Value in Health Care Accounting for Cost, Quality, Safety, Outcomes, and Innovation: Workshop Summary (2010) / Chapter Skim
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3 Approaches to Assessing Value - Illustrative Examples
3 Approaches to Assessing Value - Illustrative Examples
Pages 39-110
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From page 39... ...
He discusses the strides made in value measurement of providers and outlines the steps necessary to expand on prior work in a manner that will allow accurate, informative, and comparative assessments of efficiency and value in health care. Since surgical care accounts for more than 40 percent of overall spending for inpatient care (National Center for Health Statistics, 2006)
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From page 40... ...
Parashar B Patel concludes the chapter by discussing the impact of evidence requirements for medical devices on innovation and assessment of value from a device manufacturer's perspective and the need for crossstakeholder collaborative efforts in order to preserve incentives for innovation and discovery.
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From page 41... ...
Until recently, except for a short-lived effort by the Centers for Medicare and Medicaid Services (CMS; the Health Care Financing Administration at the time) to generate national standardized comparison data from hospitals on coronary artery bypass graft surgeries, there are very few widely available standardized comparison data at any level (physician, group, hospital, or health plan)
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From page 42... ...
. Our own research has suggested small but significant negative correlations between higher quality and lower resource use for inpatient hospitalizations and positive correlations between higher quality and higher resource use for medications at the health plan level (O'Connor et al., 2008)
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From page 43... ...
. This, coupled with the inherently wide variation in resource use-cost, especially where inpatient or surgical-procedure use is involved, the aforementioned heterogeneity of patients among practices, and the relatively small numbers of patients with a given condition in an individual physician practice, places severe limits on measurement, especially for public reporting or accountability at the individual physician or even the small-group level.
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From page 44... ...
Within a system, data on individual physician performance, although not sufficiently robust for public reporting, can serve as the basis for feedback and discussion of performance. While there are relatively few functionally integrated health delivery systems that can facilitate these system-level assessments of value, research is critically needed to explore how to create or assign individual clinicians to virtually determined delivery systems (on the basis of hospital use, referrals to other physicians, etc.)
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From page 45... ...
. As noted before, the choice of what level of the healthcare system (e.g., individual clinicians, sites, groups, integrated delivery systems, health plans)
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From page 46... ...
. With healthcare costs skyrocketing, any effort to curtail their growth will have to include surgical care.
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From page 47... ...
Evaluating Outcomes Comparing the effectiveness of new surgical interventions is traditionally the domain of evidence-based medicine. Principles of evidence-based medicine are central to the assessment of the value of novel therapies, including pharmaceuticals, medical devices, and surgical procedures.
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From page 48... ...
was recently created to advise the Centers for Medicare and Medicaid Services on national coverage decisions (Holloway et al., 1999)
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From page 49... ...
Motivated by the widespread variations in use, quality, and costs across surgical providers, this perspective is particularly timely and is the focus of several public reporting and value-based purchasing efforts. Profiling Outcomes Empirical data from numerous sources reveal widespread variations in morbidity and mortality after surgery.
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From page 50... ...
. SOURCE: American College of Surgeons National Surgical Quality Improvement Program (NSQIP)
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From page 51... ...
. Profiling Costs Assuming the perspective of a healthcare payer, such as Medicare, the costs of surgical care are a function of price per case and the number of procedures performed.
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From page 52... ...
The first step, and perhaps the most challenging, would be to use claims data to empirically define the surgical episode, either using a defined interval (30, 60, or 90 days) or identifying a natural cutoff where claims drop back TABLE 3-2 Sources of Variation in the Cost of Surgery for Each Phase of the Surgical Episode Examples of Practice Style- Phases of Surgical Episodes Examples of QualityRelated Excess Costs and Payment Types Related Excess Costs Excessive rates of Unnecessary surgery Initial decision making discretionary procedures (decision to operate)
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From page 53... ...
Preliminary data reveal large variations in the use of surgery across PHNs. For example, the use of hip replacement surgery varies threefold across the largest 20 PHNs in the Medicare population (Figure 3-3)
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From page 54... ...
VALUE IN HEALTH CARE 7 6 Rates of hip replacement 5 4 3 2 1 0 0 5 10 15 20 Physician-Hospital Network FIGURE 3-3 Variation in the use of hip replacement across the 20 largest physicianhospital networks in the United States. Rates shown are per 10,000 Medicare beneficiaries.
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From page 55... ...
The policy remedy for eliminating or minimizing low-value surgical services depends on the perspective. When considering surgical interventions, the leading policy remedy is value-based insurance design (Chernew et al., 2007)
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From page 56... ...
Forman, M.D., M.B.A., Yale University, and Frank Levy, Ph.D., Massachusetts Institute of Technology With national healthcare expenditures at an all-time high, public and private payers are increasingly looking at component spending to quantify relative value in order to improve the efficiency of spending and, ultimately, to improve health at any given spending level. Spending for diagnostic imaging (DI)
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From page 57... ...
the multiple reasons why cost-effectiveness analysis in radiology may be more difficult: (1) imaging technologies evolve more rapidly than the ability to gather clinical evidence supporting their use and (2)
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From page 58... ...
, one major limitation has been the relatively narrow indications that are studied versus the application in clinical practice. Ideal Versus the Reality -- Why an Image Is Ordered In a rational choice framework, the image ordering decision would be based on a social cost-effectiveness analysis that compares the cost of the image to the expected value of improvements in patient health that the image produces.
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From page 59... ...
. In a clinical setting, regret would arise from a misdiagnosis that could have been avoided by ordering an image.2 The psychic value of regret avoidance may be insufficient to justify the image's cost, but it remains a benefit that should be included in a social cost-effectiveness analysis.
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From page 60... ...
As a further consideration, the pharmacy benefit management (PBM) industry has risen up to incorporate economic and informational incentives targeted at steering patients to lower-cost options.
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From page 61... ...
The radiology benefit management industry has risen up in response to the rising cost of imaging and the difficulty of applying traditional managed care mechanisms for controlling utilization (Appleby, 2008)
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The orthopedic surgeon obtains a magnetic resonance imaging study in order to facilitate the procedure and provide a roadmap to the injuries. There may be a true advantage to the patient in limiting the intervention and also detecting rare complications.
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From page 63... ...
Indeed, prevention can produce important health benefits in both length and quality of life and may have favorable effects on healthcare costs in some instances. However, prevention is not always beneficial or a desirable use of limited resources.
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A Brief Introduction to Medical Cost-Effectiveness Analysis Medical cost-effectiveness analysis seeks to provide a logically coherent framework in which to maximize the health benefits of spending on health care subject to resource constraints. Medical cost-effectiveness analysis has roots in decision science, economics, and psychology but dates in its current form most clearly to the work of Weinstein and Stason (1976)
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From page 65... ...
. The probabilities of various health states at various times in the future can either be measured directly through the use of clinical trials or estimated based on the analysis of existing data and then modeled mathematically.
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From page 66... ...
Table 3-3 is a league table that reports the cost per life-year saved for a number of preventive services. Reviewing the table, one sees that some interventions, such as screening neonates for phenylketonuria, may both produce health benefits and save money and are therefore certainly desirable from the perspective of costeffectiveness.
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From page 67... ...
Yet another approach starts at the top of the table and funds interventions up until the point at which available funds for health care are exhausted. However, this approach is not useful when there is no explicit budget for health care or when one takes the perspective that nonmedical costs that would accrue outside such a budget are also appropriate considerations for cost-effectiveness analysis.
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From page 68... ...
One relatively recently developed approach to address this problem is to emphasize the "net health benefits" of an intervention, which calculates the benefits produced by an intervention across the population net of the potential health benefits that could otherwise be produced by reallocating the costs of the intervention to pay for interventions that are at the threshold that defines cost-effectiveness (Stinnett and Mullahy, 1998)
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From page 69... ...
Four Key Points About Prevention and Cost-Effectiveness Analysis As noted above, there is a long and distinguished history of the application of cost-effectiveness analysis to the analysis of prevention. Rather than to attempt to replicate that literature, the goal of this paper is to highlight a few key parts of it and extend it in the context of recent discussions of the potential of prevention to address key concerns around the control of healthcare costs in the United States.
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From page 70... ...
. This said, providing Pap smears every three years produces benefits that are so substantial and so cost-effective that, even though we waste most of the money we spend on Pap smears, their overall cost-effectiveness remains very high.
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From page 71... ...
Patients who feel that intensive therapy (with its more frequent fingersticks, injections of insulin, and risk of hypoglycemic events) reduces quality of life are much less likely to experience a net benefit from intensive therapy.
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From page 72... ...
Conclusion Prevention is a critical part of modern health care and has great potential to influence health and perhaps even help control certain aspects of healthcare costs. However, the value of prevention varies tremendously depending on the approach considered, and on how and in whom it is used.
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From page 73... ...
In practice, measuring value, especially in health care, is difficult. The Sectoral Strategies Working Group alluded to this, noting that measuring health benefits and healthcare costs is particularly challenging and that there may be substantial variability between the perspectives of individuals and those of the general population.
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From page 74... ...
the treatment decision to prescribe a product for an individual patient (Figure 3-5)
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From page 75... ...
Revenue and expenses that occur in the future are discounted back to the present according to standard accounting practices. The decision to advance a product from Phase 2 to Phase 3 also depends on estimates of the other key decisions already mentioned, that Discovery Disco Marketing Marketing Approvall Approva Ph 1 Ph 1 Launch Launch Patent Patent Ph 2 Ph 2 Generic Generic Expiration Expiration Ph 3 Ph 3 Investment Regulatory Adoption/Diffusion Treatment Investment Adoption/Diffusion Decision Decision Decision Decision Decision Decision Decision Decision n Decision to advance n Decision to n Decision to adopt n Decision to from Phase 2 to approve a product and use a product in prescribe a product Phase 3 for marketing a population for an individual patient n Stakeholder is the n Stakeholder is the n Stakeholder is the product developer regulatory agency payer or their n Stakeholder is the intermediary patient and their physician FIGURE 3-5 Key decisions in the life cycle of a drug.
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From page 76... ...
is a federal program administered by the Centers for Medicare and Medicaid Services that requires additional data collection as a condition of coverage for national coverage decisions. CED restricts coverage to patients enrolled in the study -- the decision for covering other patients is delayed until the new evidence is available.
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From page 77... ...
Adoption Decisions Adoption decisions are not as predictable as regulatory decisions, primarily because payers do not have clearly defined evidence requirements. Historically, pharmaceutical companies have proactively received informal input from payer advisory boards on developmental compounds for the purpose of Phase 3 study planning, but there is often considerable variability in the input from both within a given health plan and between health plans.
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From page 78... ...
Treatment decisions made by African-American patients were more likely to be based on preferences regarding adverse events, particularly rare, catastrophic adverse events, whereas treatment decisions made by Caucasians were more likely to be based on preferences regarding benefits. Preferences may also impact incremental cost-effectiveness ratios.
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From page 79... ...
There are generally two Figure 3-6.eps approaches to reducing uncertainty around the heterogeneity of treatment effects. One ed image genotyping and bioas bitmapped fix is the use of says to reduce uncertainty at the individual patient level.
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From page 80... ...
Finally, individual treatment decisions could be improved by better incorporating individual preferences and heterogeneity of treatment effects into the decision. APPROACHES TO ASSESSING VALUE: PERSONALIZED DIAGNOSTICS Ronald E
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The most challenging area for this issue within personalized diagnostics is the value assessment of those tests that determine the relative risks of developing a chronic illness in the far future (i.e., predisposition testing)
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From page 82... ...
Study Designs and Sensitivity Analyses The value of personalized diagnostics can be determined from a variety of study designs commonly considered in healthcare economic evaluations (Table 3-5)
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From page 83... ...
. What can be confusing are conflicting study designs that provide opposite apparent answers to the same research question.
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From page 84... ...
Since base case assumptions for either study drove their overall conclusions, this is a worrisome issue for personalized diagnostics. The study design in its execution can provide only an estimate of net value; what is most important is transparency about the study design itself, all assumptions, and all sensitivity analyses.
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From page 85... ...
Time Horizon The impact of the time horizon on the value proposition is important and again challenging, particularly for personalized diagnostics. As described earlier, for those diagnostics that are pre-disposition tests, the value would have to acknowledge the downstream effects, which may occur so far away in the future that the decision maker is essentially indifferent.
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From page 86... ...
These nuances include upending the timing and determination of when someone is ill; the implied treatment course; estimating cost for tests in a changing environment with cheaper and cheaper tests; the need for assuming value even if information is not derived from pristine, randomized controlled trials (example of cetuximab above) ; and special attention to the time horizon for estimated benefits and costs.
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From page 87... ...
. Other criticisms levied at medical device technologies relate to gaps in clinical evidence and regulatory requirements, clinical uses for unproven indications, the need for comparative effectiveness research trials, and questions about the affordability and value of new technologies, among others (Deyo and Patrick, 2005; Kessler et al., 2004)
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From page 88... ...
Ultimately, device innovators need a predictable framework to foster new innovations that benefit patient care. Clinical Benefits of Medical Devices Sometimes lost amidst criticisms of medical device industry shortcomings are the many proven, evidence-based, and often dramatic benefits of medical devices in extending and improving the lives of millions of patients.
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From page 89... ...
. More than a dozen landmark randomized controlled trials involv ing more than 8,000 patients have shown reductions in overall mortality of 23 to 55 percent with ICD therapy compared to opti mal medication therapy (Ezekowitz et al., 2007)
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From page 90... ...
Patient outcomes have been carefully tracked since the inception of the procedure in NIH-sponsored clinical registries (Detre et al., 1988; Williams et al., 2000) , and a large number of randomized controlled trials rigorously demonstrated benefits of PTCA, coronary stents, and drug-eluting stents.
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From page 91... ...
. When introduced in the early 1990s for specific atrial arrhythmias, radio-frequency catheter ablation was shown to be so much more effective than alternative treatments that randomized controlled trials were determined to be unethical.
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From page 92... ...
. Over time, the FDA has moved toward requiring randomized controlled trials for many high-risk devices as well as expanding clinical trial requirements for some 510(k)
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From page 93... ...
. Cross-Stakeholder Collaborative Efforts There are many instances in which landmark randomized controlled trials have been sponsored by the NIH and other government agencies to strengthen evidence regarding the comparative effectiveness of devices.
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From page 94... ...
These efforts complement registries sponsored by manufacturers and professional societies to track patient outcomes for a variety of devices. In the case of the recent NIH Wingspan Intracranial Stent Registry, data are supporting development of a definitive randomized controlled trial to rigorously evaluate clinical efficacy (Zaidat et al., 2008)
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From page 95... ...
. CMS has issued several other coverage decisions mandating participation in CMS-approved clinical trials or registries for devices as a condition of Medicare coverage (Tunis et al., 2007)
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From page 96... ...
We expect this trend to continue. For example in July 2008, CMS issued a list of potential future coverage decision topics that demonstrates its interest in revising existing coverage decisions for established treatments, including off-label use of drug-eluting coronary stents, vertebroplasty and kyphoplasty, lumbar fusion, and artificial cervical disks (Centers for Medicare and Medicaid Services, 2008b)
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From page 97... ...
, and recent economic evaluations of randomized studies have found high cost effectiveness for atrial fibrillation (Cheng et al., 2000b; Hogenhuis
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From page 98... ...
PT, CRPS Kemler and Furnee (2002) Cost-saving NOTE: AMI = acute myocardial infection; CMM = conventional medical management; CRPS = chronic regional pain syndrome; DES = drug-eluting stent; FBSS = failed back surgery syndrome; ICD = implantable cardioverter defibrillator; ICER = incremental cost-effectiveness ratio; NoTx = no treatment; PT = physical therapy; PTCA = percutaneous transluminal coronary angioplasty; SCD = sudden cardiac death; SCS = spinal cord stimulation; SVT = supraventricular tachycardia; WPW = Wolff-Parkinson-White syndrome.
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From page 99... ...
Calls for additional high-quality evidence from randomized controlled trials have been answered by a dramatic increase in pre-approval and post-approval randomized studies for therapeutic devices. Many of these studies represent real-world examples of comparative effectiveness research that can serve as a model for future studies (Tunis et al., 2003; Wilensky, 2006)
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From page 100... ...
The goal is to provide comparative information to clinicians, payers, and patients. However, ultimately, medical innovators need a predictable and reasonable framework in order to support development and commercialization of new medical devices in a society that still values technology advancement.
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From page 101... ...
2001b. Medicare program; prospective payment system for hospital outpatient ser vices: Criteria for establishing additional pass-through categories for medical devices: Interim final rule with comment period.
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From page 102... ...
1988. Percutaneous transluminal coronary angioplasty in 1985-1986 and 1977-1981.
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From page 103... ...
2003. Ensuring safe and effective medical devices.
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From page 104... ...
: A randomized controlled trial of percutaneous vertebroplasty. BMC Musculoskelet Disord 8:126.
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From page 105... ...
2004. The effect of spinal cord stimulation in patients with chronic reflex sympa thetic dystrophy: Two years' follow-up of the randomized controlled trial.
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From page 106... ...
1995. Trends and events in FDA regulation of medical devices over the last fifty years.
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From page 107... ...
-- Executive summary. A report of the American College of Cardiology/American Heart Association Task Force on Practice Guidelines (Committee to Revise the 1993 Guidelines for Percutaneous Transluminal Coronary Angioplasty)
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From page 108... ...
2007. Clinical evaluation of medical devices.
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From page 109... ...
2009. Bilateral deep brain stimulation vs best medical therapy for patients with advanced Parkinson disease: A randomized controlled trial.
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