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Commentary: Implications and limitations of cost-utility analysis
The Spine Journal 12 (2012) 691–692
Commentary
Commentary: Implications and limitations of cost-utility analysis David A. Wong, MD, MSc, FRCS(C)* Denver Spine Surgeons, 7800 E. Orchard Rd, Suite 100, Greenwood Village, CO 80111, USA Received 12 July 2012; accepted 7 August 2012
COMMENTARY ON: Kepler CK, Wilkinson SM, Radcliff KE, et al. Cost-utility analysis in spine care: a systematic review. Spine J 2012;12:676–90 (in this issue).
The article by Kepler et al. [1], in this issue of The Spine Journal, can be used as a resource to help readers understand several key issues that will govern the future of reimbursement for surgical procedures, injections, and even noninvasive interventions such as physiotherapy, comprehensive pain management, acupuncture, and so forth. ‘‘Show me the value’’ is the new mantra from government policy makers and third party insurance companies. Increasingly, value is being tied to the economics of health care. Cost utility is a popular methodology in economic analysis that we all need to understand. The article sets forth an easily understandable equation for defining ‘‘value’’ in the context of health care economics. Value5Cost/Benefit. However, the mantra ‘‘the devil is in the details’’ definitely relates to the application of this methodology to population statistics and especially drilling down to the level of our individual patients. In the context of a value calculation using the cost-utility methodology, two parameters need to be determined—cost and benefit. Cost may be calculated in several ways. Each approach has its own limitations and assumptions, which limits the reliability of the associated calculations. Direct cost is easier to measure. It includes expenses such as operating room DOI of original article: 10.1016/j.spinee.2012.05.011. FDA device/drug status: Approved (pedicle screws). Author disclosures: DAW: Royalties: Lippincott Williams and Wilkins (A); Stock Ownership: Denver Integrated Imaging North (A), Huron Shores LLC (50 Shares, 50%); Consulting: Anulex (B), Allosource (A), Deroyal (A); Scientific Advisory Board: United Healthcare (A); Research Support (Investigator salary, staff/materials): Anulex (B, paid directly to institution), Cervitech (B, paid directly to institution). The disclosure key can be found on the Table of Contents and at www. TheSpineJournalOnline.com. * Corresponding author. Presbyterian St. Luke’s, Denver Spine Surgeons, 7800 E. Orchard Rd, Suite 100, Greenwood Village, CO 80111, USA. Tel.: (303) 783-1300. E-mail address: [email protected] (D.A. Wong) 1529-9430/$ - see front matter Ó 2012 Elsevier Inc. All rights reserved. http://dx.doi.org/10.1016/j.spinee.2012.08.016
time, hospital stay, implants, medications, imaging studies, and so forth. However, be cautious about calculations where direct costs are estimated using ‘‘national averages’’ or a small focus group and then generalized across a large population. Indirect costs (eg, loss of work productivity) often require even more estimated data and are thus even more susceptible to error. Similarly, the benefit, that is, health outcome of an intervention must be measured to make a value determination. The most popular final metric for the measurement of health outcome is the quality-adjusted life year (QALY). The QALY is calculated from a utility score, which has a numeric value of 0 to 1 with the assumption that 05death and 15perfect health. There are several health outcomes instruments from which a utility score can be calculated directly (EQ-5D, Health Utility Index, SF-6D). The utility score is the denominator in a cost-utility analysis and the number from which QALYs are calculated. In the area of determining utility scores used to calculate QALYs, Leah Carreon and Steve Glassman have performed a tremendous service for spine practitioners, researchers, and our patients. They have established a formula through which Oswestry [2] and neck disability index [3] scores can be translated to a utility score to calculate QALYs. Before this formula, all our historical studies using Oswestry and neck disability index as the major outcome measures fell into the ‘‘huge wasted effort’’ category having no relevance to ‘‘value’’ in the new system of health care economics. After recognizing the potential for error in both the cost and benefit calculations, readers should note the marked change in the cost/QALY that comes about with minor changes in the cost and health outcomes (utility score converted to QALYs) calculation. The article contains an excellent example of this type of ‘‘sensitivity analysis.’’ The authors cite the article by Kuntz et al. [4] looking at instrumented versus noninstrumented fusion.
692
D.A. Wong / The Spine Journal 12 (2012) 691–692
The cost/QALY for instrumentation was calculated to be $4,200,000/QALY (more than $4 million above the $100,000/QALY felt to be the upper limit of acceptable cost to society). However, this number was based on the assumption that the clinical outcome was the same with and without instrumentation (although the instrumented group had a higher rate of fusion). If one assumes only a 10% improved clinical outcome with instrumentation (not unreasonable with a higher fusion rate), the cost/QALY is reduced dramatically to $111,180. If a 15% better outcome is assumed for instrumentation, then the cost/QALY comes down to $73,400. This potential for high variance is an important limitation to the methodology that researchers should keep in mind and policy makers need to be constantly reminded of. A figure that readers should keep in mind is the acceptable cost/QALY. The quality-adjusted life year is being calculated from the utility score in a cost-utility analysis. As the authors point out, the National Institute for Health and Clinical Excellence in the United Kingdom has set an upper threshold for reimbursement approval for procedures at £30,000/QALY (just under $50,000). Payers in the United States have not established such financial criteria yet. There is speculation that in the United States, the figure might be as high as $100,000 [5]. Another key issue to be recognized is the importance of maintaining improved health outcome over time. Recall that the criterion is cost per QALY. If the health improvement is maintained for a year, the cost/QALY may be $X/15$X. If the improvement is sustained for 2 years (eg, no additional costs for revision fusion), then the cost/QALY would be $X/2 or only half the cost/QALY calculated at Year 1. This is an important concept to apply in determining an appropriate time interval to apply in cost-utility study from which the cost/QALY can be calculated.
Key points: Value5Cost/Benefit Cost determined from direct and sometimes indirect expenses Benefit (improvement in health status) calculated from a utility score (0–1 with 05death, 15perfect health) in a cost-utility analysis Improved health status (utility score) maintained for a year (denominator), combined with cost (numerator) used to calculate the cost/QALY that decision makers are using to determine whether a treatment will be paid for Threshold for reimbursement approval in the United States likely to be between $50,000 and $100,000 Small changes in patient outcomes may result in large variances in the cost/QALY.
References [1] Kepler CK, Wilkinson SM, Radcliff KE, et al. Cost-utility analysis in spine care: a systematic review. Spine J 2012;12:676–90. [2] Carreon LY, Glassman SD, McDonough CM, et al. Predicting SF-6D utility scores from the Oswestry disability index and numeric rating scales for back and leg pain. Spine 2009;34:2085–9. [3] Carreon LY, Anderson PA, McDonough CM, et al. Predicting SF-6D utility scores from the neck disability index and numeric rating scales for neck and arm pain. Spine 2011;36:490–4. [4] Kuntz KM, Snider RK, Weinstein JN, et al. Cost-effectiveness of fusion with and without instrumentation for patients with degenerative spondylolisthesis and spinal stenosis. Spine 2000;25:1132–9. [5] Kiewa K. What price health? Cost-effectiveness analysis can help society get the biggest bang for the buck. Boston: Harvard School of Public Health. Harvard Public Health Review, Fall 2004. Available at: http://www.hsph.harvard.edu/review/review_fall_04/risk_whatprice.html. Accessed May 19, 2012.
Commentary
Commentary: Implications and limitations of cost-utility analysis David A. Wong, MD, MSc, FRCS(C)* Denver Spine Surgeons, 7800 E. Orchard Rd, Suite 100, Greenwood Village, CO 80111, USA Received 12 July 2012; accepted 7 August 2012
COMMENTARY ON: Kepler CK, Wilkinson SM, Radcliff KE, et al. Cost-utility analysis in spine care: a systematic review. Spine J 2012;12:676–90 (in this issue).
The article by Kepler et al. [1], in this issue of The Spine Journal, can be used as a resource to help readers understand several key issues that will govern the future of reimbursement for surgical procedures, injections, and even noninvasive interventions such as physiotherapy, comprehensive pain management, acupuncture, and so forth. ‘‘Show me the value’’ is the new mantra from government policy makers and third party insurance companies. Increasingly, value is being tied to the economics of health care. Cost utility is a popular methodology in economic analysis that we all need to understand. The article sets forth an easily understandable equation for defining ‘‘value’’ in the context of health care economics. Value5Cost/Benefit. However, the mantra ‘‘the devil is in the details’’ definitely relates to the application of this methodology to population statistics and especially drilling down to the level of our individual patients. In the context of a value calculation using the cost-utility methodology, two parameters need to be determined—cost and benefit. Cost may be calculated in several ways. Each approach has its own limitations and assumptions, which limits the reliability of the associated calculations. Direct cost is easier to measure. It includes expenses such as operating room DOI of original article: 10.1016/j.spinee.2012.05.011. FDA device/drug status: Approved (pedicle screws). Author disclosures: DAW: Royalties: Lippincott Williams and Wilkins (A); Stock Ownership: Denver Integrated Imaging North (A), Huron Shores LLC (50 Shares, 50%); Consulting: Anulex (B), Allosource (A), Deroyal (A); Scientific Advisory Board: United Healthcare (A); Research Support (Investigator salary, staff/materials): Anulex (B, paid directly to institution), Cervitech (B, paid directly to institution). The disclosure key can be found on the Table of Contents and at www. TheSpineJournalOnline.com. * Corresponding author. Presbyterian St. Luke’s, Denver Spine Surgeons, 7800 E. Orchard Rd, Suite 100, Greenwood Village, CO 80111, USA. Tel.: (303) 783-1300. E-mail address: [email protected] (D.A. Wong) 1529-9430/$ - see front matter Ó 2012 Elsevier Inc. All rights reserved. http://dx.doi.org/10.1016/j.spinee.2012.08.016
time, hospital stay, implants, medications, imaging studies, and so forth. However, be cautious about calculations where direct costs are estimated using ‘‘national averages’’ or a small focus group and then generalized across a large population. Indirect costs (eg, loss of work productivity) often require even more estimated data and are thus even more susceptible to error. Similarly, the benefit, that is, health outcome of an intervention must be measured to make a value determination. The most popular final metric for the measurement of health outcome is the quality-adjusted life year (QALY). The QALY is calculated from a utility score, which has a numeric value of 0 to 1 with the assumption that 05death and 15perfect health. There are several health outcomes instruments from which a utility score can be calculated directly (EQ-5D, Health Utility Index, SF-6D). The utility score is the denominator in a cost-utility analysis and the number from which QALYs are calculated. In the area of determining utility scores used to calculate QALYs, Leah Carreon and Steve Glassman have performed a tremendous service for spine practitioners, researchers, and our patients. They have established a formula through which Oswestry [2] and neck disability index [3] scores can be translated to a utility score to calculate QALYs. Before this formula, all our historical studies using Oswestry and neck disability index as the major outcome measures fell into the ‘‘huge wasted effort’’ category having no relevance to ‘‘value’’ in the new system of health care economics. After recognizing the potential for error in both the cost and benefit calculations, readers should note the marked change in the cost/QALY that comes about with minor changes in the cost and health outcomes (utility score converted to QALYs) calculation. The article contains an excellent example of this type of ‘‘sensitivity analysis.’’ The authors cite the article by Kuntz et al. [4] looking at instrumented versus noninstrumented fusion.
692
D.A. Wong / The Spine Journal 12 (2012) 691–692
The cost/QALY for instrumentation was calculated to be $4,200,000/QALY (more than $4 million above the $100,000/QALY felt to be the upper limit of acceptable cost to society). However, this number was based on the assumption that the clinical outcome was the same with and without instrumentation (although the instrumented group had a higher rate of fusion). If one assumes only a 10% improved clinical outcome with instrumentation (not unreasonable with a higher fusion rate), the cost/QALY is reduced dramatically to $111,180. If a 15% better outcome is assumed for instrumentation, then the cost/QALY comes down to $73,400. This potential for high variance is an important limitation to the methodology that researchers should keep in mind and policy makers need to be constantly reminded of. A figure that readers should keep in mind is the acceptable cost/QALY. The quality-adjusted life year is being calculated from the utility score in a cost-utility analysis. As the authors point out, the National Institute for Health and Clinical Excellence in the United Kingdom has set an upper threshold for reimbursement approval for procedures at £30,000/QALY (just under $50,000). Payers in the United States have not established such financial criteria yet. There is speculation that in the United States, the figure might be as high as $100,000 [5]. Another key issue to be recognized is the importance of maintaining improved health outcome over time. Recall that the criterion is cost per QALY. If the health improvement is maintained for a year, the cost/QALY may be $X/15$X. If the improvement is sustained for 2 years (eg, no additional costs for revision fusion), then the cost/QALY would be $X/2 or only half the cost/QALY calculated at Year 1. This is an important concept to apply in determining an appropriate time interval to apply in cost-utility study from which the cost/QALY can be calculated.
Key points: Value5Cost/Benefit Cost determined from direct and sometimes indirect expenses Benefit (improvement in health status) calculated from a utility score (0–1 with 05death, 15perfect health) in a cost-utility analysis Improved health status (utility score) maintained for a year (denominator), combined with cost (numerator) used to calculate the cost/QALY that decision makers are using to determine whether a treatment will be paid for Threshold for reimbursement approval in the United States likely to be between $50,000 and $100,000 Small changes in patient outcomes may result in large variances in the cost/QALY.
References [1] Kepler CK, Wilkinson SM, Radcliff KE, et al. Cost-utility analysis in spine care: a systematic review. Spine J 2012;12:676–90. [2] Carreon LY, Glassman SD, McDonough CM, et al. Predicting SF-6D utility scores from the Oswestry disability index and numeric rating scales for back and leg pain. Spine 2009;34:2085–9. [3] Carreon LY, Anderson PA, McDonough CM, et al. Predicting SF-6D utility scores from the neck disability index and numeric rating scales for neck and arm pain. Spine 2011;36:490–4. [4] Kuntz KM, Snider RK, Weinstein JN, et al. Cost-effectiveness of fusion with and without instrumentation for patients with degenerative spondylolisthesis and spinal stenosis. Spine 2000;25:1132–9. [5] Kiewa K. What price health? Cost-effectiveness analysis can help society get the biggest bang for the buck. Boston: Harvard School of Public Health. Harvard Public Health Review, Fall 2004. Available at: http://www.hsph.harvard.edu/review/review_fall_04/risk_whatprice.html. Accessed May 19, 2012.