Louis L. Nguyen, MD, MBA, MPH

Division of Vascular & Endovascular Surgery and the Center for Surgery & Public Health

Brigham & Women’s HospitalHarvard Medical School

Economic Considerations in Defining

The SVS Research Priorities

Rising Health Care costs

Hidden Costs of Health Care

Time off to care for family members $363B (Deloitte Center for Health Solutions)

Companies reduce workforce to decrease healthcare costs

Increased deductibles and co-pays Puts families at greater financial risk

Potential Changes Insurance mandate

Reduces adverse selection by forcing everyone to carry insurance

Universal health care Single payer controls cost by dictating price

Greater income equality among medical specialties Focus on prevention and cost containment

Bundled payments Shifts risk on to providers and hospitals

Likely Consequences Greater awareness of costs and outcomes

Payers and patients will want to know

“Cost” – the Other Four-Letter Word

Medical professionals avoid dealing with costs “I do what’s best for my patient, regardless of

costs”

Patients believe health care is a right “I want everything done”

Using costs to decide treatment is heartless “Death panels”

Why Use Economics Considerations?

Economics is the field of study that analyzes the production, distribution, and consumption of goods and services

Economics assumes that resources are constrained

Economics is objective and quantitative

Health care economics is about asymmetric information

How Do We Value Health Care?

How Do We Prioritize Our Research?

Cost Effectiveness Framework

Determine analysis perspective Calculate costs Calculate outcomes (effectiveness) Standardize the unit of measure (QALY)

Compare cost-effectiveness and make adjustments

The Societal Perspective Who benefits? Who pays for the costs?

Patients Providers Insurers Society

Costs vs. Charges Cost is the value of the inputs used to

produce a product/service

Charge is the price demanded by the seller

Opportunity cost is the value of the next best alternative that was forgone

Outcomes Cost-Effectiveness

Quality-adjusted life-years (QALY) Utility Cost-Benefit

Monetary measures

Cost-Effectiveness SpaceEff

ecti

vene

ss

Costs

Inferior

Superior

Trade-off

Trade-off

Using Cost Effectiveness Analyses

Incremental Cost Effectiveness Ratio (ICER) Ratio of change in cost to change in

effectiveness between one therapy and the next best therapy

Cost effectiveness league tables List of increasing cost-effectiveness non-

exclusive therapies Therapies are chosen until budget is met or

ICER limit is reached

Special Considerations

High Impact Small improvements in large numbers of

people Early improvements can prevent disease

Prevention Primary Prevention

Strategies to avoid the development of disease Secondary Prevention

Strategies to diagnose or treat disease before development of morbidity

Tertiary Prevention Strategies to reduce the negative impact of established

disease Quaternary Prevention

Strategies to avoid consequences of unnecessary treatments

Real World Outcomes

59% of patients had maximum diameter less than 5.5cm42%/69% of patients had anatomy meeting conservative/liberal criteria41% 5-year sac enlargement rate

Treatment Choices Angioplasty/stenting: less costly and but

effective Surgical bypass: more costly but more

effective

Sequential treatment Angioplasty/stenting first Bypass if angioplasty/stenting fails

Depends on failure rates and impact of stenting on bypass

Mortality Mortality hides poor quality care Mortality ends health care spending

LOS measurements in high mortality procedures can be underestimate resources

Health Services Research

Non-Randomized TrialsAdvantages Less cost Faster enrollment Reflects real-world patients and practice

Disadvantages Treatment bias Complex mathematics to control for

confounding

Cost Analysis of Face Transplantation vs.

Conventional Reconstruction BWH pioneers of full

face transplantation (4 to date)

Raw results Cost modeling

Technology and innovation has costs

Assess costs early in the process

Provider Induced Demand

Heath care is an agency problem with asymmetric information

The principal (patient) appoints an agent (doctor) to advise them about consumption of health care

The agent is also the supplier of health care

The agent influences demand and supply!

Current PID evidence is anecdotal or temporally controlled

Comparative Effectiveness and Provider Induced Demand Collaboration (EPIC):

A Clinical and Economic Analysis of Variation In Health Care

Collaboration with the Uniformed Services University

Analysis of the TRICARE Heath System (9.3M pts)

Patients receive care in two systems Military Hospitals with salaries physicians Private Hospitals with fee-for-service physicians

Do physicians induce demand for health care? What are the hidden costs/benefits of treatment?

Summary Health care reform is already here Economic analysis is an objective tool to

quantify tradeoffs between costs and benefits

All large studies should consider costs HSR to look at the way we practice

Economics can only show tradeoffs – society must make decisions about which tradeoffs we accept

“The medical profession is only one example, though in many respects an extreme one. All professions share some of the same properties. The economic importance of personal and especially family relationships, though declining, is by no means trivial in the most advanced economies; it is based on non-market relations that create guarantees of behavior which would otherwise be afflicted with excessive uncertainty.”

--Kenneth J. Arrow, 1963

Contact information

Louis L. Nguyen, MD, MBA, MPHVascular & Endovascular Surgery

Brigham & Women’s Hospital75 Francis StreetBoston, MA 02115

(857) 307-1920llnguyen@partners.org