Topic 3. Economic Evaluation: Key Concepts and Definitions
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ECONOMIC EVALUATION 16 October 2003
Topic 3. Economic evaluation: key concepts and definitions
Building on the theoretical foundations introduced in Topic 2, the objective of this session is to familiarise you with the principal techniques of economic evaluation. By the end of this topic, you should be able to explain the differences between each method and identify some of the key study design and methodological issues associated with each. At this point in the module, you will find it useful to start reading published economic evaluations. A ‘10-point checklist to assess the quality of an economic evaluation’ is provided to enable to you to systematically and critically review papers.
Principal methods: cost minimisation, cost-effectiveness analysis, cost benefit analysis, cost utility analysis, cost consequences analysis. Quality Adjusted Life Years (QALYs) Perspective Specifying the counterfactual Choosing an outcome measure Obtaining effectiveness data Identifying resource use & using cost data Discounting Incremental analysis The cost effectiveness plane Dominance Cost effectiveness ratios and league tables The threshold Sensitivity analysis
Key reading
Drummond., O’Brien, B., Stoddart, G.L, Torrance, G.W. (1997) Basic types of economic evaluation, chapter 2 in: Methods for the economic evaluation of health care programmes. Oxford Medical Publications.
‘10-point checklist to assess the quality of an economic evaluation’ from Drummond et al (1997) p.28-29.
Further reading:
For a succinct introduction to economic evaluation, see the series of articles by Ray Robinson in the British Medical Journal (www.bmj.com): Robinson R. (1993) Economic evaluation and health care. BMJ 307: 670-73; 726-28; 793-95; 859-62; 924-26; 994-96. There is also a series of ‘economics notes’ in more recent issues of the BMJ on various topics relating to economic evaluation, for example:
Briggs, A., Gray, A. (2000) Using cost effectiveness information. BMJ 320:246-7. Torgerson D, Spencer A. (1996) Marginal costs and benefits BMJ 312:35-36. Examples of economic evaluation:
Note: the following are not necessarily either good or ‘state of the art’ economic evaluations – they have been chosen as papers you will, at this point in the module, be able to critically review.
Cost minimisation analysis: Sheppard S, Harwood D, Gray A. et al (1998) Randomised controlled trial comparing at home care with inpatient hospital care II: cost minimisation analysis. BMJ 316: 1791-96. [accessible from www.bmj.com]
Cost effectiveness analysis: Caro, J., Klittich, W., McGuire, A et al (1997) The West of Scotland coronary prevention study: economic benefit analysis of primary prevention with Pravastatin. British Medical Journal 315:1577-1582. [accessible from www.bmj.com]
Cost consequences analysis: Scuffham P, Devlin N, Eberhart-Phillips J, Salt R (1999) The cost-effectiveness of routine varicella vaccination in New Zealand, Social Science and Medicine 49:763-779 [copies available in class]
Cost benefit analysis: Doessel D. (1985) Cost benefit analysis of water fluoridation in Townsville, Australia. Community Dent Oral Epid 13:19-22. [copies available in class]
Cost utility analysis: Williams A. Economics of coronary artery bypass grafting. BMJ 291:326-29. [copies available in class]
Study questions
1. Choose one of the ‘examples of economic evaluation’ listed in the further readings (or any other economic evaluation paper on a subject you may be interested in). Using the ‘10- point checklist’ provided, summarise and critically review the paper.
Continue to do this as often as you can throughout the module.
2. Using examples, explain what is meant by the following: (a) critical cost effectiveness ratio (b) treatment dominance (c) cost effectiveness league tables. Explain how each of these may be used to aid the allocation of scarce health care resources [from the 2000 exam]
3. Using examples, describe the different types of economic evaluation, pointing out their main differences. Explain when it is appropriate to use each type [from the 2001 exam]
4. Describe the principal methods of economic evaluation, highlighting their differences and similarities and critically assessing their advantages and limitations [from the 2003 exam] 5. What is the difference between cost effectiveness analysis, cost utility analysis and cost benefit analysis? Using examples, explain when each type of analysis should be used in the economic evaluation of health care programmes [from the 2002 exam]