Measuring & Estimating costs + CMA

Costs

calculated to estimate the resources (or input) that are used in the production of a good or service

price

the amount that is charged to a payer is not necessarily synonymous with the cost if the product or service

• Direct Medical Costs

• Direct Nonmedical Costs

• Indirect Costs

• Intangible cost

4 types of pharmacoeconomic-related costs

• Health Care Sector Costs

• Cost to other Sectors

• Patient and Family Costs

• Productivity Cost

alternative method of categorizing cost proposed by Drummond et al. (4)

direct medical costs

• most obvious costs to measure

• medically related inputs used directly to provide the treatment

direct nonmedical costs

cost to patients and their families that are directly associated with the treatment but are not medical in nature.

indirect costs

Involves the costs that result from the loss of productivity because of the illness or death

Indirect benefits

• the act of saving because of avoiding indirect costs

• the increased earning or productivity gains that occur because of the medical product or intervention

intangible costs

• this type of cost includes the costs of pain, suffering, anxiety, or fatigue that occurs because of an illness or the treatment of an illness

• difficult to measure or place a monetary value on these types of costs

Intangible benefits

avoidance or alleviation of intangible costs, are benefits that results from the reduction of pain and suffering related to a product or intervention

health sector costs

• This type of cost include medical resources consumed by health care entities

• These types of costs are similar in definition of direct medical costs but do not include direct medical costs paid for by the patient or other health care entities

other sector costs

This type of cost consists of some disease and their treatment impact other non-health care sectors, such as housing, homemaker services, and educational services

patient and family costs

• This type of cost includes the costs to the patient and his or her family without regard to whether the cost are medical or nonmedical in nature

• these cost include the patient’s or family’s share of direct medical as well as direct nonmedical costs

productivity cost

analogous to the economic term “indirect cost” but has the advantage of not being confused with the accounting term with the same name

perspective

To determine what costs are important to measure, the ______ of the study must be determined.

Perspective

an economic term that describes whose costs are relevant based on the purpose of the study

Conventional economic theory

suggests that the most appropriate and comprehensive perspective is that of society

society

the most appropriate and comprehensive perspective

Societal perspective

includes the costs to the insurance company, cost to the patient and other sector costs, and indirect costs because of loss of productivity

standardization of costs

When costs are estimated from information collected for more than 1 year before the study, adjustment of costs is needed; this is also referred to as _______

retrospective data

If _____ are used to assess resources used over a number of years back, these costs should be adjusted, or valued at one point in time.

discounting

If costs are estimated based on dollars spent or saved in future years, another type of modification, called ______, is needed

discount rate

Modifications for this time value are estimated using a ______

• marginal costs

• incremental costs

2 terms often used interchangeably to refer to this change or difference between alternatives.

incremental cost-effectiveness ratio

• a summary measure representing the economic value of an intervention, compared with an alternative (comparator)

• main output or result of an economic evaluation

• total costs (incremental cost)

• chosen measure of health outcome or effect (incremental effect)

ICER is calculated by dividing the difference in ______ by the difference in the ______ to provide a ratio of ‘extra cost per extra unit of health effect

direct medical costs

these costs are measured directly during a clinical study for each patient through record keeping and patient logs

Claims data review

relatively inexpensive way to collect cost data for patients but may be incomplete

• medications

• medical services

• personnel costs

• hospitalizations

Sources of estimates for four types of common direct medical cost categories (4)

average wholesale price (AWP)

• used when calculating the cost of pharmaceutical products in the United States

• considered the “list price” or “sticker price” of medications and can be found in readily available sources

average manufacturer’s price (AMP)

• calculated to reflect the amount paid to manufacturers by wholesalers after all discounts are included

• a more precise estimate of what buyers (pharmacies) pay for medications

• proprietary and not available to the general public

medical service

Source of estimate where providers have a list of charges for these types of service

reimbursement rates

amount reimbursed by payers to the providers of health services

Physician’s Fee Reference

common source for US reimbursement rates

personnel

Source of estimates where estimating the time for the personnel may include the use of estimates based on similar services or may involve more precise work measurement methods

• per diem

• disease-specific per diem

• diagnosis-related group (DRG)

• micro-costing

4 methods for estimating hospital costs

gross or macro-costing

least precise method for estimating hospital costs

micro-costing

• most precise method for estimating hospital costs

• involves collecting information on resource use for each component of an intervention to estimate and compare alternative interventions.

diagnosis-related groups (DRGs)

• relatively available and often-used method of estimating hospital costs to the payer is the payment rate for ______

• This method is used to classify clinically cohesive diagnoses and procedures that use similar resources

CMA

• measures and compares input costs, and assumes outcomes to be equivalent

• types of interventions that can be evaluated with this method are limited