Session 8: Resource Allocation

Question 1

Why set priorities in healthcare?

Answer 1

• Healthcare expenditure is rising worldwide. In 1984, gross NHS expenditure was £437m - 4% of Gross Domestic Product. For 2013/2014 NHS (England) expenditure was £109.2 billion (8.2% of Gross Domestic Product)
• Healthcare systems worldwide confront the problem of allocating limited healthcare resources in relation to competing demands.
• No country can keep up
  
  • ​​​Changes in demography (ageing population etc - an 85 year old costs the NHS 15x as much as a 5-15 year old, due to different co-morbidities + treatments).
  • Technology
  • Consumerism (people expect more)
  • Demand always exceeding supply
• Demand is driven by demographics. By 2031, the number of over 75s will increase to 8.2m (double the current population of 4.7m). 60% of those aged over 65 have a long term condition. Increased incidence (1.5% p.a.) and prevalence (3%) of cancer means increased disease burden on society. New cancer therapies are often very expensive and generally expand the pool of candidates (e.g. broader indications, fewer side effects). Often don’t cure but offer increased survival - hopefully help people live longer with a better quality of life.
• Resources are scarce and could be used in other ways to benefit the population. Priorities are set so that it is clear and explicit who benefits from public expenditure (ethical reasons) We need to be clear about whether spending is “worth it”.
• Finally, priorities are set so we are clear about what we are trying to achieve. Focus on alleviating impact of chronic conditions.

Question 2

Describe recent extra spending in the NHS and what are the 5Ds?

Answer 2

• In recent years, the NHS enjoyed big increases in spending.
• Has resulted in higher wages (87% of the extra money went on higher pay).
• Evidence of shorter waiting times but very little evidence avilable to show value of gains - so value is less clear
• Increases in activity, but relatively modest
• Unclear about improvements in quality and safety
• Not clear how much it cost to produce any improvements
• Now the NHS is in a period of austerity
• Fundamentally priority setting is needed because of scarcity of resources - demand outstrips supply. Difficult decisions have to be made “to sustain publicly funded health care….societies need to wake up and tackle rationing through explicit recognition and management of scarcity”.

Question 3

What is meant by Implicit Rationing?

Answer 3

• Implicit rationing is the allocation of resources through individual clinical decisions without the criteria for those decisions being explicit.
• Before 1990s reforms, NHS relied mainly on implicit rationing.
• Clinicians made decisions within overall budgetary constraints.
• Patients believed care was offered (or withheld) on basis of clinical need).
• Implicit rationing
  
  • ​Can lead to inequities and discrimination
  • Open to abuse
  • Decisions based on perceptions of “social deservingness”
  • Doctors appear increasingly unwilling to do it
• But despite its limitations, implicit rationing at the point of service is more sensitive to the complexity of medical decisions and the needs and personal and cultural preferences of patients.

Question 4

What is meant by Explicit Rationing?

Answer 4

• Explicit healthcare rationing or priority-setting is the use of institutional proceduress for the systematic allocation of resources within healthcare system.
• Care is limited and the decisions are explicit, as is the reasoning behind those decisions.
• Technical processes: e.g. asssessments of efficiency and equity
• Political processes: e.g. lay participation
• Advantages:
  
  • Transparent, accountable
  • Opportunity for debate
  • Use of evidence-based practice
  • More opportunities for equity in decision-making
• Disadvantages:
  
  • ​​Very complex
  • Heterogeneity of patients and illnesses
  • Patient and professional hostility
  • Threat to clinical freedom
  • Evidence of patient distress
• There is increasing support for explicit rationing since 1990. Clinical Commissioning Groups determine priorities. Big problems in identifying criteria to gvern decision-making process.
• Even when there are criteria, very difficult not to make exceptions e.g. Herceptin 2005

Question 5

What are the Levels of Rationing?

Answer 5

1. How much to allocate to NHS compared to other government priorities e.g. education?
2. How much to allocate across sectors e.g. mental health, cancer?
3. How much to allocate to specific interventions within sectors e.g. end of life drugs versus drugs with curative intent?
4. How to allocate interventions between different patients in the same group e.g. which patients with advanced cancer should be treated?
5. How much to invest in each patient, once an intervention has been initiated e.g. how low should cholesterol be lowered in treated patients?

Question 6

Describe the purpose of National Institute for Health and Care Excellence (NICE)

Answer 6

• Set up to ‘enable evidence of clinical and cost effectiveness to be integrated to inform a national judgement on the value of a treatment(s) relative to alternative uses of resources’
• Provides guidance on whether treatments (new or existing) can be recommended for use in the NHS in England and Wales
• in 2002 NICE recommendations changed from ‘guidance’ to ‘directions’ and became binding.
• NICE is asked to appraise significant new drugs and devices to ‘help make sure that effective and cost effective products’ are made available to patients quickly and to minimise variations in the availability of treatments’.
• While a drug or device is being appraised by NICE, NHS organisations make decisions on its use locally, using their usual arrangements.
• Once national guidance has been issued by NICE it replaces local recommendations and promotes equal access for patients across the country.
• NICE has particularly controversial role in relation to expensive treatments. If not approved, patients are effectively denied access to them.
• If approved, local NHS organisations must fund them, sometimes with adverse consequences for other priorities.
• Also exceptional rulings e.g. Herceptin in early stage breast cancer. Cost ~£21,800 per course impacted on allocation of budget resources elsewhere.

Question 7

What is meant by tariffs?

Answer 7

Payment by results

• Healthcare Resource Groups (HRGs) - standard groupings of clinically similar treatments which use common levels of healthcare resource.
• HRGs are a ‘unit of currency’ determining an (imperfectly measured) equitable reimbursement for care services delivered by providers.
• When a hospital treats a patient, the diagnosis and treatment are recorded and coded, the HRG assigned and a tariff paid e.g. a caesarian birth (more specialist, more complicated) has a higher tariff than normal birth

Link with quality

• Efficient trusts can make a profit, but inefficient trusts can lose money - incentive to bcome more efficient over time.
• If the trust is efficient, it can make a profit by doing things for less than they are paid by the tariff.
• If avoidable complications occur, the trust may lose money.
• ‘Never event’ - no payment for in-hospital maternal death from haemorrhage after elective caesarean section.

Question 8

What are the problems with letting the public decide?

Answer 8

• Consultation very problematic
• Resistance to inevitability of rationing
• Majority think everyone should have the healthcare they need regardless of cost
• Tend to value heroric (emergency medicine etc) interventions and particular patient groups e.g. babies/children over the elderly.
• Preference for treating patients with dependents.
• A willingness to discriminate against those who were partially responsible for illness (e.g. drinking).
• BUT some level of consultation likely to be important for legitimacy.
• Public priorities differ from those of doctors and policy makers.
• Public priorities may be contrary to spirit of equity and equal access according to need.
• Public priorities may go against cost effectiveness data.
• Strong reaction to NICE decision (NICE is seen as a body that stops people getting access to new treatments etc) reflects gulf between public expectation and necessity for rationing.

Question 9

What is health economics?

Answer 9

• Assumes resources are scarce
• Is concerned with making the most of societies’ resources by maximizing social benefits subject to the constraints imposed by resource availability: how can we get the most for our money?
• Is about
  
  • Net benefits
  • Evaluating services
  • Providing information to assist in the allocation of scarce resources in an efficient and equitable way.
    *

Question 10

Describe the need for economic assessment

Answer 10

• Recognises the reality of fixed NHS resources - and brings this to the attention of the public
• Exposes the opportunity costs of new interventions
• Enables consistency in investment and disinvestment decisions
• Helps to direct innovation into those areas regarded as priorities by the health system
• Doctors are involved in decisions about resource allocation. Health economics helps to make some of the principles for resource allocation explicit.
• Need to understand basics of economic evaluation to contribute to/learn from evidence.
  *

Question 11

What are the basic concepts in health economics?

Answer 11

• Scarcity: need outstrips resources. Prioritisation is inevitable.
• Efficiency: getting the most out of limited resources
• Equity: the extent to which distribution of resources is fair
• Effectiveness: the extent to which an intervention produces desired outcomes
• Utility: the value an individual places on a health state
• Opportunity Cost: once you have used a resource in one way, you no longer have it to use in another way.​

Question 12

Explain about Opportunity Cost

Answer 12

• When deciding to spend resources on a new treatment, these resources cannot now be used on other treatments. The opportunity cost of the new treatment is the value of the next best alternative use of thsoe resources. Cost is viewed as sacrifice rather than financial expenditure. Opportunity cost is measured in benefits foregone.
• By choosing to use resources in one particular way, other opportunities for using those resources are foregone.
• The opportunity costs of committing resources to produce a good or service is the benefits you lose from those same resources not being used in their next best alternative.
• E.g. a common psychiatric nurse is hired at a cost of £20,000. Alternatively, this money could have been used to provide 50 overnight hospital stays for acutely ill children (~£400 each). Financial cost of nurse = £20,000. Opportunity cost = lost benefit to 50 children needing overnight observation had money not been spent instead to fund psychiatric care.
• From a limited budget, the most efficient mix of services to funx will be that which generates the greatest aggregate (overall) benefit (to the greatest amount of people).
• The aim of economics is to ensure that we do those activities whose benefits outweight their opportunity cost (i.e. we do the most beneficial things with the resources at our disposal).
• Many considerations in defining the ‘greatest aggregate benefit’ connected to views about the ethical implications of different conceptions of welfare.

Question 13

What is meant by Technical Efficiency and Allocative Efficiency?

Answer 13

• Technical Efficiency: you are interested in the most efficient way of meeting a need (e.g. should antenatal care be community or hospital-based?) - HOW YOU MEET PEOPLE’S NEEDS
• Allocative Efficiency: where you are choosing between the many needs to be met (e.g. fund hip replacements or neonatal care?) - WHO’s NEEDS YOU’RE GOING TO MEET

Question 14

What is meant by Economic Evaluation?

Answer 14

• Is the comparison of resource implications and benefits of alternative ways of delivering healthcare
• Can facilitate decisions so that they are more transparent and fair
• Underpinned by concepts of:
  
  • Scarcity/sacrifice
  • Efficiency
  • Opportunity Cost
  • Utility
• It is a system whereby competing programmes are evaluated in terms of their costs and consequences.

Question 15

Describe Economic Decision Making. How do you measure costs?

Answer 15

• An economic analysis compares the inputs (resources) and outputs (benefits and value attached to them) of alternative interventions. This allows better decisions to be made about which interventions represent best value for investment.

How do you measure costs?

• Identify, quantify and value resources needed
• Categories of costs:
  
  • Costs of the health care services
  • Costs of the patient’s time
  • Costs associated with care-giving
  • Other costs associated with illness
  • Economic costs borne by the employers, other employees and the rest of society

Question 16

How do you measure benefits?

Answer 16

• Benefits are harder to measure
• Improved (or maintained) health hard to value
• Categories of benefits/consequences
  
  • Impact on health status (in terms of survival or quality of life or both);
  • Savings in other health care resources (such as drugs, hospitalisations, procedures, etc) if the patient’s health state is improved (e.g. less drugs needed in future) - can be difficulty to quantify
  • Improved productivity if patient, or family members, returns to work earlier.

Question 17

Describe the problems (and solutions) of economic evaluation

Answer 17

• Economic evaluation is usually based on some assumptions. But sensitivity analysis can be used to check effects of assumptions
• Some health benefits are not felt for some years e.g. benefits of smoking cessation.
• Discounting is a method of calculating present values of inputs and outcomes which may accrue in the future.

Question 18

What are the 4 types of economic evaluation?

Answer 18

• Cost minimisation analysis
• Cost effectiveness analysis
• Cost benefit analysis
• Cost utility analysis

All consider costs, but differ in the extent they attempt to measure and value consequences/benefits

Question 19

Describe Cost Minimisation Analysis

Answer 19

• Outcomes assumed to be equivalent
• Focus on measurement is on costs (i.e. only the inputs)
• Not often relevant as outcomes rarely equivalent
• Possible example: say all prostheses for hip replacement improve mobility equally. Choose the cheapest one.

Question 20

Describe Cost Effectiveness Analysis

Answer 20

• Used to compare drugs or interventions which have a common health outcome e.g. reduction in blood pressure
• Compared in terms of cost per unit outcome e.g. cost per reduction of 5 mm/Hg
• If costs are higher for one treatment, but benefits are too, need to calculate how much extra benefit is obtained for the extra cost.
• Key Question: is extra benefit worth extra cost?

Question 21

Describe Cost Benefit Analysis

Answer 21

• All inputs and outputs valued in monetary terms
• Can allow comparison with interventions outside healthcare e.g. if this roof is mixed, family is less likely to get respiratory problems, infections etc
• Methodological difficulties e.g. putting monetary value on non-monetary benefits such as lives saved.
• “Willingness to pay” often used but this is also problematic - normally they will under-value the service.

Question 22

Describe Cost Utility Analysis. What are QALYs?

Answer 22

• Particular type of cost effectiveness analysis
• Cost utility analysis focuses on quality of health outcomes produced or foregone
• Most frequently used measure is quality adjusted life year (QALY) - used by NICE. Interventions can be compared in cost per QALY terms.
• To use cost-effectiveness as a guide to decision-making, we need to compare the cost-effectivness of different uses of resources. Therefore we need an effectiveness measure that can be used in a wide range of settings.
• Life years gained - but only when survival is main outcome
• Quality-adjusted life years (QALYS): composite of survival and quality of life
• Used since 1970s and allows broad comparisons across differing programmes.
• QALYs adjust life expectancy for quality of life
  
  • 1 year of perfect health = 1 QALY
  • Assumes that 1 year in perfect health = 10 years with a quality of life of 0.10 perfect health

Question 23

Give QALY examples

Answer 23

• QALY: 1 year of healthy life for one person
• You can trade off survival and quality of life
  
  • ​​1 QALY = 2 years at 50% QOL for 1 person
• Each year of healthy life is of equal value
  
  • 1 QALY = 6 months of healthy life for 2 people
• E.g. a man is diagnosed with cancer. Told he has 1 year to live if he does not have treatment. His quality of life, without treatment, will be 0.8 of perfect health and he will then die quickly. Without treatment = 0.8 QALYs. If he receives treatment, he will live for 4 years but his QoL will be 0.2 of perfect health. With treatment = 0.8 QALYs. Therefore there is no point in treatng this man.

Question 24

Give an example of use of QALYS in cost utility analysis

Answer 24

• Female diagnosed at age 54 with peptic ulcer can expect to live 23 years. QoL without treatment is 0.7 of perfect health => expects to have 16.1 QALYs without treatment
• QoL with treatment A (ranitidine) is 0.95 of perfect health, at cost of £50 per annum => expects to have 21.85 QALYS on A. Life expectancy has not increased.
  
  • QALYs gained = 21.85 - 16.1 = 5.75
  • Total cost of treatment = 23 x 50 = £1,150
  • £1,150/5.75 = £200
  • Cost per QALY gained = £200
• QoL with treatment B (gaviscon) is 0.80 at cost of £30 per annum => expects to have 18.4 QALYs on B
  
  • QALYs gained = 18.4 - 16.1 = 2.3
  • Total cost of treatment = 23 x 30 = £690
  • £690/2.3 = £300 = cost per QALY gained
• So treatment A is more expensive but when you compare benefits and costs, it is more cost effective.

Question 25

What alternatives to QALYs are there? How does NICE decide

Answer 25

* The QALY has attracted considerable controversy * Alternatives are health-year equivalents (HYEs), saved-young-life equivalents (SAVEs), disability adjusted life years (DALYs) * Advantages and disadvantages to all but NICE uses QALYs NICE decides by * Technology appraisals * Clinical effectiveness * Cost effectiveness * Data from RCTS, systematic reviews etc * Process (all part of consultation) * Identification of topics - DoH, professionals, patients, carers, public * Scoping - NICE / DoH * Assessment - HTA assessment groups (reviewed by different teams) * Appraisal - committee

Question 26

Describe the costs per QALY used by NICE

Answer 26

* To assess cost-effectiveness, the QALY score is integrated with the price of treatment using the incremental cost-effectivness ration (ICER) * ICER represents the change in costs in relation to the change in health status * The result is a 'cost per QALY' figure which allows NICE to determine the cost-effectiveness of the treatment

Question 27

How does NICE make its decisions?

Answer 27

* Committee makes judgement on 'most plausible' Incremental Cost Effectiveness Ratio (ICER) * Below 20K per QALY technology will normally be approved * £20 - £30K judgements will take account of * Degree of uncertainty * If change in HRQL is adequately captured in the QALY * Innovation that adds demonstrable and distinctive benefits not captured in the QALY * Above £30K need an 'increasingly stronger case'

Question 28

What are the criticisms of QALYs?

Answer 28

* Do not distribute resources according to need, but according to the benefits gained per unit of cost * Technical problems with their calculations e.g. disagreement about the grading of different health states * QALYs may not embrace all dimensiosn of benefit; values expressed by experimental subjects may not be representative * Controversy about the values they embody * RCT evidence is not perfect (can never give you the complete picture) * ​Comparison therapies may differ * Length of follow-up * Atypical care * Atypical patients * Limited generalisability * Sample sizes * Statistical modelling can address some problems and areas of uncertainty

Question 29

Describe NICE and legitimacy

Answer 29

* Often resented by patient groups, especially those with long-term conditions rather than life-threatening conditions * Resented by pharmaceutical companires (can't do direct marketing) * CCgs forced to prioritise NICE-approved interventions, may thus skew priorities * Concerns about political interference * NICE had made process more transparent and centralised but often faces legitimacy problems.