
method provides no summary of the results
and the decision making must apply
subjective weights
Cost Effectiveness
Compare extra costs with extra outcome
Have one critical outcome of interest
Can leave it in natural units
Decision making
More focused
Compare costs to a single outcome
Still no capacity to compare interventions or
treatments with different outcomes without subjective
weighting
Cost Utility
Compare dollars and quality adjusted life years

Concreteness of construct
Quality of life is not concrete
Health utility is one step less concrete
Health utility over time with need to compare
sequence of values is very abstract
Decision making
In theory can compare any interventions
However, must still decide what a QALY is worth
Cost Benefit
Place a dollar value not only on resources
but also on benefits
Placing a dollar value on health and life
requires a lot of abstraction
Decision making
Leads directly to an indication of the most and
least favorable comparisons of costs and
benefits

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Actually there are all kinds of science involved,

Concreteness of constructs being measured

Immediate impact on decision making

Compare dollars and quality adjusted life years

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