Costing methods in the Canadian literature on the economic evaluation of health care. A survey and assessment

Basing care reforms on evidence: the Kenya health sector costing model

Background

The Government of the Republic of Kenya is in the process of implementing health care reforms. However, poor knowledge about costs of health care services is perceived as a major obstacle towards evidence-based, effective and efficient health care reforms. Against this background, the Ministry of Health of Kenya in cooperation with its development partners conducted a comprehensive costing exercise and subsequently developed the Kenya Health Sector Costing Model in order to fill this data gap.

Methods

Based on standard methodology of costing of health care services in developing countries, standard questionnaires and analyses were employed in 207 health care facilities representing different trustees (e.g. Government, Faith Based/Nongovernmental, private-for-profit organisations), levels of care and regions (urban, rural). In addition, a total of 1369 patients were randomly selected and asked about their demand-sided costs. A standard step-down costing methodology was applied to calculate the costs per service unit and per diagnosis of the financial year 2006/2007.

Results

The total costs of essential health care services in Kenya were calculated as 690 million Euros or 18.65 Euro per capita. 54% were incurred by public sector facilities, 17% by Faith Based and other Nongovernmental facilities and 23% in the private sector. Some 6% of the total cost is due to the overall administration provided directly by the Ministry and its decentralised organs. Around 37% of this cost is absorbed by salaries and 22% by drugs and medical supplies. Generally, costs of lower levels of care are lower than of higher levels, but health centres are an exemption. They have higher costs per service unit than district hospitals.

Conclusions

The results of this study signify that the costs of health care services are quite high compared with the Kenyan domestic product, but a major share are fixed costs so that an increasing coverage does not necessarily increase the health care costs proportionally. Instead, productivity will rise in particular in under-utilized private health care institutions. The results of this study also show that private-for-profit health care facilities are not only the luxurious providers catering exclusively for the rich but also play an important role in the service provision for the poorer population. The study findings also demonstrated a high degree of cost variability across private providers, suggesting differences in quality and efficiencies.

Providing systematic guidance in pharmacoeconomic guidelines for analysing costs

BACKGROUND

Despite the considerable amount of work that has gone into the standardisation of costs, a recent survey indicated that there is still a wide variation in methods used in costing studies in the published literature. Part of the answer to the lack of standardisation may lie in pharmacoeconomic guidelines themselves.

OBJECTIVE

The purpose of this paper is to categorise the current recommendations for the analysis of costs within an economic evaluation, and to use these categories to assess variations in guidelines.

DESIGN

Based on identified costing methodology, we developed a detailed categorisation. We then surveyed existing guidelines to determine similarities and differences in the guidelines.

RESULTS

Our framework had five categories: general design items; resource identification and classification; resource measurement; resource valuation; and overall reporting. We noted differences in perspective, some of which were due to methodological uncertainty and differences in the purposes of the studies covered by the guidelines. There was very little guidance in how to put the basic cost measure into operation. In addition, the preferred concept for resource utilisation was that of resource use under actual (rather than experimental) conditions, and there was very little guidance as to how to achieve this measure.

CONCLUSION

There are still large variations, as well as gaps, in guidelines in the costing area. This is due, in part, to wide-ranging objectives for studies, methodological uncertainty and a neglect of the fundamentals of costing. We recommend that the contents of the basic measure of 'average cost' should be explained in more detail, with recurring, capital and allocated overhead costs being reported separately. A target capacity level (e.g. 80%) should be reported, even if in a sensitivity analysis. More guidance should be provided regarding the translation of utilisation under experimental care to that under routine care. For resource valuation, adjustments to the 'average cost' measure should be made explicit. There should be more guidance on how to project system-wide costs from the costs of one hospital. The manner in which overall results are reported should be addressed, including the identification of how costs should be categorised.

Using computerised patient-level costing data for setting DRG weights: the Victorian (Australia) cost weight studies

Casemix-funding systems for hospital inpatient care require a set of resource weights which will not inadvertently distort patterns of patient care. Few health systems have very good sources of cost information, and specific studies to derive empirical cost relativities are themselves costly. This paper reports a 5 year program of research into the use of data from hospital management information systems (clinical costing systems) to estimate resource relativities for inpatient hospital care used in Victoria's DRG-based payment system. The paper briefly describes international approaches to cost weight estimation. It describes the architecture of clinical costing systems, and contrasts process and job costing approaches to cost estimation. Techniques of data validation and reliability testing developed in the conduct of four of the first five of the Victorian Cost Weight Studies (1993-1998) are described. Improvement in sampling, data validity and reliability are documented over the course of the research program, the advantages of patient-level data are highlighted. The usefulness of these byproduct data for estimation of relative resource weights and other policy applications may be an important factor in hospital and health system decisions to invest in clinical costing technology.

Cost estimates for hospital inpatient care in Australia: evaluation of alternative sources

OBJECTIVE

This paper presents a framework for evaluation of alternative sources of estimates of the costs of hospital inpatient care in Australia. It argues that the choice of costing methods depends on the decision-context and the sensitivity of the decision to estimation errors.

METHOD

Five criteria are proposed for evaluation of sources of hospital cost data, with detailed consideration of the way estimates are derived in two computerised approaches which use accounting data. Three broad approaches to cost estimation are evaluated against these criteria.

RESULTS

Choosing an estimation method entails an optimisation analysis for each decision context. 'Microcosting' techniques remains the most valid approach to cost estimation, but are costly and this may, in turn, limit the sample of patients or institutions. Protocol-based cost estimates vary widely in their validity, depending on source data, but there is little justification for continued use of crude per diem cost estimates in such protocols. When precision and resolution are important objectives, clinical costing approaches provide the most valid inpatient cost estimates at a reasonable data cost. When external validity is important, or where standardisation of hospital costs is desired, use of published national cost weights may be preferred.

CONCLUSION

Both primary and secondary sources of cost data must withstand challenges to internal and external validity. The 'resolution' (or precision) of cost estimates and the relative costs of collection must also be considered.

IMPLICATIONS

Studies using estimates of the costs of hospital care should defend the appropriateness of the costing approach and data source for the decision context.

Review of methods to determine VA health care costs

BACKGROUND

Estimates of health care cost are needed to conduct cost-effectiveness research at the facilities operated by the US Department of Veterans Affairs.

METHODS

The medical literature was searched for VA studies to characterize different cost methods and identify their advantages and disadvantages.

RESULTS

Different methods are appropriate for different studies. Analysts who wish to capture the effect of an intervention on resources used in a health care encounter may wish to create a detailed pseudo-bill by combining VA utilization data with unit costs from the non-VA sector. If a cost function can be estimated from non-VA data, VA costs may be determined more economically from a reduced list of utilization items. If the analysis involves a new intervention or a program that is unique to VA, direct measurement of staff time and supplies may be needed. It is often sufficient to estimate the average cost of similar encounters, for example, the average of all hospital stays with the same diagnosis and same length of stay. Such estimates may be made by combining VA cost and utilization data bases and by applying judicious assumptions.

CONCLUSIONS

Assumptions used to estimate costs need to be documented and tested. VA cost-effectiveness research could be facilitated by the creation of a universal cost data base; however, it will not supplant the detailed estimates that are needed to determine the effect of clinical interventions on cost.

Secondary analysis of economic data: a review of cost-benefit studies of neonatal screening for phenylketonuria

STUDY OBJECTIVE

To estimate the net financial benefit of neonatal screening for phenylketonuria (PKU): by a simple pooling of cost data from the literature; and by a more complex modelling approach.

DESIGN

A systematic literature review was conducted to identify papers containing data on the monetary costs and benefits of neonatal screening for PKU. The methodological quality of the studies was appraised, and data were extracted on resource use and expenditure. Monetary data were converted to common currency units, and standardised to UK incidence rates. Net benefits were calculated for median, best case and worst case scenarios, and the effect of excluding poor quality studies and data was tested. The net benefit was also estimated from a model based on data from the literature and assumptions appropriate for the current UK situation. Extensive sensitivity analysis was conducted.

MAIN RESULTS

The direct net benefit of screening based on the median costs and benefits from the 13 studies identified was 143,400 Pounds per case detected and treated (39,000 Pounds and 241,800 Pounds for worst case and best case scenarios respectively). The direct net benefit obtained by the modelling approach was lower at 93,400 Pounds per case detected and treated. Screening remained cost saving under sensitivity analysis, except with low residential care costs (less than 12,300 Pounds per annum), or very low incidence rates (less than 1 in 27,000).

CONCLUSIONS

The economic literature on PKU screening is of variable quality. The two methods of secondary analysis lead to the same conclusion: that neonatal PKU screening is worthwhile in financial terms alone in the UK, and that it justifies the infrastructure for collecting and testing neonatal blood samples. This result cannot necessarily be extrapolated to other countries.