Measuring and Estimating Costs

Question 1

What is cost analysis?

Answer 1

Studies related to a product or service’s costs

Question 2

What is clinical/outcomes analysis?

Answer 2

Studies related to the outcomes that result from a product or service

Question 3

What is PE?

Answer 3

Studies both costs and outcomes related to a product or service

Question 4

What is a cost?

Answer 4

Calculated to estimate the resources that are used in the production of an outcome

Question 5

What are the types of costs?

Answer 5

1. Direct medical costs
2. Direct non-med costs
3. Indirect costs
4. Intagible costs

Question 6

What is an opportunity cost?

Answer 6

True cost of a certain resource
(The value of best-forgone option or the best option)

Question 7

What is a direct medical cost?

Answer 7

Medically related inputs used directly in providing treatments

Question 8

Types of direct medical costs?

Question 9

What are direct non-medical costs?

Answer 9

Costs directly associated with treatment, but are not medical in nature

Question 10

What are examples of direct non-med costs?

Answer 10

1. Travel expenses
2. 2. Non-med assistance
3. Childcare
4. Food and lodging

Question 11

What are indirect costs?

Answer 11

Cost that result from loss of productivity due to illness or death

Question 12

Examples of indirect costs?

Question 13

What are intangible costs?

Answer 13

Costs of pain, suffering, anxiety, or fatigue that occurs because of an illness or treatment

Question 14

What are examples of intangible costs?

Answer 14

1. Difficult to measure intangible costs
2. Pain suffering
3. Anxiety
4. Fatigue

Question 15

What are healthcare sector costs?

Answer 15

1. Medical resources consumed by HC entities
2. SImilar to direct med cost, but excludes costs paid by patients and non-HC

Question 16

What are other sector costs?

Answer 16

Resources in non-healthcare sectors that could be potentially impacted by patients with certain disease states and treatments

Ex: Resources used and savings incurred by the treatment of patients with schizophrenia

Question 17

What are examples of patient and family costs?

Answer 17

1. Paid by patient and familty w/o regards to when costs are med or non-med
2. Patient’s & family’s share of direct medical & non-medical costs

Question 18

What is a perspective?

Answer 18

Describes whose costs are relevant based on the puprose of PE study

Used to detemine what costs are important to measure

Question 19

What is the current economic theory?

Answer 19

Societal costs = most approproate perspective for economic studies

Question 20

What are examples of a societal cost?

Answer 20

1. costs to the insurance company, paitient, and indirect costs from loss of productivity
2. Rarely used in PE

Question 21

What is the most common perspective in PE studies?

Answer 21

Institution or payer costs

Question 22

Who is considered a payer?

Answer 22

1. third party
2. Patient
3. Combo copay and third party cost

Question 23

When should costs be estimated and adjusted?

Answer 23

Collected info >1yr before study, and >1yr into future

Question 24

When is retrospective data used to estimate and adjust costs?

Answer 24

Assess resources used for >1 year, costs should be adjusted to the present year

Question 25

What is the standard discount of costs?

Answer 25

3-10%

Question 26

What is the rationale of discounting costs?

Answer 26

1. Present value of money today is not worth more in the future 2. If given money today, a person could invest or use it for an immediate need that increase its value 3. If not discounted, costs or benefits in the first year will remain stable, which could lead to inaccurate conclusions about the value of the benefit

Question 27

What is the discounting formula to determine cost at present value?

Answer 27

**PV = FC x DF** PV -> present value FC -> future cost DF -> discount factor

Question 28

How do you calculate discount factor?

Answer 28

𝟏/〖(𝟏+𝐫)〗^𝐧 r -> discount rate (in decimal form) n -> year when cost was incurred

Question 29

What are the methods used to calculate costs in CEA?

Answer 29

1. Average cost effectiveness ratio (ACER) 2. Incremental cost effectiveness ratio (ICER)

Question 30

What is ACER?

Answer 30

1. Ratio of resources used per unit of clinical benefit 2. Assumed that the calculated ratio is compared to no treatment 3. Not as clinically relevant because healthcare providers aren’t likely questioning the choice to treat or not

Question 30

What is ICER?

Answer 30

1. Ratio of the difference in costs divided by the difference in outcomes 2. calculated ratio is comparing two treatment options 3. extra cost of producing one extra unit of benefit 4. Most appropriate method for presenting CEA data

Question 31

What are the methods for estimating direct med costs?

Answer 31

1. Direct measurement of costs for indiviual patients (prospectively maintaining financial reocrds and logs) 2. Retrospective review of patient medical records or third-party insurance reimbursement claims data (disadvantages -> labor and time-consuming)

Question 32

What are common types of direct medical costs?

Answer 32

1. Medications 2. Med services 3. Personnel 4. Hospitalization

Question 33

Why is PE useful for estimating costs?

Answer 33

Mirror real-world clinical practice that provides more accurate cost estimates Enables better, more informed decision-making by HCP

Question 34

What are average wholesale price?

Answer 34

1. Used to calculate the costs of meds in the US 2. List price, sticker price 3. Red book 4. Higher cost estimate than pharamcies

Question 35

What is wholesale aquition cost?

Answer 35

1. Price that estimates the costs to wholesaler from the manufacturer 2. Catalog price 3. No discount

Question 36

What is average manufactuer price?

Answer 36

1. Average amount paid to manufacturers by wholesalers after including discounts 2. More precise estimate of what pharmacies pay for medications 3. AMP -> proprietary information; not available to general public

Question 37

What is physicion fee refernce?

Answer 37

Database that provides the amount reimbursed by payers to healthcare providers

Question 38

What are centers for medicare and aid?

Answer 38

Resource for medicare reimbursement rates

Question 39

What has greater reimburcement rates?

Answer 39

Physician’s Fee Reference > reimbursement rates for Medicare

Question 40

What are ex of med services?

Answer 40

1. Clinical vistis, labs 2. list prices of med services

Question 41

How do you determine cost assumptions for the service?

Answer 41

1. Average pharmacist hourly wage 2. Average hours available

Question 42

HOw do you determine personal cost break even point?

Answer 42

1. “Break-even” point = hourly wage X weekly hours available 2. Explanation  pharmacy must generate at least $xxx from MTM to pay RPh wages

Question 43

How do you determine profitability of proposed clinical service?

Answer 43

1. Revenue generated < “break-even” point  not profitable 2. Revenue generated > “break-even” point  profitable

Question 44

What are the methods of estimating hospitalization costs?

Answer 44

1. Per-diem -> LEAST PRECISE 2. Disease–specific per-diem 3. Diagnosis–related groups (DRGs) 4. Micro-costing -> MOST PRECISE

Question 45

What factors contribute to precision in a study?

Answer 45

1. Importance of hospital-related costs to the overall evaluation 2. Study perspective 3. Availability of cost data 4. Availability of resources to conduct study

Question 46

More precise estimates are likely more ___?

Answer 46

Labor and time-consuming

Question 47

What is per-diem?

Answer 47

Least precise method for estimating hospitalization costs For each day that a patient is hospitalized, an average cost per day for all types is used as a multiplier.

Question 48

What is disease specific per-diem?

Answer 48

1. More precise method for estimating hospitalization costs than per-diem For each day that a patient is hospitalized, an average cost per day for a specific disease state is used as the multiplier.

Question 49

What is diagnosis related groups?

Answer 49

More precise method for estimating hospitalization costs than per-diem & disease-specific per-diem Used to classify clinically cohesive diagnoses and procedures that use similar resources

Question 50

What is microcosting?

Answer 50

Most precise method for estimating hospitalization costs Collecting information on resource use for each intervention component to estimate & compare alternatives Involves reviewing medical records to determine what services were used & assign costs to each service Institutions maintain records for each service to calculate the amount to charge payers. Hospitals = profitable