DHA 721 Week 5 Cost-Effectiveness Analysis Example

Worth It, Not Cheaper: A Cost-Effectiveness Analysis of Community Paramedic Visits for Heart Failure in Four Rural Counties

[Student Name]

University of Phoenix

DHA/721: Health Care Economics

Week 5 Assignment

[Instructor Name]

[Date]

The rural region, the paramedic program, patient numbers, costs, readmissions and quality-adjusted life years are composites written for a model paper; research findings come from the sources cited.

The region's emergency medical services director proposed a community paramedic program. Paramedics would visit patients discharged after a heart failure admission at home, checking weight, symptoms and medications, adjusting diuretics under standing orders and connecting patients to their clinicians. Heart failure readmissions in the four rural hospitals ran near 24% within thirty days. The regional vice president asked whether the program was worth its cost. This paper answers with a cost-effectiveness analysis.

Framing the Decision

Cost-effectiveness analysis compares an intervention with an alternative by relating the difference in cost to the difference in health. The intervention is six paramedic visits over thirty days after discharge, plus telephone follow-up to ninety days. The comparator is usual care: discharge instructions and a clinic appointment within two weeks, which about a third of rural patients miss. The analysis covers the roughly 400 heart failure discharges the region has each year.

Standards for the Analysis

The analysis follows national guidance on method. A second expert panel, convened in 2012 to update the 1996 standards, recommended a standard reference case, two reference analyses, one from the health care sector perspective and one from the societal perspective, and an impact inventory, a structured table of consequences inside and outside the formal health care sector, to make each analysis's scope clear (Sanders et al., 2016).

The Impact Inventory

Inside the health care sector, the inventory includes program costs, hospital readmissions, emergency visits and clinic visits. Outside it, the inventory includes patients' travel time and costs, caregivers' time and lost work. The time horizon is one year, since most effects of a post-discharge program appear within that period.

Program Costs

Program costs total about $780,000 a year: four community paramedics, a part-time supervising nurse, vehicles, scales and blood pressure cuffs for patients, training and data systems.

Savings From Avoided Admissions

Based on results reported by similar programs and the region's own pilot of 60 patients, the program is expected to reduce thirty-day readmissions from 24% to 17% and ninety-day readmissions by a similar share. That means about 29 fewer readmissions within ninety days each year, at an average cost of $14,000 each, or roughly $410,000 saved.

Net Cost

Subtracting savings from program costs leaves a net cost of about $370,000 a year from the health care sector perspective. The program does not pay for itself. This is the point at which many proposals are rejected, because leaders expect prevention to save money. The analysis continues because the relevant question is not whether the program pays for itself, but whether the health it produces is worth the net cost.

Health Gains

Health gains come from fewer hospital stays, better symptom control and a small reduction in deaths. Using published quality-of-life weights for heart failure, the analysis estimates a gain of about 9.5 quality-adjusted life years across 400 patients in the first year. A quality-adjusted life year weights each year lived by how well a person feels and functions: a year in full health counts as one, and a year lived with symptoms that limit daily activity counts as less. The measure lets analysts compare programs as different as paramedic visits and new medications on the same scale.

The Incremental Ratio

The incremental cost-effectiveness ratio is the net cost divided by the health gained: $370,000 divided by 9.5 QALYs, or about $39,000 per QALY from the health care sector perspective.

The Societal Perspective

From the societal perspective, the program also saves patients and caregivers travel and lost work time. Many families drive more than an hour to the hospital, and caregivers often take unpaid leave during admissions. Including these gains of about $75,000 reduces the net cost to $295,000 and the ratio to about $31,000 per QALY.

Sensitivity Analysis

The result depends on assumptions. If readmissions fall only half as much as expected, the ratio rises to about $61,000 per QALY. If program costs are 25% higher, it rises to about $59,000. If quality-of-life gains are 30% smaller, it rises to about $56,000. In the most favorable case, with larger readmission reductions, the program nearly breaks even.

Interpreting the Ratio

Whether $39,000 per QALY is good value depends on a threshold. Neumann and colleagues noted that the frequently cited figure of $50,000 per QALY has no firm basis and has changed little for decades despite inflation, and they argued that a figure two or three times higher, $100,000 to $150,000 per QALY, would fit present prices and incomes better (Neumann et al., 2014). By any of these thresholds, the program represents good value. The program does not save money, but it buys health at a price the region would gladly pay for a new drug.

Cost-Effective Is Not Cost-Saving

Some trustees assumed the program would save money because it prevents admissions. Evidence cautions against that assumption. When Cohen and colleagues sorted published ratios, under 20% of the preventive measures analyzed turned out to save money and that the range of ratios for prevention resembled the range for treatment (Cohen et al., 2008). Prevention, like treatment, should be judged by its value, not by whether it pays for itself.

Budget Impact

Cost-effectiveness does not settle affordability. The program's net cost of $370,000 a year must come from somewhere. Savings from avoided admissions fall partly on the hospitals, which lose revenue when admissions fall, and partly on payers, which pay less. This mismatch between who pays for the program and who benefits is a common reason good-value programs go unfunded. The region could seek funding through Medicaid managed care plans, which benefit from avoided admissions, and through shared savings in the network's accountable care contract.

Equity

The program serves patients who live far from clinics and have few other supports, many of them older, poor or both. Its benefits therefore fall disproportionately on those with the greatest barriers to care, an equity gain the ratio does not capture. The Second Panel's impact inventory allows such effects to be listed alongside the ratio, and the region will report them to the board with the numbers.

Limitations

Estimates rely on a small pilot of 60 patients, which may have enrolled more motivated patients than a full program would, and on results from other programs, quality-of-life weights come from published studies rather than local patients and the one-year horizon may understate long-term benefits.

Recommendation

The region should launch the program for two years, seek partial funding from Medicaid plans, track readmissions, deaths, costs and patient experience and repeat the analysis with local data after the first year, reporting both perspectives and the sensitivity results to the board.

Conclusion

The community paramedic program adds cost and adds health. At about $39,000 per QALY from the health care sector perspective and $31,000 from the societal perspective, it offers good value by common thresholds, even though, like most prevention, it does not save money. A two-year launch with careful measurement is warranted.

References

Cohen, J. T., Neumann, P. J., & Weinstein, M. C. (2008). Does preventive care save money? Health economics and the presidential candidates. New England Journal of Medicine, 358(7), 661-663. https://doi.org/10.1056/NEJMp0708558

Neumann, P. J., Cohen, J. T., & Weinstein, M. C. (2014). Updating cost-effectiveness: The curious resilience of the $50,000-per-QALY threshold. New England Journal of Medicine, 371(9), 796-797. https://doi.org/10.1056/NEJMp1405158

Sanders, G. D., Neumann, P. J., Basu, A., Brock, D. W., Feeny, D., Krahn, M., Kuntz, K. M., Meltzer, D. O., Owens, D. K., Prosser, L. A., Salomon, J. A., Sculpher, M. J., Trikalinos, T. A., Russell, L. B., Siegel, J. E., & Ganiats, T. G. (2016). Recommendations for conduct, methodological practices, and reporting of cost-effectiveness analyses: Second Panel on Cost-Effectiveness in Health and Medicine. JAMA, 316(10), 1093-1103. https://doi.org/10.1001/jama.2016.12195