Objectives 5/2/17. Consider This: Cost Perspectives of Economic Evaluations of Healthcare Investments

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1 Consider This: Are HAIs Costly? It Depends - Who s Asking? Doug Scott, PhD Division of Healthcare Quality Promotion Centers for Disease Control and Prevention Disclaimer: The findings and conclusions in this presentation are those of the author and do not necessarily represent the views of the Centers for Disease Control and Prevention. Monetary valuations of the economic cost of health care associated infections (HAIs) are important for decision making and should be estimated accurately. Erroneously high estimates of costs, designed to jolt decision makers into action, may do more harm than good in the struggle to attract funding for infection control. Expectations among policy makers might be raised, and then they are disappointed when the reduction in the number of HAIs does not yield the anticipated cost saving. The HAI costs a lot approach to influencing decision making has served the infection control community well. The time has arrived, however, for the methodological advances that have been achieved in this area to be implemented by researchers. Graves et al. Estimating the Cost of Health Care Associated Infections: Mind Your p s and q s. Clinical Infectious Diseases 2010; 50: Objectives Describe economic theory underlying divergent cost perspectives. Present cost (cost saving or benefit) estimates of HAIs (mostly hospital-onset) from varying cost perspectives. Economic burden to the healthcare system Excess reimbursements made to Medicare Introduce the societal cost perspective Illustrate the use of the statistical value of life (VSL) as used by the federal government for regulatory impact analysis. Back to the past - current musings on measuring the cost of infection control and the limits of traditional accounting practices. Cost Perspectives of Economic Evaluations of Healthcare Investments Perspective: What is the point of view which the analysis is based? Determines which benefits and costs to included: The cost perspective of healthcare providers includes those costs of the resources used to prevent and/or treat patients while in their care The cost perspective from patients include lost work days, out-of-pocket costs for care, pain and suffering, impact on family and / or other caregivers, long term morbidity and mortality. The cost perspective of third party payers (like Medicare) assesses the excess reimbursements that would be saved due to infections averted by investing in HAI prevention. Societal perspective must consider all cost and benefits to all members of society Characteristics of a Perfectly Competitive Market qlarge number of buyers and sellers willing to buy or sell the product at a certain price. qperfect information All consumers and producers know all prices of products and what their value is to the consumer. qhomogeneous products The products made by producers are perfect substitutes for each other, qwell-defined Property rights with no externalities (Costs or benefits of an activity do not affect third parties.) qno barriers to entry or exit. Characteristics of a Perfectly Competitive Market qevery participant is a price taker No participant with market power to set prices. qperfect factor mobility In the long run factors of production are perfectly mobile. qprofit maximization of sellers Firms sell where the most profit is generated qrational buyers: Buyers act according to their own selfinterest. qzero transaction costs No cost incurred in exchange of goods. Source: Source: 1

2 Underlying Theory Results In This: Neoclassical economics theory of how individual decision makers behave in various market structures focusing on the determine the distribution of goods, outputs, and income. Key assumption on human behavior rational choice Individuals will act to promote their self-interest (maximize their own welfare or utility). Desirable Outcome: Resources are valued at their opportunity costs But Why? Multiple cost perspectives are the result of market failure in markets for healthcare services - one or more characteristics needed for a market to function efficiently is lacking. Problem is one of asymmetric information or the principalagent problem (Kenneth Arrow). The Categories of Costs Related to Hospital-Associated Infections Categories of Cost* Direct Medical Costs Fixed Costs: Buildings Utilities Equipment/Technology Labor (laundry, environmental control, administration) Variable Cost: Medications Food Consultations Treatments Procedures Devices Testing (laboratory and radiographic) Supplies Problem occurs when one individual, acting as an agent but processing more information, is able to make decisions on behalf of another individual, or principal, who cannot be sure that the agent is always acting in the principal s best interest (i.e., doctor-patient relationship, doctor-third party payer relationship). Indirect Costs Intangible Cost Downstream or Upstream Encounters: (Readmissions + Outpatient Visits + Physician Visits, etc.) Lost/Wages Diminished worker productivity on the job Short term and long term morbidity Mortality Income lost by family members Forgone leisure time Time spent by family/friends for hospital visits, travel costs, home care Psychological Costs (i.e., anxiety, grief, disability, job loss) Pain and suffering Change in social functioning/daily activities *Adapted from Haddix AC and Shaffer PA. Cost-effectiveness analysis. In Prevention Effectiveness: A Guide to Decision Analysis and Economic Evaluation. Oxford University Press, Healthcare Provider Perspective: Business Case for HAI prevention Majority of economic evaluations of HAI Investments by hospitals have been done from the cost perspective of the hospital or healthcare system (direct medical costs only) HAI preventions efforts will reduce hospital costs by reducing cases (and length of stay). Difficult to estimate using traditional economic models of production (at the hospital level) non-standardized production processes. Non-standardized accounting practices for cost accounting (unlike financial statements). Assessing the Economic Impact of HAI to Hospitals: Previous Approaches As production of hospital patient health is unique to each patient (non-standardized production process), detailed accounting data for each patient is lacking. Instead, epidemiologic (cohort) models have been used that included non-hai infected patients and patients with HAI 1. Crude group comparisons on patient cost 2. Matched group comparison on patient cost 3. Statistical Model with measures on confounders 4. Combination of 2 and 3 Attributable HAI patients cost are typically measured using epidemiologic methods (cohort studies). Or 5. AEP (Appropriateness Evaluation Protocol) 2

3 Searching for the Attributable Cost of HAIs Early attempts at understanding the economic impacts to hospital finances were mostly limited to measuring the excess or attributable cost of HAI as opposed to doing a cost-effectiveness analysis. Stone et al. A systematic audit of economic evidence linking nosocomial infections and infection control interventions: Am J Infect Control Nov;33(9): Conclusion: Published economic evidence on HAIs and infection control and prevention lacked rigor due to the variety of study designs, statistical methods, study settings, and cost outcomes used. Searching for the Attributable Cost of HAIs Roberts et al. Costs Attributable to Healthcare-Acquired Infection in Hospitalized Adults and a Comparison of Economic Methods. Med Care 2010;48: Study Design: Cohort study with medical, surgical, ICU, and non-icu patients, different infection sites and any infecting organism were combined in a single analysis to reflect hospital-wide impact. Cost estimates were derived from a resource-based accounting model using actual hospital expenditures in the year Total cost for each resource were calculated using the multiple distribution method was used to allocate support costs to the departments that provide directly measurable patient services. Roberts Results Estimated Cost Method of Analysis (Total cost: not adjusted for ARI) per Infection Generalized linear model $20,888 OLS linear regression $19,917 OLS linear regression: total cost minus MD and procedures $18,615 Propensity score matched comparison $19,251 LOS multiplied by mean HAI cost/d $19,344 OLS linear regression; 98% Winsorized $15,203 LOS multiplied by mean non-hai cost/d $15,149 3S-PHM LOS multiplied by mean HAI cost/d $11,889 Quantile linear regression $11,662 OLS linear regression; 95% Winsorized $11,299 3S-PHM LOS multiplied by mean non-hai cost/d $9,310 Biased Estimation in Cohort Studies of Attributable Cost n n Models of excess length of stay (LOS) that do not account for time to infection overstate the excess LOS due to HAI VA study comparing three strategies to estimate HCO-MRSA* Measurement Strategies Incremental LOS Incremental Variable Costs Incremental Total Costs % Change in Total Costs from Post-HAI Costs Post-HAI costs only $12,559 $24,015 - Convention Cohort $16,786 $31, % Method Matched on Time to Infection $14,393 $26, % *Nelson RE et al. Reducing Time-dependent Bias in Estimates of the Attributable Cost of Health Care associated Methicillin-resistant Staphylococcus aureus Infections A Comparison of Three Estimation Strategies. Med Care 2015;53: Measuring the Economic Burden of HAIs* : Systematic Literature Reviews For economic burden (to hospitals) of those HAIs that are the primary focus of prevention efforts, the average cost per case is: n Central-line bloodstream infections - $ n ventilator-associated pneumonia - $40,144 n surgical site infections - $20,785 n Clostridium difficile infection - $11,285 n catheter-associated urinary tract infections - $896 Partnership for Patients: Estimated Cost Savings, by Hospital-Acquired Condition (HAC), The total annual costs for the 5 major infections - $9.8 billion (95%CI, $8.3-$11.5 billion), with surgical site infections represents 33.7% of total costs ventilator-associated pneumonia (31.6%) central line associated bloodstream infections (18.9%) C difficile infections (15.4%) catheter-associated urinary tract infections (<1%) *Zimlichman E, Henderson D, Tamir O, Franz C, Song P, Yamin CK, Keohane C, Denham CR, Bates DW. Health care-associated infections: a meta-analysis of costs and financial impact on the US health care system. JAMA Intern Med. 2013;173(22): Source: AHRQ National Scorecard Estimates from Medicare Patient Safety Monitoring System, National Healthcare Safety Network, and Healthcare Cost and Utilization Project. 3

4 Cost Estimates: PfP Program PfP Hospital Acquired Condition Estimated Additional Cost* per HAC Catheter-Associated Urinary Tract Infections $1,000 Central Line-Associated Bloodstream Infections $17,000 Surgical Site Infections (17 procedures in 2010 NHSN) $21,000 Ventilator-Associated Pneumonia $21,000 Hospital-Acquired MRSA $17,000 Hospital-Acquired VRE $17,000 Hospital-Acquired Antibiotic-Associated C. difficile $17,000 However!!! DHQP is experimenting with an analogy costing methodology used by the Defense Department to develop economic burden estimates using administrative data. Sources: Literature review and expert opinion Third Party Payer Perspective Do HAIs results in excess reimbursements paid by Medicare?* CLABSI patients in intensive care unit- $25,000 (see Scott RD et al. CDC Central-Line Bloodstream Infection Prevention Efforts Produced Net Benefits Of At Least $640 Million During Health Affairs, 33, no.6 (2014): ). CAUTI - intensive care unit (ICU): $8,500; non-icu: $1500) (see Yi SH et al. Medicare reimbursement attributable to catheter-associated urinary tract infection in the inpatient setting: a retrospective cohort analysis. Med Care Jun;52(6):469-78). Multifaceted Infection Control and Antimicrobial Stewardship Program to prevent CDI: $2.5 billion in saved reimbursements over 5 year period. (see Slayton et al. The Cost Benefit of Federal Investment in Preventing Clostridium difficile Infections through the Use of a ultifaceted Infection Control and Antimicrobial Stewardship Program. Infect Control Hosp Epidemiol 2015;00(0):1 7 What is the Societal Cost Perspective? Societal Cost = Direct Medical Costs + Indirect Costs+ Intangible Costs Note: Third party reimbursements are not included only the costs associated with the resources used for patient treatment are considered in cost-benefits analysis. What About Calculating Societal Cost Perspective Can estimate direct medical cost and lost productivity due to hospital stays with available data. Additional data needed including: Long-term sequelae (amputations, discharge to longterm care, etc.). Lost productivity long-term Value of premature death Lost productivity of care giver if employment is forgone Intangible cost (lost leisure time, disability) Patient out-of-pocket costs Very little data for HAI patients on most these items difficult to estimate societal perspective except mortality (somewhat). Societal cost of hospital-acquired infections.* Category Societal Low Societal High Direct costs (Billions 2010$) Index hospitalization $24.8 $53.9 Professional fees index hospitalization $4.9 $13.2 Post-discharge outpatient $0.2 $0.2 Readmission post-index hospitalization $3.4 $4.0 Professional fees readmission $0.7 $1.0 Post-discharge diagnosed infection $0.3 $1.7 Sub-totals $34.3 $74.0 Indirect costs Lost wages, incapacitation ($149 a day) $2.5 $3.9 Lost future wages, premature death ($685,225) $59.1 $68.7 Sub-totals $61.6 $72.6 Total societal costs Societal cost of illness $96* $147* *Marchetti A, Rossiter R. Economic burden of healthcare-associated infection in US acute care hospitals: societal perspective. J Med Econ Dec;16(12):

5 Valuing Reductions to the Risk of Death Marchetti study used an accounting value to represent the value of a lost life (lost productivity). An alternative value used by federal regulatory agencies for regulatory impact analysis (RIA) is the value of statistical life (VSL) or value of mortality risk reduction. VSL - the value that an individual places on a marginal change in their likelihood of death. Value of Statistical Life Example take a population of 100,000 Suppose each person would be willing to pay (WTP) an average of $50 to reduce their risk of dying by 1 / 100,000. VSL is equal to $50 (1 / 100,000) or $5 million. Works for small changes in risk WTP will change in proportion with the risk change as long as WTP is small fraction of income. Valuing Reductions to the Risk of Death - Measurement Issues VSL measured in 2 ways Wages studies that examine wages differentials for with varying job-related risks. Survey methods where respondents are asked what they would be willingness to pay for changes in risk of death. Table 5: Marchetti Direct Cost of Associated Hospital-Onset HAI and EPA VSL Measure Number of Attributable cases Per Patient Cost Estimates Total Cost VSL estimate is age invariant Using EPA values for Mortality 39,595 (40% of 98,987) $4 million (low) $8 million (high) $158 billion - $317 billion An alternative to VSL that accounts for age differences in remaining life expectancy is the value of a statistical life year (VSLY) but this measure is not consistent with economic theory and not used. Marchetti Direct Medical Costs Total Societal Costs 1,453,077 (low) 1,676,628 (high) $17,070 (low) $32,176 (high) $ 34 billion - $ 74 billion $192 billion $391 billion Current VSL used by the U.S. Environmental Protection Agency is $7.6 million (2006$) Implication HHS Guidelines n The benefits from reductions to the risk of mortality significantly outweigh the benefits of reduced direct medical costs. DEPARTMENT OF HEALTH AND HUMAN SERVICES (HHS) HAS DEVELOP GUIDELINES FOR CONDUCTING REGULATORY IMPACT ANALYSIS (RIA) THAT COMPLY WITH OFFICE OF MANAGEMENT AND BUDGET (OMB) GUIDELINES. REGULATORY-IMPACT-ANALYSIS. 5

6 Another Example: Antimicrobial Stewardship Proposed Federal Regulation: 42 CFR Parts 482 and 485 Requires hospitals (including critical access) to have policies and procedures for, and to demonstrate evidence of, an active and hospital-wide antibiotic stewardship program along with updating requirements for infection control programs. Estimated costs - $773 million to $1.1 billion Estimated net savings to society - $284 million No estimate for the value of mortality risk reductions Benefits and Costs of a Comprehensive CDI Prevention Program (2015 $) Using VSL Total Intervention Costs (in billions) Total Direct Medical Cost Savings Benefits of Mortality Risk Reduction Lower Bound VSL- $4 billion 35% Attributable Mortality 50% Attributable Mortality Base VSL - $9 billion 35% Attributable Mortality 50% Attributable Mortality Upper Bound VSL - $14 billion 35% Attributable Mortality 50% Attributable Mortality 7% discount rate, 10% effectiveness 3% discount rate, 10% effectiveness 7% discount rate, 50% effectiveness 3% discount rate, 50% effectiveness $3.6 $4.0 $3.6 $4.0 $1.0 $1.2 $4.6 $5.7 $15.2 $21.8 $32.7 $46.6 $49.7 $70.9 $18.3 $26.2 $39.3 $56.1 $59.8 $85.3 $76.9 $108.9 $164.0 $233.2 $249.4 $354.7 $91.8 $131.0 $196.5 $280.7 $298.8 $426.8 Range of Total Net Benefits With Lower Bound VSL $ $22.7 $ $23.4 $ $109.9 $ $132.7 With Base VSL $ $44.0 $ $53.3 $ $234.2 $ $282.4 With Upper Bound VSL $ $68.3 $ $82.5 $ $355.7 $ $428.5 EPA 1990 Clean Air Act Amendments prevent:* Year 2010 (in cases) Year 2020 (in cases) Adult Mortality - particles 160, ,000 Infant Mortality - particles Mortality - ozone Chronic Bronchitis 54,000 75,000 Heart Disease - Acute Myocardial Infarction 130, ,000 Asthma Exacerbation 1,700,000 2,400,000 Emergency Room Visits 86, ,000 School Loss Days 3,200,000 5,400,000 Lost Work Days 13,000,000 *Source: 17,000,000 Total Benefits = $2 trillion (85% of which are benefits to reduce risk of premature deaths) Cost to meet standards of Clean Air Act = $65 Billion HHS Guidelines: What About Morbidity Impacts? Use suitable WTP estimates of reasonable quality if available. If not, use monetized QALYs as a proxy. Federal Aviation Administration Guidelines: Abbreviated Injury Scale for each level, the value of injury is related to the loss of quality and quantity of life resulting from an injury typical of that level. Selected Sample of Injuries by the Abbreviated Injury Scale (AIS) AIS Injury Severity Selected Injuries 1 Minor Superficial abrasion or laceration of skin; digit sprain; first-degree burn; head trauma with headache or dizziness (no other neurological signs). 2 Moderate Major abrasion or laceration of skin; cerebral concussion (unconscious less than 15 minutes); finger or toe crush/amputation; closed pelvic fracture with or without dislocation. 3 Serious Major nerve laceration; multiple rib fracture (but without flail chest); abdominal organ contusion; hand, foot, or arm crush/amputation. 4 Severe Spleen rupture; leg crush; chest-wall perforation; cerebral concussion with other neurological signs (unconscious less than 24 hours). 5 Critical Spinal cord injury (with cord transection); extensive second- or thirddegree burns; cerebral concussion with severe neurological signs (unconscious more than 24 hours). 6 Unsurvivable Injuries, which although not fatal within the first 30 days after an accident, ultimately result in death. Relative Disutility Factors by Injury Severity Level (for Use with 3% or 7% Discount Rates) AIS Description of Fraction of Dollar Value Code Injury VSL AIS 1 Minor $28,800 AIS 2 Moderate $451,200 AIS 3 Serious $1,008,000 AIS 4 Severe $2,553,600 AIS 5 Critical $5,692,800 AIS 6 Unsurvivable/Fatal $9,600,000 Source: 6

7 In Summary: Approach to measure economic burden to healthcare system is in development NSHN data has been successfully linked to Medicare claims data this should be become easier in time. Economic Evaluation of HAIs: Further Musings Partial Equilibirum Analysis vs. System Analysis Cost-Effectiveness / Cost Benefit frameworks assume all other factors are kept constant while investigating a particular policy. Alternative evaluation model Cost of Quality (CoQ) New HHS guidelines should help with developing regulatory impact-type analysis that incorporates values for mortality and morbidity risk reductions. Figure 2: Classical P-A-F Model How Does CoQ Work? It starts with accounting system The point of a cost accounting system (or managerial accounting system) understand the expenditures or costs generated within an organization to improve decision making Many hospital accounting systems are based on the Medicare cost report method ICR method Identify nonrevenue or cost support centers vs revenue center. Determine cost for each cost center, allocate from cost to revenue centers, allocate costs to the units of service. How Does CoQ Work? There is no formal theory behind accounting practice. Generally accepted accounting practices (GAAP) set by Financial Accounting Standards Board Remember mark to market accounting and Enron? CoQ model identifies hidden cost associated with quality improvements in complex production processes using activity-based costing methods. For hospital infection control, how about Laundry Housekeeping (environmental control) Central services and supply (sterilization) Hand Hygiene Consider Daily Costs Typical Cost Equation 5 TC i = (Fixed ik + Hotel ik + Treatment ik ) K = 1 Cost of Quality 5 TC i = (Fixed ik + Hotel ik + Treatment ik + IC ik ) K = 1 Or 5 TC i = (Fixed ik + Hotel ik + Treatment ik + Prevention ik + K = 1 Failure ik ) 7

8 $1,400 $1,200 $1,000 Infection Control as Quality Improvement Hypothetical Daily Patient Cost Implications Restructuring of Medicare cost reports? Infection Control as Revenue Center or Service Center? $800 $600 $400 Question becomes what price to charge to fund infection control programs at levels wanted / needed. $200 $ Days Move from disease management to risk management (like FAA) Fixed Costs Hotel Costs Treatment Costs Infection Control Costs Consider This: Monetary valuations of the economic cost of health care associated infections (HAIs) are important for decision making and should be estimated accurately. Erroneously high estimates of costs, designed to jolt decision makers into action, may do more harm than good in the struggle to attract funding for infection control. Expectations among policy makers might be raised, and then they are disappointed when the reduction in the number of HAIs does not yield the anticipated cost saving. Questions? The HAI costs a lot approach to influencing decision making has served the infection control community well. The time has arrived, however, for the methodological advances that have been achieved in this area to be implemented by researchers. Graves et al. Estimating the Cost of Health Care Associated Infections: Mind Your p s and q s. Clinical Infectious Diseases 2010; 50: