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Research Design Service London
Health economics
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Watch 'Understanding Health Economics' with James Shearer, RDS London methodology lead

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Introduction to Health Economics and Economic Evaluation

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What is health economics?
Health economics is concerned with the problem of allocating health care resources under conditions of scarcity and uncertainty. With increasing demands on NHS resources and limited funding, the economic impact of new treatments has never been more important or influential.
What is economic evaluation? The process of gathering and comparing the costs (i.e. health care resource use) and consequences (i.e. health outcomes) of alternative treatment options is known as economic evaluation (See Shiell et al., Health economic evaluation, Journal of Epidemiology and Community Health 2002;56:85-88 for a helpful guide) . These data are often collected and analysed within a clinical trial. A health economist conducting an economic evaluation is typically interested in the resources needed to deliver a new treatment and any comparison treatments (i.e. control intervention), any resulting savings in terms of reduced need for future health and social care, and benefits to patients, their families or society as a whole. The results of economic evaluations are used by health care decision makers such as NICE to determine whether or not to recommend the adoption of new treatments into routine practice.
Have there been any economic evaluations in my area?
Previous studies will give invaluable insights into how economic questions have been addressed in your field and the types of costs and outcomes that have been considered.
A health economist can help you to interpret existing economic evidence, advise on the relevance of an economic component to your study, and assess how best to use existing evidence to develop an economic evaluation appropriate to your study.
How has resource use been measured in my patient group?
The Database of Instruments for Resource Use Measurement (DIRUM) is an open access database of resource use measures for trial health economists, including questionnaires and diaries, which can be searched for instruments previously used in your treatment population. A health economist can help select or develop resource use questionnaires suitable for your treatment population or study context.
How are health outcomes measured in economic evaluations? For the development of NICE guidelines, the preferred measure of health outcome is the Quality Adjusted Life Year (QALY) calculated using the EQ-5D, a brief, five-dimension measure of Health Related Quality of Life (HRQL). The revised version of the EQ-5D is the EQ-5D-5L. The EQ-5D-5L has five response levels for each dimension, compared to three levels in the original version. The aim of the EQ-5D-5L is to improve the sensitivity of the EQ-5D to smaller changes in health status.
A health economist can advise on alternative measures of HRQL or health outcome that may be more relevant to your disease area.
What to think about before meeting a health economist
What is the most appropriate perspective (i.e. NHS, patient, society as a whole) for identifying, measuring and valuing the outcomes and costs of your treatment? For the development of NICE guidelines, the patient/carer perspective is preferred for outcomes (health benefits, adverse effects), and the NHS/Personal Social Services perspective preferred for costs.
Is the control treatment in your study a relevant comparator from the point of view of a decision maker i.e. does it reflect usual care offered by the NHS?
Resources and costs
Where do the costs of your intervention fall (i.e. NHS, or patients) and where will the resulting costs (or savings) be realised (i.e. NHS, Personal Social Services, patients/carers)?
What health and social care resources will be required to deliver your treatment in practice? Typical resource use items include clinician time (who does what to whom, how often and where), training, supervision, consumables, drugs, diagnostics, and hospital bed days. Research specific costs or discounts not available or relevant to routine practice are not taken in to consideration.
Do the resource requirements of your intervention differ from usual care i.e. are additional or fewer health and social care resources needed?
Will your intervention affect other health and social care resource use i.e. potential side effects requiring treatment, or improvements in mobility that might reduce the need for social care?
Are there significant impacts beyond health and social care, for example on informal care (unpaid care provided by a friend or relative), or productivity (the ability to work and thus contribute to the wider economy)?
Does your primary measure of outcome capture all the benefits (and harms) of your intervention compared to usual care?
Will generic health status measures (i.e. EQ-5D-5L) be sufficiently sensitive to capture the outcomes of your treatment compared to usual care?
Time horizon
When will the costs (or savings) and benefits of your treatment be realised? Is the trial time frame long enough to capture the majority of these effects? If these extend beyond the research time frame, economics modelling may be needed to capture the full impact of your treatment on costs and health outcomes beyond the trial time horizon.
Author: James Shearer, Research Design Service London, King’s College London

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