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PubMed1998

Reduced uncertainty as a diagnostic benefit: an initial assessment of somatostatic receptor scintigraphy's value in detecting distant metastases of carcinoid liver tumours.

This paper employs classical concepts of diminishing marginal utility to demonstrate that risk-aversion can increase the perceived value of diagnostic procedures and thus raise optimum diagnostic expenditures. The theory is applied to a model in the spirit of Phelps and Mushlin's initial technology assessments. The specific evaluation is the cost-effectiveness of somatostatin receptor scintigraphy used to detect distant metastases of carcinoid liver tumours in a patient otherwise eligible for surgical resection of the liver. Data for the model are taken from published sources and financial databases, when available, and otherwise from a senior clinician's experience (LKK). The quantitative results indicate that receptor scintigraphy may have two beneficial impacts to risk-neutral individuals. First, it may reduce the combined costs of therapy and treatment because the diagnostic procedure costs less than the expected savings generated by avoiding inappropriate surgeries. Second, it may improve the patient's expected health-status-adjusted life years (HSALY) because the information allows physicians to better match treatment to the cancer's stage. Finally the paper demonstrates that risk aversion, as embodied in classical diminishing marginal utility applied to health status, can increase the value of the diagnostic tests and can lead the patient to choose a less beneficial treatment. An illustrative risk-averse utility function changed the optimum treatment from surgery to chemotherapy and increased scintigraphy's benefit by 500%.

Carcinoid Tumor↗
PubMed1998

Volume responses to Medicare payment reductions with multiple payers: a test of the McGuire-Pauly model.

The effects of changing financial incentives on physician's practice behaviour have long been of interest to researchers and policy makers. We test a model of physician volume response within the context of multiple payers developed by Thomas McGuire and Mark Pauly. A panel data set covering discharges from about 200 hospitals in the US over 45 months is used to carry out the empirical investigation. A fixed-effect model with generalized least squares and instrumental variable specifications is used to compute empirical evidence of volume responses from eight specialties experiencing varying degrees of Medicare payment reductions following the implementation of Omnibus Budget Reconciliation Acts of 1989 and 1990. The empirical findings are compared with McGuire and Pauly's simulated predictions. We note that in examining physician responses to Medicare payment reductions in the context of a multi-payer environment, it becomes evident that only fixing one payer's reimbursement policy is at best a partial solution to cost containment. We echo observations made by other analysts that physician responses to payment changes can be quite complex. Physicians do not all respond to payment reduction in the same way.

Budgets↗
PubMed1998

Drug use, drug abuse, and labour market outcomes.

This paper examines the relationship between illicit drug use and labour market success, and in doing so addresses two shortcomings of the previous literature. First, unlike many previous analyses, ours accounts for differences in intensity of use using clinically based diagnostic measures. Second, while recent studies focus only on young adults, we analyze a prime-age (30-45-year-olds) sample as well. Our results indicate that these differences are important. Similar to previous studies, we find evidence of a positive relationship between drug use and income for young workers. However, we also find some evidence of lower incomes for young workers reporting daily use of illicit drugs. For prime-age men, we find strong evidence that problematic drug use (as indicated by either a diagnosis of pathological use or dependence or by daily use) is negatively related to income. We also find a negative relationship between problematic use and employment among prime-age, but not younger, men.

Adolescent↗
PubMed1998

Technical efficiency in the clinical management of critically ill patients.

The purpose of this paper is to obtain empirical measures of performance in the management of critical patients treated in intensive care units (ICUs) and to evaluate the factors associated with performance, in a two stage approach. In the first stage, this paper uses an extended version of Data Envelopment Analysis (non-discretionary and categorical variables, and weight constraints under consideration) to obtain measures of technical efficiency in the treatment of 993 critical care patients in intensive care units in Catalonia (Spain) in 1991-92. The model incorporates accurate individual measures of illness severity from Mortality Probability Models (MPM II0) and quality outcome measures in the input-output set to obtain non-biased efficiency measures. In the second stage, a loglinear regression model is applied to test a number of hypothesis about the role of different environmental factors--such as ownership, market structure, dimension, internal organization, diagnostic, mortality risk, etc.--to explain differences in the efficiency scores.

Critical Care↗
PubMed1998

Cost efficiency, factor interchange, and technical progress in US specialized hospital pharmacies.

Specialized hospitals perform unique, technologically more complex, and relatively expensive medical procedures. Growing use of high-cost biotechnology drugs and increased clinical pharmacy tasks at these facilities have increased costs. This paper used a unique data set supplied by Eli Lilly, and a dual translog cost system to model the costs of specialized hospital pharmacy production. Results show that the potential substitution of pharmacy technicians for registered pharmacists and the decomposed technical change savings effects of expensive factors of production offer the greatest opportunities for containing costs. Slight diseconomies of scale were also observed.

Cost Control↗
PubMed1998

Early health-related behaviours and their impact on later life chances: evidence from the US.

This paper uses evidence from the US to examine the impact of adolescent illegal consumption and violent behaviour on later life chances. Specifically, we look at the effect of such behaviour by young men in late adolescence on productivity and household formation 10 years on. We find that alcohol and soft drug consumption have no harmful effects on economic prospects in later life. In contrast, hard drug consumption and violent behaviour in adolescence are both associated with lower productivity even by the time the individuals are in their late twenties. These effects are substantial and affect earnings levels and earnings growth. These results are robust to the inclusion of a rich set of additional controls measuring aspects of the individuals' backgrounds. However, we find no evidence of any of these behaviours significantly affecting household formation.

Adolescent↗
PubMed1998

Estimating country-specific cost-effectiveness from multinational clinical trials.

Because costs and outcomes of medical treatments may vary from country to country in important ways, decision makers are increasingly interested in having data based on their own country's health care situations. This paper proposes methods for estimating country-specific cost-effectiveness ratios from data available from multinational clinical trials. It examines how clinical and economic outcomes interact when estimating treatment effects on cost and proposes empirical methods for capturing these interactions and incorporating them when making country-specific estimates. We use data from a multinational phase III trial of tirilazad mesylate for the treatment of subarachnoid haemorrhage to illustrate these methods. Our findings suggest that it is possible for meaningful country-by-country differences to be found in such trial data. These differences can be useful in informing reimbursement, utilization, and other decisions taken at the country level.

Clinical Trials as Topic↗
PubMed1998

More physicians: improved availability or induced demand?

A number of empirical studies have shown that there is a negative association between population:physician ratio and utilization of medical services. However, it is not clear whether this relationship reflects supplier-inducement, the effect of lower prices on patient demand, a supply response to variation in health status, or improved availability. In Norway, patient fees and state reimbursement fees are set centrally. Therefore, the correlation between utilization and population:physician ratio either reflects supplier-inducement, a supply response or an availability effect. We applied a theoretical model which distinguished between an inducement and an availability effect. The model was implemented on a cross-sectional data set which contained information about patient visits and laboratory tests for all fee-for-service primary care physicians in Norway. Since population:physician ratio is potentially endogenous, an instrumental variable approach is used. We found no evidence for inducement either for number of visits or for provision of laboratory services.

Clinical Laboratory Techniques↗
PubMed1998

Price elasticities of demand for curative health care with control for sample selectivity on endogenous illness: an analysis for Sri Lanka.

Estimation of demand for health care with samples of only the ill may bias estimates. Additionally, the lack of exogenous information, especially distance, about the alternative care providers causes omitted variable problems. This paper alleviates both problems through geographic mapping of facility information to individuals, combined with joint estimation of illness (health production) and health care demand. The joint estimation full sample demand results are compared to those from one equation estimation for only the ill sample. The results indicate that the selectivity problem is significant, but that for this sample the magnitude of the bias on the price coefficient is small.

Adolescent↗
PubMed1998

The black box of health care expenditure growth determinants.

In this paper, the determinants of growth of aggregate health expenditures are investigated. The study departs from previous literature in that it looks at differences across countries in growth (and not levels) of health care expenditures. Estimation is made for 24 OECD countries. Health system characteristics usually believed to influence health expenditures growth, like population ageing, the type of health system (public reimbursement, public contract or integrate) and existence of gatekeepers, are found to be non-significant. Nevertheless, there is evidence that health expenditures experienced a clear slower growth in the last decade. The explanation for this slowdown could not be found in the proposed model and should stimulate further research.

Aged↗
PubMed1998

Discounting costs and effects: a reconsideration.

Using a simple societal utility function--giving equal weight to current and future generations-it is concluded that costs need to be discounted on the basis of the expected increase in income and the marginal utility of consumption, and that effects need to be discounted on the basis of the expected increase in health and the marginal utility of health. It is derived that both rates need to be equal when assuming a kind of perfect market, where growth rates are determined by the societal utility function. It is argued that this is an extremely heroic assumption and that different discount rates may be needed. Additionally, the traditional 'inconsistency arguments' of Weinstein and Stason and of Keeler and Cretin are reconsidered. Within the context presented earlier, the first inconsistency only emerges when a growth equilibrium is assumed, reinforcing the arguments put forward before. The Keeler and Cretin paradox is reconsidered by showing that absolutely no paradox emerges when programs are not supposed to stop after a year but are supposed to continue indefinitely. The conclusion is drawn that non-believers in market mechanisms assuring an optimal social policy, need to reconsider the use of their discount rates.

Cost-Benefit Analysis↗
PubMed1998

An investment appraisal approach to clinical trial design.

In this paper, a general investment appraisal model is presented which shows how pharmaceutical companies could take profit considerations into account when making decisions about the design of randomized controlled trials. A general model is presented based on the net present value method of investment appraisal. The approach is illustrated with a hypothetical example which shows how optimal (net present value maximizing) designs can be determined based on choices about sample size and endpoint measurement. The method could be extended to accommodate considerations about other trial design features, and could be used to determine a portfolio of studies which maximizes the expected return on a given development or trial budget. Furthermore, the approach could be used by pharmaceutical companies to evaluate the incremental costs and benefits of incorporating non-clinical objectives into trials, such as quality of life research and economic evaluation studies. A number of practical difficulties would need to be overcome to utilize the approach. Directions for further research are therefore highlighted centred on the key components of the model: a trial cost function, a product demand function, innovation diffusion processes and Bayesian approaches to trial design.

Bayes Theorem↗
PubMed1998

The impact of ownership type on nursing home outcomes.

This paper examines the sorting of residents between for-profit and nonprofit nursing homes and the health outcomes of those residents conditional on ownership type. Using data from the 1987 National Medical Expenditure Survey, we find evidence of systematic sorting of residents by ownership type, and significant effects of ownership type on outcomes. These results are broadly consistent with the hypothesis that for-profit and nonprofit homes exploit their informational advantages to differing extents in a market characterized by asymmetric information.

Aged↗
PubMed1998

Insurance effects on US medical spending (1960-1993).

Regression results show that nearly half of 1960-1993 growth in real per capita medical spending and almost two-thirds of its 1983-1993 growth were due to ever-increasing levels of insurance coverage (the spending portion paid by third parties). Growth in coverage may have played a minor part as well; we would not rule out the standard finding that it has had a positive but relatively small effect. Viewed from a different perspective, the results imply that about two-thirds of 1960-1993 spending growth came via cost-increasing advances in medical technology resulting from: (1) commercial research and development induced by coverage levels and (2) noncommercial medical research. The remaining one-third, was due to standard factors: age-sex mix changes, income growth and coverage growth (the latter playing a small but indeterminate part).

Age Factors↗
PubMed1998

Drinking patterns within households: the estimation and interpretation of individual and group variables.

Levels of alcohol consumption tend to be similar for individuals living in the same household. This may be because: (a) individuals with similar characteristics collect in households (correlated effects); (b) individuals in the same household are influenced by common factors (exogenous effects); and/or (c) the consumption levels of an individual directly influences the consumption levels of other individuals in the same household (endogenous effects). Whichever of these three possibilities is the principal reason underlying household clustering of consumption levels has important policy implications. In this paper we propose a testing strategy to distinguish between the three types of effect in a cross-sectional data-set. Allowing for exogenous or endogenous effects shows that the significant socio-economic gradient in a model containing only individual variables arises because of misspecification. However, because we find significant evidence of correlated effects, we cannot identify whether it is endogenous or exogenous effects which give rise to statistically significant group level variables. The results indicate the possible pitfalls of omitting group level influences.

Adult↗
PubMed1998

Estimation of a multiproduct cost function for physically frail older people.

Using the theory of multiproduct cost functions, this paper derives a cost function for physically frail older people living in private households, based on data collected between 1991 and 1995, for 472 subjects aged 65 years of age or over in four areas of England. The main characteristic of the cost function is that output categories are classified in terms of movements between different health states. These were measured by changes in activities of daily living (ADL) over 2 years, with 'low' ADL representing better functional ability than 'high' ADL. Empirical application of the approach, using four states defined in terms of worsening progression (stable low ADL; deteriorated or improved ADL; stable high ADL; deceased), indicated more favourable states were associated with lower costs. Multivariate analysis showed that the derived states were significantly related to costs which, when combined with variables indicating presence of particular chronic health conditions (diabetes or previous stroke), admission to continuing care accommodation and household structure, explained one-fifth of the variation in log average costs per week. Variables such as age, sex, carer input, social networks and level of cognitive functioning had no independent impact on costs. These findings could be used as a starting point for those interested in predicting the cost implications associated with the ageing population.

Activities of Daily Living↗
PubMed1998

Confidence intervals or surfaces? Uncertainty on the cost-effectiveness plane.

Although cost-effectiveness analysis is not new, it is only recently that economic analysis has been conducted alongside clinical trials. Whereas in the past economic analysts most often used sensitivity analysis to examine the implications of uncertainty for their results, the existence of patient-level data on costs and effects opens up the possibility of statistical analysis of uncertainty. Unfortunately, ratio statistics can cause problems for standard statistical methods of confidence interval estimation. The recent health economics literature contains a number of suggestions for estimating confidence limits for ratios. In this paper, we begin by reviewing the different methods of confidence interval estimation with a view to providing guidance concerning the most appropriate method. We go on to argue that the focus on confidence interval estimation for cost-effectiveness ratios in the recent literature has been concerned more with problems of estimation than with problems of decision-making. We argue that decision-makers are most likely to be interested in one-sided tests of hypothesis and that confidence surfaces are better suited to such tests than confidence intervals. This approach is consistent with decision-making on the cost-effectiveness plane and with the cost-effectiveness acceptability curve approach to presenting uncertainty due to sampling variation in stochastic cost-effectiveness analyses.

Confidence Intervals↗