Value in Healthcare
What is the value we bring with our new product? Who will benefit from it? And how much? we will discuss all in this short article.
In any discipline, improving overall performance and accountability relies upon having a shared aim that unites the pursuits and activities of all stakeholders. However, in Healthcare, stakeholders frequently have conflicting desires, including profitability, safety, protection, convenience, etc. Lack of clarity about goals and desires has led to different approaches, bending the system, and slow improvement progresses. The main goal should be delivering value to the patient. Value for the patient is financial, but not only! It is also convenience, liability, expending lifetime, and quality of life. This primary goal unites all the stakeholders and can enhance the value to them by perusing to improve it.
Our core belief is that in order to create value for patients, and by that to stakeholders, the first and primary focus should be on the unmet need. Once the unmet need is clear and understood, we can begin to understand to whom and by what we create value when addressing the problem. It sounds very complicated to deal with, because how can we quantify value? Well, the good thing is that value can be measured and compared.
Health expenditure is one of the largest items in the national budget. US health care spending increased by 9.7% to reach $4.1 trillion in 2020, a much faster rate than the 4.3% increase seen in 2019. There is a need to find the right and proper way of allocating resources to healthcare as it is a massive challenge worldwide. Due to this complex problem, the field of health economy gained popularity. New and old products, treatments, and drugs are being carefully valued to show efficacy, lower costs or enhance the quality of life to patients. Safety and effectiveness are no longer the only salient attributes of benefiting medical treatments; the effect on total health resource utilization, cost, and quality of life must also be evaluated.
There are several ways to quantify value to patients. The main question that is being asked to quantify it is: “what difference does the treatment make in patient outcomes under real-world conditions?”. The four main health economic methods to quantify value are cost-effectiveness, cost-minimization, cost-benefit, and cost-utility.
Cost-effectiveness analysis aims to reward treatments that improve patients’ lives. The measurement is for an entire patient population rather than one individual, comparing different treatment outcomes and economic costs. This analysis is the most known and has been popularly used in the health sciences over the past several decades. Due to its importance, several statistical methods were developed for this analysis.
The incremental cost-effectiveness ratio (ICER) is the most known and used. It is defined by the difference in cost between two possible interventions, divided by their effect. To better understand the ICER, we can look at the image below.
Cost-minimization analysis compares the costs of alternative medical interventions that are supposed to have an equivalent medical effect. This type of analysis can be used to determine which of the alternatives provides the least expensive way of achieving a specific health outcome for a population.
Cost-benefit analysis puts costs and benefits of some medical treatment in monetary terms. The method is to sum the potential rewards expected from treatment and then subtract the total costs associated with that treatment.
Cost-utility analysis compares the costs and effects of alternative interventions. It measures health effects in terms of quantity (life years) and quality of life. These are combined into a single measure of health: quality-adjusted life years (QALYs). QALY (quality-adjusted life-year) is an academic tool that measures which treatment improves patients’ lives. QALY index was developed to combine the value of these attributes into a single number that can be measured and compared. QALYs can be incorporated with medical costs to arrive at a final common denominator of cost/QALY.
Another essential tool is the evLYG (Equal Value of Life Years Gained) which evenly measures any gains in length of life, regardless of the treatment’s ability to improve patients’ quality of life. That means that the evLYG measure will go up evenly to two different treatments that add one year to a patient’s life (it doesn’t matter what illness or how old the patient is).
Those tools are essential to our day-to-day work as innovators in the healthcare sphere – we are obligated to show value in more than just better treatment or cheaper alternatives. We need to establish a true benefit in that complex system that takes many parameters into account. By knowing and understanding the concept of those parameters and measurements methods, we can better understand how to examine and quantify value in healthcare.
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