PETER MUENNIG, MD, MPH, is a professor in the Department of Health Policy and Management at Columbia University.

MARK BOUNTHAVONG, PharmD, MPH is a pharmacoeconomist at the Veterans Affairs San Diego Health Care System and an adjunct faculty member of the Skaggs School of Pharmacy and Pharmaceutical Sciences at the University of California, San Diego.

List of Tables, Figures, and Exhibits xi

Preface xxi

Acknowledgments xxv

About the Author xxvii

Chapter 1 Introduction to Cost-Effectiveness 1

Learning Objectives 1

Overview 1

Why Cost-Effectiveness Is Useful 2

Elements of Cost-Effectiveness Analysis 4

The Average and Incremental Cost-Effectiveness Ratio 9

Why Conduct Cost-Effectiveness Analysis? 11

The Reference Case Analysis 14

Cost-Effectiveness Analysis and Policy 17

Summary 24

Further Readings 24

References 25

Chapter 2 Principles of Cost-Effectiveness Analysis 29

Learning Objectives 29

Overview 29

The Perspective of a Cost-Effectiveness Analysis 29

Capturing Costs 33

Capturing Quality 35

Interpreting the Cost-Effectiveness Ratio 39

Types of Economic Analysis 43

Summary 48

Further Readings 49

References 49

Chapter 3 Developing a Research Project 53

Learning Objectives 53

Overview 53

Eight Steps to a Perfect Research Project 53

Developing a Research Question 55

Designing Your Analysis 64

Summary 70

Further Readings 70

References 70

Chapter 4 Working with Costs 73

Learning Objectives 73

Overview 73

Opportunity Costs 74

Identifying Costs 77

Micro-Costing and Gross Costing 80

Getting Cost Data 82

Using Diagnosis Codes 84

Adjusting Costs 86

Costs Associated with Pain and Suffering 95

Assessing the ‘‘Relevancy’’ of Cost Data 97

Other Cost Considerations 98

Summary 102

Further Readings 103

References103

Chapter 5 Probabilities and Decision Analysis Models 105

Learning Objectives 105

Overview 105

The Idea Behind Decision Analysis 105

Probabilities 109

Decision Analysis Models 114

Summary 131

Further Reading 132

References 132

Chapter 6 Calculating Life Expectancy 135

Learning Objectives 135

Overview 135

Hand-Calculating Years Gained 135

Calculating Life-Years Lost Using Markov Models 140

Summary 150

Further Readings 151

References 151

Chapter 7 Working with Health-Related Quality-of-Life Measures 153

Learning Objectives 153

Overview 153

Framework 154

Deriving HRQL Scores 158

Other Considerations and Reminders 168

Using Disability-Adjusted Life-Years 171

Summary 172

Further Readings 173

References 173

Chapter 8 Calculating QALYs 177

Learning Objectives 177

Overview 177

Using the Summation Method 178

Using the Life Table Method 180

More On Discounting 189

Issues with QALYs 191

Calculating Incremental Cost-Effectiveness 192

Disability-Adjusted Life-Year (DALY) 195

Summary 196

Further Readings 196

References 196

Chapter 9 Conducting a Sensitivity Analysis 199

Learning Objectives 199

Overview 199

Performing a Sensitivity Analysis 199

Sensitivity Analysis 201

One-Way Sensitivity Analysis 203

Two-Way Sensitivity Analysis 207

Tornado Diagram 208

Multiway Sensitivity Analysis 210

Summary 222

Further Readings 222

References 223

Chapter 10 Preparing Your Study for Publication 225

Learning Objectives 225

Overview 225

Content and Structure of Cost-Effectiveness Articles 225

Title and Abstract 230

Introduction 231

Methods 233

Results 235

Discussion 238

Other 238

Technical Appendix 239

Figures and Illustrations 240

Summary 240

Further Reading 241

References 241

Chapter 11 Basic Concepts in Epidemiology and Application to Cost-Effectiveness Analysis 243

Learning Objectives 243

Overview 243

Review of Incidence 244

Understanding Error 252

Managing Error in Cost-Effectiveness Analysis 255

Calculating Weighted Means 261

Evaluating Study Limitations 263

Summary 274

Further Readings 275

References 276

Chapter 12 Finding the Data You Need 279

Learning Objectives 279

Overview 279

Finding Data in the Medical Literature 279

Grading Published Data 281

Using Electronic Datasets 282

Data Extraction Tools 290

Using Unpublished Data 293

Using Expert Opinion 294

Organizing Your Data 295

Summary 295

Further Readings 296

References 296

Chapter 13 A Worked Example 299

Learning Objectives 299

Overview 299

Helping Students Learn 299

Laboratory Exercise One: Building a Markov Tree 300

Laboratory Exercise Two: Comparing Interventions 320

Laboratory Exercise Three: The Cost-Effectiveness of Health Insurance 333

Laboratory Exercise Four: Sensitivity Analysis 344

Summary 358

Appendix A Answer Key to Exercises 359

Appendix B Life Expectancy and Quality-Adjusted Life Expectancy Tables 375

Appendix C EQ-5D-5L Health Questionnaire (English Version for the United States) 379

Appendix D Diagnosis, Charges, Medicare Reimbursement, Average Length of Stay, and Cost-to-Charge Ratio by Diagnosis-Related Groups, 2011 383

Glossary 419

Index 431

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