Sleep. 20(10):829-834
© 1997 American Sleep Disorders Association and Sleep Research Society
Impact of Sleep Disorders
Clinical Economics and Sleep Disorders
B. Crawford
The Lewin Group. Cambridge. Massachusetts. U.S.A.
Summary: Sleep disorders have been shown to have substantial psychosocial sequelae with large economic impact. Numerous studies have examined the psychosocial aspects of sleep disorders; however, there has been little
published on the associated economic implications. With increasing pressure to contain health care expenditures
and provide value for the dollar, clinical economics is playing an important role in the decision-making process
about alternative strategies within health care organizations. There are several strategies one may pursue to examine
the economics of medical interventions. The predominant strategies include: cost identification, cost effectiveness,
cost utility, and cost benefit. This review provides a basis for performing clinical economic evaluations in sleep
disorders. Key Words: Sleep disorders-Economics-Costs.
As the cost of health care has increased rapidly in
recent years, means of controlling costs without sacrificing safety, efficacy, or effectiveness have been
sought. To address these concerns, certain techniques
have been devised to demonstrate the value for money
inherent in a particular therapy. These techniques,
which are rooted in medical, epidemiological, economic, and outcomes research, seek to assess the cost of
new therapies as well as their overall clinical and economic impact.
There has been little published on the economic implications of sleep disorders; however, numerous studies have been published regarding the psychosocial aspects of sleep disorders. The economics of sleep disorders focuses on the consequences of sleep disorders
and treatment. To date, only the economic effects of
sleep-related accidents and direct medical costs have
been examined. These studies estimated the cost of
sleep disorders in 1990 at $15.9 billion for direct costs
only (1) and between $43.15 billion and $56.02 billion
in 1988 for accidents related to sleep disorders (2).
Studies should examine the direct costs of treatment
and the corresponding medical outcomes and indirect
costs, not a single component. For example, it has been
noted that despite compliance with treatment, there is
residual sleepiness and symptomatology in patients
Accepted for publication July 1997.
Address correspondence and reprint requests to Bruce Crawford,
M.A., The Lewin Group, Suite 1701, 101 Main Street, Cambridge,
MA 02142, U.S.A.
with narcolepsy (3,4). The effects of this residual
sleepiness have their own sequelae which may result
in accidents at home, work, or while driving (5-7),
and which have been associated with both property
damage and early death (8,9). These costs are important to an understanding of the full economic impact
of this disorder with respect to pharmaceutical treatment. The removal of residual sleepiness may reduce
the number of accidents, decreasing the expenditures
on medical care and on personal and family suffering
associated with severe accidents.
WHY EXAMINE THE ECONOMICS?
In many health care systems in developed countries,
decision makers (clinicians, medical directors, health
care policy makers) consider the actual economic impact, or "intrinsic economic value", of new products
and programs in their selection of treatment and prevention strategies. The intrinsic value of a product is
equivalent to its economic efficiency and takes into
account the global and long-term economic impact (direct, indirect, and intangible costs) as well as the effectiveness (e.g. events avoided, change in patient
quality of life) of the product.
Clinical economics is playing an increasingly important role in the decision-making process associated
with alternative strategies within health care organizations. There has been increasing pressure from employer groups for health care organizations to dem-
829
B. CRAWFORD
830
on strate the value of the health care dollar being spent
(10). Managed care organizations (MCOs) have responded with various mechanisms to restrain their
costs in order to keep employer premiums and member
copayments down and to stay competitive. They have
used clinical economics in the development of practice
guidelines and benefits packages and to determine formulary [or pharmacy and therapeutic (P&T)] listings.
It has been reported that 65% of the health maintenance organizations with memberships of over 40,000
have implemented drug formularies to encourage costeffective prescriptions (11). Therefore, it is crucial for
a new technology to understand where it may have
additional economic impact compared with existing
therapies.
ECONOMIC EVALUATIONS
Analysis strategies
There are several strategies one may pursue to examine the economics of medical interventions. The
predominant strategies, described below, are cost identification, cost effectiveness, cost utility, and cost benefit. These evaluations examine all costs associated
with treatment, comorbid disorders, and outcomes of
treatment (adverse events, additional treatments due to
misdiagnosis). Costs, to be detailed later, include direct
costs (medication, office visits), indirect costs (lost
work time, personal time), and, ideally, intangible
costs (pain, suffering) related to the disorder and that
are accrued over the respective time period. Quality of
life evaluations are also often invoked to augment the
results of an economic evaluation.
Effectiveness
II
A
III
IV
Cost
FIG. 1. Graphically representing cost effectiveness combines the
two independent variables in a meaningful way.
Cost-minimization analysis (CMA), or cost-cost, is
used when the therapeutic interventions are assumed
to have equal efficacy, and therefore only the cost of
both the treatment and the corresponding outcomes are
of concern. If there is a difference in efficacy or effectiveness, the comparison of therapies in terms of
costs only may produce misleading information for decision makers. A less effective and less costly drug
may truly cost more for a specified outcome once all
comorbid and adverse events are accounted for.
Cost-effectiveness analysis (CEA)
Cost-effectiveness analysis, the most common strategy, accounts for both the costs and outcomes of a
medical therapy, unlike CMA, which only looks at the
costs of the therapy. Effectiveness is reported as a single medical outcome or effect, such as cases identified,
lives saved, or improvement in the Epworth sleepiness
scale. This allows the comparison of costs associated
with obtaining a specific outcome [see Rittenhouse
(13) for further discussion]. A drawback associated
Cost-identification analysis
with CEA is that it does not explicitly assess whether
Cost identification is the simplest strategy in eco- or not the costs are worth the outcomes obtained (14).
Plotting the results of a cost-effectiveness analysis
nomic evaluations. It can take the form of a "burden
of illness" or "cost of illness" study or that of a cost will often provide some insight into the value of the
minimization or cost-cost study. A burden of illness therapy under investigation. Figure 1 presents the two
study identifies all costs associated with a disorder for independent variables combined in a meaningful way
a particular time period, typically a year (prevalence regarding the choice between two medical technoloapproach), or over the lifetime of the individual, once gies. Because lower cost and improved outcomes are
diagnosis has occurred (incidence approach). The in- preferred, any point to the upper left (quadrant I) of
cidence approach, however, ignores any misdiagnosis the standard comparator, A, represents a dominant
prior to the determination of the true diagnosis. The choice. In contrast, the points in quadrant IV are never
prevalence approach may be modified to incorporate preferred. The points in quadrants II and III require
these costs, using the incidence of diagnosis and mis- further information on the trade-off between costs and
diagnosis. Burden of illness studies provide an overall outcomes in order to determine the preferred choice.
cost estimate, allowing the identification of major cost For example, some combinations of increased cost and
drivers. They may also be used as a baseline estimate increased effectiveness (quadrant II) may be preferred,
for comparison against new medical treatments (12).
whereas others may not be.
Sleep, Vo!. 20, No. 10, 1997
CLINICAL ECONOMICS AND SLEEP DISORDERS
Another way to represent the outcomes of the costeffectiveness analysis is through the cost-effectiveness
ratio. This ratio provides the costs associated with obtaining one unit of outcome, such as life year gained.
The ratio may also be displayed as the incremental cost
effectiveness. In other words, how much money will
it cost to obtain one additional unit of outcome, relative to the baseline comparator?
Cost-utility analysis (CUA)
Cost-utility analysis is a special form of cost effectiveness in which the effectiveness measure is expressed as quality adjusted life years (QALY) gained.
A QALY is a life year that has been adjusted to reflect
the health-related quality of the individual's life for the
given year(s). The life year is discounted by utility
weights representing the value an individual places on
different states of health. This will simultaneously capture changes in mortality and morbidity and combine
them into one measure [see Torrance (15) for further
discussion]. Cost-utility analysis must focus on final
outcomes, such as quality and quantity of life.
The use of utilities affords the opportunity to measure patient preference for treatments and the effectiveness of a particular therapy, including side effects,
duration of treatment, pain and suffering, and overall
quality of life. For example, a program for the early
identification of narcolepsy in school-aged children
will result in appropriate treatment to relieve symptoms that may cause psychosocial problems in school
(5). This may reduce comorbid disorders such as depression, reduce embarrassment, and improve the
child's schooling (1), all of which have a positive impact on the patient's quality or utility of life. Simply
stated, the more effective the treatment to relieve
symptomatology, the happier the patient will be, and
therefore that state is assigned a higher utility weight.
Utilities can be derived through two main techniques: time trade off (TTO) or standard gamble (SG).
The assessment of utilities through a TTO is commonly used, although theoretically such an assessment
is inferior to the SG. In a TTO, individuals are asked
how much time they would be willing to forgo to obtain a higher quality health state. The advantage of
using a TTO is that it is measured in time, and thus
bodes well with QALY s, adjustment of quality with
time and outcomes in years.
The assessment of utilities through a SG is theoretically preferred because it has its roots in economic
utility theory, i.e. von Neuman-Morgernstern utility. In
a SG, the individual is asked to choose a constant
health state for X years or a health state that has a
probability, p, of perfect health and (1-p) of death.
The probability p is varied until the individual is in-
831
different. However, the complexity of the formula and
difficulties in patient understanding hamper the implementation of the SG.
Cost-benefit analysis (CRA)
In cost-benefit analyses, unlike the previous strategies, both costs and benefits are measured and expressed in terms of monetary units. The results of
CBA allow the comparison of therapeutic outcomes
across the spectrum of disorders. This allows policy
makers to ration fixed health care resources to produce
the maximum benefit to society. A major limitation of
CBA is the difficulty it entails in terms of evaluating
indirect and intangible costs and benefits (12). Two
methods for evaluating benefits in monetary units are
predominantly used: human capital approach and willingness to pay approach [see 10hannesson and Weinstein (16) for further discussion]. These methods are
described under cost evaluations.
Quality of Life (QOL)
The assessment of changes in QOL from medical
interventions is gaining widespread use. Quality of life
assessments examine change in patient-perceived quality of life across a disorder pathway. Medical interventions that improve various domains of a patient's
QOL should consider the use of QOL measurements.
A QOL questionnaire is a multidimensional self-assessment of various aspects of the patient's psychological, social, and func;tional ability. It may be either disorder-specific or generic. A generic QOL questionnaire
may be used "generically" for any disorder because
it has been designed to examine the major domains of
a patient's QOL. Many of these generic questionnaires
have been validated for specific disorders. A disorderspecific QOL questionnaire is designed to be able to
detect clinically relevant differences. Disorder-specific
questionnaires were developed because specific disorders have specific outcomes that may not be captured with a generic QOL instrument.
In sleep disorders, it-is important not only to capture
the quality of the patient's sleep but also to understand
how residual daytime sleepiness affects various QOL
domains (e.g. social interaction, mood, concentration).
A recent article by Idzikowski (17) reviewed the impact of insomnia from a variety of illnesses on QOL.
Leger et al. (18) examined QOL in insomnia for the
treatment of zopiclone. However, the measurement of
QOL in itself is not sufficient. Results in changes in
QOL must be correlated with meaningful clinical information to demonstrate what a significant change in
QOL really means for the patient.
Sleep, Vol. 20, No. 10, 1997
B. CRAWFORD
832
Direct Medical Costs
Direct Non Medical Costs
Inpatient Care
• Specific Equipment
• Days Hospitalization
• Transportation
• Lab Tests
• Nursing
• Hospital Drugs
• Personnel
• Surgery/Procedures
• Specific Diet/Care
though they should be presented individually so that
decision makers may examine the costs relevant to
their perspectives. For example, an insurer will primarily be interested in the costs associated with medical treatment (i.e. direct medical costs) but may also
be interested in the impact on employment as a marketing tool to employer groups.
• Consultations
Indirect Costs
Outl!atient Care
• Days Missed From Work
• Physician Consultations
• Under/Unemployment
• Outpatient Drugs
• Time Lost
• Lab Tests
• ProcedureslTherapies
Intangible Costs
• Pain/Suffering
• Loss of ADLs
SOCIETY
HEALTH INSURANCE
PATIENT
FIG. 2. The appropriate costs to include in any study are dependent upon the perspective. Three perspectives are shown, each with
their own associated costs. Note that societal costs include both the
health insurer and the patient perspectives.
Cost evaluations
The compilation of cost estimates may be the most
difficult task in an analysis. Costs should include not
only those associated with the provision of a medical
technology but also those that accrue as a result of
changes in treatment and the trajectory of the disorder
(19).
Costs need to be identified, measured, and valued
for the perspective chosen. The perspective of an analysis should drive the cost identification. Perspectives
for costs include society, payers (insurance companies), providers, or patients. It is important that all the
resource utilization and changes in productivity be
measured appropriately during the study. Upon completion of the study, one standardized cost should be
associated with each resource. This will eliminate bias
from geographical or site differences. Additionally, the
true costs of producing an intervention are difficult to
obtain (although cost-to-charge ratios (20) may be
used), and they are irrelevant to the managed care organization. Straight charges are often used as a compromise. When possible, average reimbursed amounts
for an MCO should be obtained, thereby addressing
the relevant payer's need (20).
The costs to be measured are direct, indirect, and
intangible. Their association to perspectives is diagrammed in Fig. 2. Note that the societal view encompasses all costs, whereas the patient and insurance perspectives are not as inclusive. It is recommended, however, that all costs be included in any analysis, alSleep, Vol. 20, No. 10. 1997
Direct costs
Direct costs consist of resource utilization attributable to the medical intervention under investigation.
These include direct medical and direct nonmedical
expenditures. Direct medical costs are those related to
the therapy obtained, such as hospitalization, diagnostic tests, physician visits, pharmaceutical use, switching of therapies due to inefficiency, and treatment of
adverse events cif therapy. Direct nonmedical costs include those paid by the patient, such as transportation
and caregiver costs.
Indirect costs
Indirect costs occur from loss of productivity (both
work and leisure) and death. These costs may be substantial in patients with sleep disorders and should be
addressed as completely as possible (1). Reduced productivity from excessive daytime sleepiness in a narcoleptic sample has been shown to be a significant
problem (1,5). This reduction in productivity has a
large financial impact on firms and on patients through
loss of promotions or jobs.
The loss of productivity is commonly measured by
the human capital approach, in which the patient's
wage is used to value lost productivity, including time
removed from the workforce due to early death. The
human capital method, although the most widely used,
is economically flawed in that it does not incorporate
the individual's valuation of his/her health and survival. Additionally, it biases disorders that affect a higher
proportion of working people. The latter may be indirectly addressed through the use of an average wage
or salary that is applied to all lost productivity, regardless of employment.
Alternatively, productivity may be measured by the
friction cost method (21). This method is more involved in that it accounts for the economic circumstances in each firm, e.g. excess production capacity
that may be used to cover an absent employee. Although this method provides a better estimate of the
true costs of lost productivity, its implementation is
hampered by the need for numerous labor variables
(production capacity, industry unemployment rate, average time to fill an opening).
833
CLINICAL ECONOMICS AND SLEEP DISORDERS
Intangible costs
Intangible costs represent the economic value of
pain, suffering, loss of activities of daily living
(ADLs), inconvenience, and other nonfinancial outcomes of a disorder and its treatment. Evaluation of
intangible costs is difficult and is often ignored in analyses. The importance of intangible costs should be recognized in an analysis, even if these costs are not measured. For example, how does one measure the frustration associated with insomnia or the embarrassment
of a cataplectic attack? The development of CUA has
attempted to capture these intangible costs using the
willingness to pay approach. The willingness to pay
approach measures an individual's willingness to pay
for the avoidance of a disorder or death or for improvement in outcomes. The willingness to pay method is not widely used because of the difficulties associated with measuring an individual's preference or
valuation of a change in outcomes/symptoms.
DISCUSSION
There have been numerous studies examining the
psychosocial impacts of sleep disorders. However, little has been published to address the economic consequences of these impacts. Leger (2,22) and Webb
(23) have examined the costs of sleep-related accidents, but that is only one component of sleep disorder
costs. The National Commission on Sleep Disorders
Research (1) examined the direct costs of sleep disorders but was unable to provide estimates of indirect
and intangible costs due to the lack of comprehensive
data. Again, direct costs reflect only one component
of sleep disorders. There is a need to understand the
breadth of costs--costs of production loss, impaired
schooling, psychiatric disorders, and treatment. To fully understand these costs and the economic impact of
each component, investigators first need to address the
cost of the illness. This may be done with a cost of
illness study or the continual "piecing process" of
economic impacts of each component until the puzzle
has been completed. Chilcott and Shapiro (24) and
Stoller (25) provide a nice overview of the socioeconomic impact of insomnia. They provide the best overviews in sleep disorders that have attempted to capture
all relevant costs-direct and indirect. The authors arrived at their disease burden through the piecing together of multiple sources and estimates, demonstrating the lack of complete information on sleep disorders. One avenue to increase available data may be to
collect the economics alongside the psychosocial studies. Investigators will then be able to use the strategies
described above to evaluate new interventions and diagnostics. The field of sleep disorders is an open stage
for economic evaluations, and the base needs to be
built.
In summary, the economic impact of sleep disorders may be quite large. It is our duty as physicians,
scientists, and researchers to break down the public
misconceptions about sleep disorders and to provide
economic figures for these disorders and associated
benefits of new technologies. The use of economic
evaluations allows for medical technologies to enter
the MCO environment in a credible fashion with the
ability to present the results of controlled and accepted studies. This will help secure appropriate reimbursement, acceptance, and penetration in the marketplace.
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