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The role of cost-effectiveness analysis in health care decision-making.

The Role of Cost-Effectiveness Analysis in Health Care Decision-Making

The proposed inclusion of cost-effectiveness as a criterion in coverage decisions by the Health Care Financing Administration and the cost concerns of private insurers have prompted pharmaceutical firms and medical device manufacturers to sponsor cost-effectiveness analyses (CEA). Physicians have also become more concerned with the cost as well as the clinical effectiveness of comparable technologies, and medical journals have become major publishers on CEA.

Despite what appears to be a strong push toward CEA, the actual impact of CEA findings on health care decision-making has been mixed. Indeed, CEA sometimes appear to be largely ignored by health care decision-makers. This situation has led some investigators to question the value of CEA.

Although the state of the art of CEA is expanding, the quality of these studies is not consistently excellent nor are the results well communicated. Recent years have witnessed a proliferation of CEA methods. Efforts have been made to better capture the cost and benefits associated with specific medical interventions, but often these efforts fall short in meeting the informational needs of clinicians, insurers, and policy-makers.

One of the weaknesses and, at the same time, strengths of CEA is its societal view. CEA typically begins with an effort to capture all the costs and benefits of the health intervention under study, regardless of to whom these costs and benefits accrue or when they materialize. This societal perspective is fundamental to CEA studies. However, health care decisions are often made from the perspective of the buyer or the consumer of services. Thus identifying, at the outset of CEA, who pays, who benefits from health care interventions, and who decides how much and where health care resources are used is key to identifying costs and benefits that are relevant to allocation decisions.

For example, CEA findings have shown that neonatal intensive care programs are less cost-effective than prenatal care programs in saving lives, but it is unlikely that we will see a massive redistribution of resources away from the former to support the latter. Such a shift implies a major change in the structure of our nation's health care delivery and financing system, which is currently oriented toward the provision of acute and institution-based services rather than preventive care.

To make CEA more meaningful in health resource allocation decision-making, researchers need to recognize the intended audience for the studies, the audience's scope of influence, and the practical actions the audience will take with respect to the health intervention under study. However, evaluating health interventions only from the perspective of an individual decision-maker, interest group, or program could perpetuate inappropriate resource allocation arrangements and yield suboptimal decisions for society.

The timing of the cost-benefit stream is another aspect of CEA that affects decision-making. For example, with preventive health care measures, such as screening programs, the cost of the health intervention typically occurs up front and often must be met out of the budget of a specific program. The benefits of intervention, however, may not be realized for many years and are often dispersed over a wide population. These benefits are difficult to measure. Thus it may appear as if there is a poor correlation between the cost of screening and the expected rewards. Sponsors concerned with demonstrating the cost-saving kr budget-neutral aspects of an intervention may have a hard time justifying a screening program, particularly if program performance is evaluated within the framework of a short planning cycle.

In addition, it is important to recognize that health care decision-makers do not make decisions solely on the basis of economics. Other factors, such as quality of life, patient preference, and ethical and legal considerations, may and often do take precedence over economic efficiency. Patients, for example, are motivated by much more than economic considerations. Telling an individual that adherence to an antihypertensive regimen that reduces the need for medication is cost-effective is probably less relevant to the patient than other considerations having to do with life-style choices.

Thus, the intangible benefits and risks associated with health interventions may be more compelling in directing behavior than the more measurable economic considerations traditionally captured by CEA. CEA techniques are still not very good at measuring such intangibles as feelings of well-being, pain, convenience, and functional independence, although there is growing interest in applying quality of life measures to CEA.

Despite the aforementioned limitations, CEA does have an important role to play in guiding health care decision-making. Commenting on the role of CEA at a recent AMA Medical Science Lecture, Bryan Luce, MBA, PhD, Director of Battelle's }edical Technology and Policy Research Center, observed that CEA is best viewed as a decision-assisting rather than a decision-making tool. He emphasized that the strongest contribution of CEA is in laying out the cost and consequences of health interventions in a structured way that allows comparisons between technologies.

Until now, the major contribution of CEA in the health care arena has been in clarifying the issues and tradeoffs that attend the use of specific health care interventions and in facilitating communication between the clinical community and the socioeconomic and political community. In the future, CEA may have a more direct impact on health care decision-making, particularly if it becomes an integral part of patient coverage and reimbursement decision-making. As CEA becomes more prominent in policy discussions, the limitations and strengths of CEA will come under expanded scrutiny.

Judith S. Magel, MBA, MCP, is a Senior Scientist in the Division of Health Care Technology, American Medical Association, Chicago, Ill.
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Author:Magel, Judith S.
Publication:Physician Executive
Date:May 1, 1990
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