Meeting Need
Economics for Commissioning and
Priority Setting : theory and practice
Jo Gray
Session Outline
• Introduction to the concept of scarcity and
commissioning/priority setting in the NHS
• Introduction to the role of economics and
economic principles in addressing and
managing scarcity
• The application of economic principles to
commissioning/priority setting
= Scarcity
Does the NHS manage scarcity?
• National Level: Priority setting via NICE &
HTAs
• Local Level: managing scarcity through
Priority setting and commissioning
CCGs are responsible for managing the local health care budget, and
assessing population needs, purchasing and/or organising services to
meet needs, and implementing national guidance
= COMMISSIONING
But how and how can health economics help us?
–What frameworks and methods are
available?
Summary of prinicples
• Weighing up costs and benefits- the inputs
and outputs from alternative use of resources
The application of economics to
priority setting : National Level
• How can we re-allocate resources to maximise
benefits to the population for the resources
available?
• Economic evaluation underpins principles at
national level
Economic evaluation
• What is economic evaluation?
The comparative analysis of alternative courses of
action in terms of both their costs and consequences
• Why conduct an economic valuation of health care
options?
Scarcity implies the need to make choices and to be
efficient with available resources
2. Are at least 2 alternatives compared?
…determine forms of evaluation
1. Are both costs (inputs) and consequences (outputs) examined?
NO
Examines only
consequences
NO
1A
YES
Examines only
costs
PARTIAL EVALUATION
• Outcome
description.
3A
YES
• Cost description.
PARTIAL EVALUATION
• Efficacy or
effectiveness
evaluation.
1B
3B
2
PARTIAL EVALUATION
• Cost-outcome description.
4
FULL ECONOMIC EVALUATION
• Cost analysis.
•
•
•
•
Cost-minimisation analysis.
Cost-effectiveness analysis.
Cost-utility analysis.
Cost-benefit analysis.
Summary of evaluative techniques
Evaluative technique
Benefits
Unit of measurement
Cost-effectiveness
analysis
Quantity of life
OR
Health gain
Life years gained
Cost-utility analysis
Quantity & quality of
life
- QALYs (generic or
condition-specific)
- HYEs
Cost-benefit analysis
Quantity & quality of
life (possibly
including some nonhealth aspects)
Money e.g.
- Human capital
- Willingness to pay
Natural units e.g.
- Pain reduction
- Cases detected
- Activities of daily living
- Cholesterol reduction
The application of economics to
commissioning: Local level
• How can we re-allocate resources to maximise
benefits to the population for the resources
available?
• Allocative and technical efficiency issues
• Economics can provide some principles but
can we operationalise them in a way that
CCGs and similar organisations can use?
Priority Setting
* Priority setting of health interventions: the need for multi-criteria decision analysis, Rob Baltussen, Louis Niessen, Cost effectiveness and resource allocation (2006)
PRIORITY SETTING PROCESS
MCDA steps
1) Establish the decision context, objectives (goals), and
identify the decision maker(s).
2) Identify the intervention alternatives.
3) Identify the relevant criteria to the decision problem
4) Estimate the performance of the interventions on the
criteria by gathering evidence or expert opinion
5) Estimate the overall score of all the interventions i.e.
these scores can then be used to prioritise
Advantages and Disadvantages
of Different Prioritisation Methods
Method
Advantages
Disadvantages
Portsmouth scorecard
Quick, intuitive and easy to Only uses subjective
use
evidence
Option
Appraisal
Already used in the NHS
Can tailor complexity
Can be manipulated
Typical MCDA (e.g. STAR)
Combines objective and
subjective data
Time and resource
intensive
MCDA with DCE’s (e.g.
HE.LP)
Robust, evidence based
approach
Time and resource
intensive
PBMA
Considers both investment
and disinvestment
Users tend to focus on PB
aspect only
Overview of Spend & Outcome
Lower spend,
Better outcome
Higher spend,
Better outcome
2.5
2.0
Outcome Z score
1.5
1.0
Nn
0.5
0.0
Oth
Mat,SC
Poi
BloodLD,Vis,Hear,Dent
Skin
Musc
End
-0.5
Neu,Circ
HI
-1.0
Resp
GI
Can
GU
-1.5
-2.5
-2.5
Lower spend,
Worse outcome
MH,Trau
Inf
-2.0
-2.0
-1.5
-1.0
-0.5
0.0
Spend per head Z score
0.5
1.0
1.5
2.0
2.5
Higher spend,
Worse outcome
Standardised Comparator
North Tyneside
-3
Inf
Can
Blood
-2
-1
Nottingham North & East
Spend (z)
0
1
North Tyneside
2
3
-3
-2
Nottingham North & East
Weighted outcome (z)
-1
0
1
2
3
Inf
Can
Blood
End
End
MH
MH
LD
LD
Neu
Neu
Vis
Vis
Hear
Hear
Circ
Circ
Resp
Resp
Dent
Dent
GI
GI
Skin
Skin
Musc
Musc
Trau
Trau
GU
GU
Mat
Mat
Nn
Nn
Poi
Poi
HI
HI
SC
SC
Oth
Oth
Multi Criteria Decision Analysis
•
•
•
•
•
•
Assessing options against multiple criteria
Can be conflicting objectives
Weighting and scoring criteria
Uses different data sources
Combines hard data & value judgements
Different methods – differing levels of
complexity
Portsmouth Scorecard
Factor
Magnitude of benefit
(Health gain)
Addresses health
inequality
Strength of evidence of
clinical effectiveness
Cost effectiveness
National and local
priority
Number who will
benefit (not the
number treated)
Affordability
Very low
Mid-scale
Very high
Under 3 points
Limited improvement in
health or life expectancy
20 points
Moderate improvement
in health or life
expectancy
40 points
Large improvement
in health or life
expectancy
Under 3 points
Does not address a health
inequality
Under 3 points
Limited or no evidence
(Case series, experimental)
20 points
Partially addresses a
health inequality
20 points
Modest evidence
(Cohort studies)
Under 3 points
> £20,000 per QALY
20 points
£10-20,000 per QALY
40 points
Fully addresses a
health inequality
40 points
Good evidence
(meta-analysis,
RCTs)
40 points
<£10,000 per QALY
Under 3 points
None
Under 3 points
10
20 points
Two targets
Identified as need in the
CSP/JSNA
20 points
1000
40 points
must do
Major need in
CSP/JSNA
40 points
10,000
Under 3 points
>£100,000
10 points
<£50,000
20 points
Cost saving to the
PCT
Score
*Austin, D., Edmundson-Jones, P. and Sidhu, K. (2007) Priority setting and the Portsmouth scorecard: prioritising public health services: threats and opportunities.
Out of
40
40
40
40
40
40
20
Summary
• There will never be enough resources to meet
all unmet need/demands/wants
• Resources are scarce
• Choices have to made and managed
• Economics is discipline founded on explicit
recognition of scarcity and should provide
some theory and solutions
• MCDA provides a vehicle for
opertationalising economic principles –fast
and frugal