Economic Analysis of Perioperative Optimization

The goal of this chapter is to make the following points:

1.
Taxpayers, employers, and employees demand that medicine deliver better value. Physicians need evidence-based medicine to establish which interventions are truly beneficial and modern management techniques to implement those interventions.
2.
Perioperative interventions are investments, each with its costs and, it is hoped, its benefits. The benefits of perioperative interventions are often difficult to quantify in precise dollar amounts (e.g., pain relief).
3.
Three ways of measuring the benefits of health-care interventions are by improved clinical results (i.e., effects), by increased quality-adjusted life-years (QALYs), or by assigned monetary benefit.
4.
Any new intervention being considered must be evaluated in comparison to the best existing alternative. As a result, the fundamental concept is the incremental cost-to-effectiveness ratio.
5.
Because of the multiplicity of health-care stakeholders (i.e., patients, providers, payers, and society as a whole), an economic study in health-care must specify ahead of time—and be consistent in—its point of view.
6.
Costs of perioperative interventions are direct, indirect, and intangible. Direct costs are the easiest to define and quantify, but vary depending on the costing method used. Direct costs decrease over time, because of competition, the learning curve, technological progress, work process redesign, and the bundling of interventions.
7.
Much more attention should be directed toward identifying and addressing barriers to implementation of beneficial interventions. These barriers include lack of awareness (the physician does not know about the new intervention), of familiarity (knows intervention exists but not the details), of agreement (physician does not agree with proposed intervention), of self-efficacy (does not think they can do it), of outcome expectancy (does not think it will work), as well as system factors not allowing successful implementation.

With the aging of the postwar baby boomers and the explosion of technological options at medicine’s disposal, health-care systems around the world, whether fee-for-service or publicly funded, struggle to increase the quality and to decrease the cost of care. As a result, it is more important than ever to know what really works and what does not. The ultimate payers of health-care costs (taxpayers, employers, and employees) demand that physicians provide better value for the money spent. “Pay-for-performance” metrics are one attempt by these payers to reward systems for attaining the biggest bang for its health-care buck.

Physicians must first know which perioperative interventions actually benefit patients and then apply those interventions at the lowest possible cost. This is a moving target, as the economic attractiveness of perioperative interventions changes with time, as new interventions are introduced (e.g., new drugs such as oral anticoagulants), old interventions evolve (e.g., enhanced recovery after surgery), or as new discoveries are made.

In this chapter, we present the conceptual framework used for the economic analysis of interventions so that the reader can critically appraise economic studies of perioperative optimization.

Health-Care Interventions as Investments

Economics describes how people in societies satisfy their needs and wants in an environment of limited resources. During the 19th and 20th centuries, economists, political scientists, and politicians debated the merits of free-market capitalism, with individual freedom of choice and private property versus central planning and state ownership of the means of production. For normal goods, the individualistic free market approach is predominant.

In medicine, however, much central planning occurs because the consumer (the patient) usually does not directly pay the full cost of the care and is often not able to judge the quality of the health-care product. In economic language, physicians are agents for patients, meaning they are asked to make decisions and “invest” on behalf of their patients.

Costs and (We Hope) Benefits

Health-care interventions are investments, very similar to financial investments, in that there is a cost of the intervention, and then there is an outcome —and, one hopes, a benefit. Unfortunately, many medical practices have not been studied adequately to find out whether they are really beneficial, so some of our therapy is of uncertain value. The motivation of evidence-based medicine is to find out whether our costly interventions really do, in fact, produce benefits. Once we know that an intervention actually provides a benefit to the patient, we have to decide whether the increased benefit is worth the increased cost.

No medical intervention can be considered cost effective in isolation but must be compared with an alternative treatment (usually, the standard therapy). This is hugely important. For example, if a new analgesic technique costs $100 and reduces postoperative pain scores by 50%, then its value needs to be compared with the best current treatment to determine whether it is worthy of implementation.

In health-care—as in any type of management—we manage at the margin, constantly analyzing marginal, or incremental, benefits and comparing them with the marginal, or incremental, costs. The fundamental analytical concept of managing at the margin is the incremental cost-effectiveness ratio , in which the incremental cost of the proposed new intervention is divided by the increase in effectiveness achieved by the intervention.

If a new technique achieves a better outcome at lower cost (e.g., polio vaccination compared with polio treatment), the new cost-saving technique is said to dominate the old technique, and it should become the new standard treatment. For example, ultrasound-guided nerve blocks are superior to nerve stimulator-guided blocks. The example is imperfect, however, since ultrasound-guide blocks require initial investments in equipment and training.

Health-care interventions differ from financial investments in one key respect. The primary benefits of health-care for the patient—such as improved health, improved function, and pain relief are difficult to quantify in precise dollar amounts. As an example, if the new postoperative analgesic reduces pain by 50%, how much is that pain reduction worth in monetary terms to both the patient and the payer?

The Agency Problem—Providers as Fiduciaries

Doctors are not the primary beneficiaries of the interventions they choose for their patients. Furthermore, doctors may benefit from the performance of interventions with unclear patient benefit. For example, knee arthroscopy in the treatment of knee pain in patients who are middle-aged or older has “inconsequential” benefit when compared with conservative therapy.

Within provider systems, parochial budgetary concerns may interfere with the simple goal of maximizing benefits to the patient. For example, a hospital pharmacy committee may not want to burden the hospital pharmacy budget by spending extra money on rivaroxaban, despite evidence of better patient experience and less fatal bleeding with rivaroxaban than with warfarin. This silo problem whereby each silo worries about their budget more than the impact on the entire health system is a continuing challenge that must be recognized.

In summary, health-care suffers from the agency problem: Will the CEO of a large corporation and other members of top management (the providers and payers) act in the interest of the “shareholders” (the patients), or will they enrich themselves first, and only later think about what is best for the shareholders?

Health-Care Economic Studies Offer Challenges

The Point of View Must Be Clear and Consistent

Because there are multiple actors in health-care, it is essential that we remain consistent in the point of view of our analysis. Are we looking at an issue from the point of view of the patient, the entity paying the bills, the provider (the physician, hospital, or clinic), or perhaps society as a whole?

Our Goal Is to Know What Works and How Much It Costs

If we were able to surmount the difficulties involved in quantifying the monetary and nonmonetary costs and benefits of our perioperative interventions, and if we were able to specify from whose point of view we were analyzing the issue, we might be able to construct a chart detailing the utility and costs of perioperative interventions.

The US Public Health Service Panel on Cost Effectiveness in Health and Medicine recommends that studies :

▪
Adopt a societal perspective.
▪
Use community- or patient-derived preference weights for utilities (as opposed to expert opinion).
▪
Use net costs (cost of intervention minus savings in future medical costs).
▪
Use appropriate incremental comparisons.
▪
Discount costs and QALYs at the same rate.

Despite the recommendation to approach analysis from a societal perspective, namely from the point of view of all involved parties with all outcomes and costs, the majority of studies do not follow the recommendation. As of 2005, only 29% of studies involving QALY included a complete societal perspective (most were missing key elements such as transportation and caregiver time).

The consensus recommendations were updated in 2016 to include “reference case” and “impact inventory” as a means to standardize cost-effectiveness analysis to improve comparability between studies. A reference case is a set of recommendations covering components of analysis, methods, and reporting techniques. Two reference cases should be done, one from the perspective of the health system and one from that of society. From the health system perspective, the analysis should include an incremental cost-effectiveness ratio and the net benefit (health or monetary). The societal reference case should include a complete “impact inventory,” a structured chart of effects and costs, with components including patient time, caregiver time, transportation, and effect on productivity. All analyses should give clear explanations regarding the perspective being adopted.

With growing evidence and cost pressure, many more studies of the costs and benefits of perioperative interventions have been done to guide physician behavior.

Barriers to Doing the Right Thing

But even if we were able to know exactly what the costs and benefits of various perioperative interventions were, we would still find that implementation of known beneficial interventions lags far behind our awareness of the effectiveness of the interventions.

There are many possible reasons for the gap between awareness of beneficial interventions and their implementation. These include:

▪
Lack of awareness: The physician does not know about the new intervention.
▪
Lack of familiarity: The physician knows the intervention exists but not the details.
▪
Lack of agreement: The physician does not agree with the proposed intervention.
▪
Lack of self-efficacy: The physician does not think they can perform the intervention.
▪
Lack of outcome expectancy: The physician does not think the intervention will work.
▪
Inertia: The physician does not want to change.
▪
External barriers: The physician wants to change but cumbersome and inefficient work processes make it difficult to change.
▪
It is futile to simply exhort physicians to work harder and to perform better. Caregivers need work process redesign as well as concrete positive or negative incentives for changing their behavior.

The goal then is to build compliance with best practices into the system, so that the best care is the default option. For example, best practice for tidal volumes has changed over time toward a “lung protective ventilation strategy” with smaller tidal volumes and positive end-expiratory pressure (PEEP). Changing the default setting on the anesthesia machine is an effective way to change the tidal volumes and PEEP received by patients. The default setting facilitates a change in practice of physicians without adding additional hassle. Another example is that placing hand sanitizer in more convenient and visible locations improves caregiver compliance with hand hygiene, presumably as a result of increased ease of performing hand hygiene.

Costs—What Exactly Do We Mean?

Costs can be analyzed from different points of view—that of the patient, the provider (physician, hospital, clinic), the payer, or society as a whole. For example, the cost of a medical service to the payer (e.g., an insurance company) equals the percentage of charges actually paid by the payer. However, to the patient, the relevant cost is the out-of-pocket expense (that portion not covered by insurance) plus other indirect costs (e.g., inability to work) incurred as a result of the illness. From society’s point of view, the cost of a medical service is the total cost of all the different components of providing the service, plus the costs of any future consequences of that service, such as complications or disability.

To maximize the usefulness of an analysis to different audiences, the perspective of the analysis needs to be clear and hopefully relevant to the intended audience. For example, pharmacists may be more focused on the hospital or provider perspective. The physician should give greatest weight to the patient’s perspective, whereas the health economist is likely to focus on the analysis from society’s perspective.

Aside from the difficulties presented by differing points of view, the term costs has many different meanings.

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