Home Care Application by wse14750

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									   Cost-Benefit, Cost-Effectiveness
   Analysis, and An Application to
             Home Care
                   William Weissert
                    Professor and Chair
           Department of Health Management and
               Policy, School of Public Health
                   University of Michigan
                         Ann Arbor


Weissert                                         1
                      Outline

• Key concepts and examples
      – Types of cost-analysis
• An application of cost-benefit analysis to
  home care budgeting
• Take away points on Cost Effectiveness
  Analysis (CEA)



Weissert                                       2
               Cost-Benefit Ratio

      $CostIntervention - $CostComparison



      $BenefitsIntervention - $BenefitsComparison




Weissert                                            3
               Compared to What?
• What’s the intervention?
           • Expanded home care benefits
• What’s the comparison group?
           • Usual care
              – What they’re already getting: not nothing

• What’s the marginal cost?
           • How much additional spending is made
• What’s the marginal benefit?
           • What are the additional benefits
              – Over what they would have been without the intervention?

Weissert                                                           4
     +                                      •ADOPT?


                         ADOPT                    CEA
      EFFECTIVENESS




                                                      •REJECT?

                      •ADOPT?


                          CEA                   REJECT

                                 •REJECT?

      -
Source: Cliff Goodman, Lewin Assoc.
                                      COST                 +
Weissert                                                         5
           Whose Costs, Who’s Benefits

•   Patient
•   Family
•   Provider
•   Medicaid
•   Medicare or other payer
•   Society at large


Weissert                                 6
           Types of Economic Analysis
• Cost - Minimization: $ vs. $ (same outcome)

• Cost - Effectiveness: $/ Outcome units

• Cost - Utility: $/Quality units

• Cost - Benefit: $/$ or ($-$)


Weissert                                        7
              Cost-Minimization Analysis
• (Hospvisits2*Hospcosts2)+(ERvisits2*ER$2)+(OPvisits2*OP$2)+
  (HCvisits2*HC$2)+(Trans2*Trans$2)+(Nhadmits2*NHdays2*NH
  $/day2)+(Infhrs2*Inf$2)+(DMEunits2*DME$2)+(Prescribe2*Pres
  cribe$2)+(Disposunits2*Disposunits$2)+(Housingdays2*Housing
  $2)+(Meals2*Meals$2)+or(Copay2*Copay$2)
   +(NewTreat2*NewTreat$2)
                           minus
• (Hospvisits1*Hospcosts1)+(ERvisits1*ER$1)+(OPvisits1*OP$1)+
  (HCvisits1*HC$1)+(Trans1*Trans$1)+(Nhadmits1*NHdays1*NH
  $1)+(Infhrs1*Inf$1)+(DMEunits1*DME$1)+(Prescribe1*Prescribe
  $1)+(Disposunits1*Dispos$1)+(Housingdays1*Housing$1)+(Mea
  ls1*Meals$1)+or-(Copay1*Copay$1)
                               equals
• Net cost difference (+ or -)

   Weissert                                               8
           Cost-Minimization Example
                After Home Care Expansion
                 Patients PerDeim Days        Cost
     Hospital          98      $800   2.94     $230,496
     NursHome          75      $100    329   $2,467,500
     HomeCare         200       $50    200   $2,000,000
     Sum                                     $4,697,996
                Before Home Care Expansion
                 Patients PerDeim Days        Cost
     Hospital         100      $800      3     $240,000
     NursHome         100      $100    365   $3,650,000
     HomeCare          50       $50     50     $125,000
     Sum                                     $4,015,000
     After minus Before                        $682,996
                                                17.01%
Weissert                                                  10
           Cost-Effectiveness Analysis
• [(Hospvisits2*Hospcosts2)+(ERvisits2*ER$2)+(OPvisits2*OP$2)+(HCv
  isits2*HC$2)+(Trans2*Trans$2)+(Nhadmits2*NHdays2*NH$2)+(Infhrs2
  *Inf$2)+(DMEunits2*DME$2)+(Prescribe2*Prescribe$2)+(Disposunits2
  *Dispos$2)+(Housingdays2*Housing$2)+(Meals2*Meals$2)+or-
  (Copay2*Copay$2)
  +(NewTreat2*NewTreat$2)]
                                  minus
• [(Hospvisits1*Hospcosts1)+(ERvisits1*ER$1)+(OPvisits1*OP$1)+(HCv
  isits1*HC$1)+(Trans1*Trans$1)+(Nhadmits1*NHdays1*NH$1)+(Infhrs1
  *Inf$1)+(DMEunits1*DME$1)+(Prescribe1*Prescribe$1)+(Disposunits1
  *Dispos$1)+(Housingdays1*Housing$1)+(Meals1*Meals$1)+or-
  (Copay1*Copay$1)]
                               divided by
• [Units of a Single Outcome2 (such as %Satisfied or Days in
  Community) minus Units of the same Single Outcome1]
                                  equals
• Net cost per increased unit of Same Single Outcome (+ or -)

Weissert                                                         10
           Cost-Effectiveness Example
                After Home Care Expansion
                 Patients PerDeim Days        Cost
     Hospital          98      $800  2.94      $230,496
     NursHome          75      $100   329    $2,467,500
     HomeCare         200       $50   200    $2,000,000
     HigherADL         10             365
     Sum                                     $4,697,996
                Before Home Care Expansion
                 Patients PerDeim Days        Cost
     Hospital         100      $800     3      $240,000
     NursHome         100      $100   365    $3,650,000
     HomeCare          50       $50    50      $125,000
     Sum                                     $4,015,000
     After minus Before                        $682,996
     Cost per improved client day:  $187        17.01%

Weissert                                              12
                   Measuring Utiles
• Utiles are usually measured in QALYs
• QALYs are Quality Adjusted Life Years
     – (1 year of life at full health minus adjusted for
       reduced quality)
     – e.g., if one year of full health equals 1 QALY
     – and having one ADL dependency reduces the value
       of life by 20%
     – then prevention of loss of independence in one
       ADL=.2QALY
• %reduction is arbitrary, or preference based
     – I used, 5ADL dependency=0 Quality of Life (0
       QUALYs)
           • May understate value of 5ADL dependent life
              - and thus overstates value of preventing a single ADL decline
Weissert                                                                       12
                   Cost-Benefit Analysis
•   [(Hospvisits2*Hospcosts2)+(ERvisits2*ER$2)+(OPvisits2*OP$2)+(NHadmits2
    *NHdays2*NH$2)+(Trans2*Trans$2)+(Infhrs2*Inf$2)+(DMEunits2*DME$2)+(
    Prescribe2*Prescribe$2)+(Disposunits2*Dispos$2)+(Housingdays2*Housing$2)
    +(Meals2*Meals$2)+or-(Copay2*Copay$2) +(NewTreat2*NewTreat$2)
                                        minus
•   (Hospvisits1*Hospcosts1)+(ERvisits1*ER$1)+(OPvisits1*OP$1)+(NHadmits1*
    NHdays1*NH$1)+(Trans2*Trans$1)+(Infhrs1*Inf$1)+(DMEunits1*DME$1)+(P
    rescribe1*Prescribe$1)+(Disposunits1*Dispos$1)+(Housingdays1*Housing$1)+
    (Meals1*Meals$1)+or-(Copay1*Copay$1)]
                                      divided by
•   [(Units of outcomeA2*$value per unit of outcomeA2)+(Units of
    outcomeB2*$value of outcomeB2)+ (Units of outcomeN2*$value per unit of
    outcomeN2)
                                        minus
•   (Units of outcomeA1*$value per unit of outcomeA1)+(Units of
    outcomeB1*$value of outcomeB1)+ (Units of outcomeN1*$value per unit of
    outcomeN1)]
•   Outcomes are converted first to QALYs, Quality Adjusted Life Years (1 year
    of life at full health minus discount for reduced quality), then to $, e.g., if one
    year of full health is worth $200,000, and having one ADL dependency
    reduces the value of life by 20%, then prevention of loss of independence in
    one ADL=$40,000
Weissert                                                                              13
               Value of Life
• Usually estimated by either human capital
  approach (lifetime earnings) but produces
  discrimination problems, or preferably
  willingness to pay (also called contingent
  valuation) – as revealed by extra pay for
  extra risky jobs, or population cost of life-
  saving products like air bags divided by
  lives saved in the population


Weissert                                          14
           Cost-Benefit Example
                  After Home Care Expansion
                    Patients    PerDeim          Days         Cost
     Hospital              98             $800      2.94        $230,496
     NursHome              75             $100          329   $2,467,500
     HomeCare             200             $50           200   $2,000,000
     HigherADL             10         -$110             365    -$400,000
     HigherSat            100              -$5      180         -$98,630
     Sum                                                      $4,199,366
                  Before Home Care Expansion
                    Patients    PerDeim          Days         Cost
     Hospital             100             $800           3      $240,000
     NursHome             100             $100          365   $3,650,000
     HomeCare              50             $50           50      $125,000
     Sum                                                      $4,015,000
     After minus Before                                         $184,366
                                                                     4.59%

Weissert                                                                     17
                     Discounting
• If costs and benefits flow over a different time,
  then discounting should be applied
• Often ignored on the assumption that most
  benefits are short term
    – Not a bad assumption in long-term care
    – Worse assumption for early prevention
• Requires applying a discount rate for each year of
  delay between costs and outcomes,
    – e.g. value of outcomes to come in 5 years might be
      discounted at 3%/year*5years
    – Or, if some costs or benefits are short term, and others
      long, apply discounting to both long term values

Weissert                                                         16
 An Application of Cost-Benefit
    Analysis to Home Care
          Budgeting




Weissert                      17
           Problems with Home Care
• Not cost-minimizing
    – Utilization and cost results poor
           – Minimally reduced hospital use
           – Some nursing home reduction
               » But not enough to offset new costs
           – Net costs 15-20% higher

• Not cost-effective
    – Few outcome benefits, very high cost per
      benefit
           – No physical or mental benefits
              – ADL, IADL, activities, other measures
           – No increase in longevity
           – Contentment higher (though transient) in:
              » some patients
              » some family care-givers
Weissert                                                 20
 Underlying Cause: Imperfect Agency
• Perfect agent requires:
      – Clear goals from principal
      – Good information
           • Tools, procedures, resources,
             training, feedback
      – Appropriate incentives
           • Rewards, constraints, sanctions

Weissert                                       19
             Observed Versus Predicted:
           Mean Rate of Hospitalization for
                Selected Subgroups
     Characteristic         Predicted   Actual   Ratio
     Male                   0.0178      0.0178   1.00
     Age over 80            0.0134      0.0133   1.01
     Human help toileting   0.0155      0.0156   0.99
     Human help transfer    0.0161      0.0160   1.01
     Human help eating      0.0142      0.0135   1.05
     Human help w/mobil     0.0161      0.0161   1.00
     Mental/Alz. dx         0.0128      0.0128   1.00
     Respiratory dx         0.0207      0.0207   1.00
     Nonhyperten. circ.dx   0.0172      0.0172   1.00

    Weissert                                          32
        Resource allocation is random
  Figure 1. Per Capita Spending by Decile of
    Hospitalization Risk in ALTCS ’92-97




Weissert                                   21
  Figure 2. Per Capita Spending by Decile of
Nursing Home Admission Risk in ALTCS ’92-97




  Weissert                              22
Figure 3. Per Capita Spending by Decile of
     Risk of Death in ALTCS ’92-97




Weissert                                     23
 Figure 4. Per Capita Spending by Decile of
 Functional Decline Risk in ALTCS ’92-97




Weissert                                  24
Reform Agenda: Improve Agency
• Clarify goals
      – Focus on patient specific outcome goals
• Improve information
           • Provide risk assessment tools
      – Reduce false positives in selection
           • Replace single, categorical eligibility with multistage
             process
      – Create demand for dose-response data
• Create incentives for efficiency, effectiveness
      – Impose budget constraint binding on every patient
      – Focus care planning on marginal benefit for
        marginal cost


Weissert                                                               25
              Effectiveness, Risk, Value
                (ERV) Budget Model
• Clarifies goals
     – Emphasizes patient-specific outcomes
           • Accommodates broad range of outcomes
• Improves information
     – Provides better risk assessment methods
     – Employs two-stage needs assessment
     – Implies care plan evaluation criteria
• Creates incentives for marginal benefit-
  marginal cost trade-offs
     – Sets binding constraint on care plan costs
     – Shifts funds from low risk to high risk patients
     – Rewards improved effectiveness
Weissert                                                  26
           ERV Example for One Risk
• If…
      – Hospital risk for a given patient = 25%, and,
      – Cost of hospitalization would be = $10,000, and
      – Effectiveness of home care in mitigating hospital
        risk = 20%,
      – Then, monthly ERV= $500
                 » (500=.20*.25*10,000)
• Note incentives:
      – Higher effectiveness=more money
      – Spending reallocated to highest risk-benefit potential
      – Process, outcome evaluation criteria implied

Weissert                                                         27
                     Some Case Examples
Characteristics   Value     Outcome                Monthly Risk        Monthly      Budget
                                                    Risk Percentile Target Budget     %
ADL's                   4   Death                    0.82%  15-20%             $8    15-20%
Married            Widow    Functional Decline       1.82%  10-15%            $35    10-15%
AGE                    87   Hospitalization          0.86%  15-20%            $42    15-20%
SEX                Female   Nursing home admission   1.71%    0-5%            $64      0-5%
                            Total                                            $149      0-5%

Characteristics   Value     Outcome                Monthly Risk        Monthly    Budget
                                                    Risk Percentile Target Budget   %
ADL's                   1   Death                    0.72%  10-15%             $7 10-15%
Married           Widower   Functional Decline      10.97% 95-100%           $212 95-100%
AGE                    92   Hospitalization          0.78%  10-15%            $38 10-15%
SEX                  Male   Nursing home admission   4.03%  30-35%           $151 30-35%
                            Total                                            $408 50-55%

Characteristics   Value     Outcome               Monthly Risk        Monthly     Budget
                                                   Risk Percentile Target Budget    %
ADL's                   4   Death                  67.59% 95-100%            $684 95-100%
Married           Married   Functional Decline      2.35%  25-30%             $45 25-30%
AGE                    82   Hospitalization         7.66% 95-100%            $375 95-100%
SEX               Female    Nursing home admission 61.86% 95-100%          $2,314 95-100%
                            Total                                          $3,419 95-100%


     Weissert                                                                            28
           Take-Away Points About Cost-
              Effectiveness Analysis
• Central purpose of CEA:
      – Compare relative value of marginal costs of new
        policy to marginal value of health benefits produced
            • Specify all current costs and new costs
            • For a single outcome, subtract old costs from new, and
            • Subtract old benefit levels from new
                – Divide net cost by number of clients benefiting
            • For multiple outcomes, convert all outcomes to QALYs
            • QALYs must be valued to produce value of benefits
• CEA doesn’t render decisions, only input
      – Just trying it will improve your decision process
            • Makes you clear about what you’re likely to get and costs
                – May help you think about what’s feasible and what’s not


Weissert                                                                    29

								
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