An economic approach to commissioning: lessons from research practice

1. An economic approach to commissioning:lessons from research & practice Dr Ric Fordham Director, Health Economics Consulting, UEA

2. `I can't believe that!' said Alice. `Can't you?' the Queen said in a pitying tone. `Try again: draw a long breath, and shut your eyes.' Alice laughed. `There's no use trying,' she said: `one can't believe impossible things.' `I daresay you haven't had much practice,' said the Queen. `When I was your age, I always did it for half-an-hour a day. Why, sometimes I've believed as many as six impossible things before breakfast!'  

3. Outline for next 25 mins.. Economic approach to commissioning ‘Back to basics’ What health economics can improve? What lessons are there already? What next? New methods? New techniques?

4. ‘Back to basics’

5. Traditional v. new economic approaches The traditional approach: maximizing ‘health gain’ subject to a budget constraint, which implies ranking programs according to their ‘cost-effectiveness’ etc. However, this traditional approach is subject to three important difficulties: limitations in with all economic evaluation methodology, incorporating equity principles, and practical constraints (data, evidence, opinion etc & multiple objectives etc etc!) ..inter-sectoral impacts (how to jointly plan/deliver) Source: Katharina Haucka, Peter C. Smith and Maria Goddard, 2005 The Common’s Public Accounts Committee recently reported that only £6bn of £35bn in potential public sector productivity savings identified in 2007 were ‘genuinely sustainable efficiency savings.’ In addition, it is uncertain to whether the current round of NHS changes will liberate managerial savings or whether such costs will only re-emerge in new guises? Efficiency savings have been ongoing for decades (albeit sometimes relaxed and flexed with changing economic forecasts) and the QIPP and QOF initiatives have continued the process. But despite this NHS productivity has fallen by 0.4% annually since 2000 so the potential for further large efficiency gains is unlikely. The Common’s Public Accounts Committee recently reported that only £6bn of £35bn in potential public sector productivity savings identified in 2007 were ‘genuinely sustainable efficiency savings.’ In addition, it is uncertain to whether the current round of NHS changes will liberate managerial savings or whether such costs will only re-emerge in new guises? Efficiency savings have been ongoing for decades (albeit sometimes relaxed and flexed with changing economic forecasts) and the QIPP and QOF initiatives have continued the process. But despite this NHS productivity has fallen by 0.4% annually since 2000 so the potential for further large efficiency gains is unlikely.

6. Economic paradigm

8. What does being efficient mean? Inefficiency Short/medium-term rigidities in staffing a major cost (‘suppliers of virtue’) Packaging quality, innovation, productivity and prevention has created mixed economic impacts which often pull in different directions Efficiency gains are a mixed blessing! Ignore sunk costs at your peril – leave ‘risk adverse’ margins! Paying attention to incentives and disincentives is a must: GPs have to deliver service to a defined popln. on budget & are at forefront of arresting expenditure on the most expensive end of care – ie. hospitals Hospital clinicians have an incentive to stay in business by behaving efficiently and offering services likely to be in demand by GPs Being more efficient with primary care resources should be kept under review. It may be additive to costs if hospital referral is delayed or ultimately necessaryShort/medium-term rigidities in staffing a major cost (‘suppliers of virtue’) Packaging quality, innovation, productivity and prevention has created mixed economic impacts which often pull in different directions Efficiency gains are a mixed blessing! Ignore sunk costs at your peril – leave ‘risk adverse’ margins! Paying attention to incentives and disincentives is a must: GPs have to deliver service to a defined popln. on budget & are at forefront of arresting expenditure on the most expensive end of care – ie. hospitals Hospital clinicians have an incentive to stay in business by behaving efficiently and offering services likely to be in demand by GPs Being more efficient with primary care resources should be kept under review. It may be additive to costs if hospital referral is delayed or ultimately necessary

9. Economic tools for making decisions Reference costs, tariffs, unit costs etc. Ad hoc economic evaluations (CEAs & CUAs) Systematic reviews, meta-analyses, models etc. Guidelines (inc. economic assessment & cost impacts) Programme Budgeting Marginal Analysis (PBMA) Multi-criteria decision analysis (MCDA) ‘Return-on-investment’ (CBA) Willingness-to-pay, contingent valuation studies

10. PBMA A decision analysis technique which allows PCTs to disinvest from low benefit services and reinvest in higher benefit ones Considers all (relevant) resources consumed in the delivery of a service Marginal analysis is an economic appraisal that evaluates incremental changes in costs and benefits when resources within a programme are increased, decreased or deployed in different ways (Brambleby et al, 2007)

11. Mental Health in Norfolk Source: Ball H, Kemp L & Fordham RJ. 2009 ‘Road testing PBMA in three English regions: the Norfolk Mental Health PBMA Pilot’ The Psychiatric Bulletin Psychiatric Bulletin 33(4) 141-4 (April). Source: Ball H, Kemp L & Fordham RJ. 2009 ‘Road testing PBMA in three English regions: the Norfolk Mental Health PBMA Pilot’ The Psychiatric Bulletin Psychiatric Bulletin 33(4) 141-4 (April).

12. What can these tools help you achieve?

13. Depends policy objective!

14. Cost per benefit point: of business cases

15. Provenance Cost-effective commissioning and investment and disinvestment Advising the NHS on putting economic approaches into routine decision making Involved in several priority setting exercises with PCTs (strategic, programme & technological) A national pilot project sponsored by the DH on Programme Budgeting and Marginal Analysis (diabetes, mental health & CAMHS). (See: http://www.yhpho.org.uk/viewResource.aspx?id=1538)

16. Big C studyCancer aftercare   Patient and carersurvey & community consultation (eg. Norfolk Against cancer ‘roadshow’)Patient and carersurvey & community consultation (eg. Norfolk Against cancer ‘roadshow’)

17. CRITERION 1: Effectiveness and impact  The service should provide an indication of how it will benefit the target audience and the impact it is likely to have on them   How certain is the effectiveness of the initiative? What is the validity and strength of best available evidence? (eg. audit and impact assessments etc).   How relevant is the evidence to the local clients/potential clients?   Is there consensus about the effectiveness/impact? Or, is there differing or strongly-held counter-views among interested parties and professionals etc? What number of people are likely to be able to have access and use the proposed service?* [*Please note: breadth of coverage, proportion of users, or depth (specialisation of service) etc. may be relevant and/or equally important and numbers of users per se should not automatically increase a score][*Please note: breadth of coverage, proportion of users, or depth (specialisation of service) etc. may be relevant and/or equally important and numbers of users per se should not automatically increase a score]

18. CRITERION 2: Fairness and equity   The service should demonstrate fairness and equity through its delivery plan and ongoing monitoring strategies Will this service make a fairer distribution of resources for the same level of need in a population   Will it ensure that those with different needs have proportionately different levels of resources to meet them?   Will it improve the situation for particularly ‘hard to reach’ and/or vulnerable individuals and groups?

19. CRITERION 3: Improve quality of life and wellbeing The service should be able to make improvements in overall wellbeing and quality of life This should include:  Wellbeing - including health but not excluding other aspects of wellbeing Promotes health (minimising the impact of an individual’s condition or treatment on their health and wellbeing) Congruency with spiritual/religious/philosophical beliefs Does the initiative take account of the characteristics of the whole person (physical, mental, social etc. dimensions)? Areas for evidence might include:  What is the likely net gain in length and/or quality of life (e.g. as measured by QALYs) or other wider health benefits? using a recognized and/or well validated scale.  

20. The other criteria.. CRITERION 4: Empowerment CRITERION 5: Make it personal! CRITERION 6: Timely CRITERION 7. Promote independence and enable participation  CRITERION 8: Integration with other services CRITERION 9. Compliant with existing policy  CRITERION 10: Communication

21. Respondents were asked to allocate 100 points across the criteria (more important criteria should be given more points). A total of 29 responses were received, these are summarised in the table below. The criterion which had the highest mean score (average allocation from the 100 points across the 29 respondents) was criterion 3, which had a score of 12.7. Conversely, criterion 9 had the lowest mean score with 6.1. Respondents were asked to allocate 100 points across the criteria (more important criteria should be given more points). A total of 29 responses were received, these are summarised in the table below. The criterion which had the highest mean score (average allocation from the 100 points across the 29 respondents) was criterion 3, which had a score of 12.7. Conversely, criterion 9 had the lowest mean score with 6.1.

22. What different stakeholders said?

23. Multi-criteria decision analysis Suitable for complex resource allocation decisions Incorporate evidence-based scoring (business case template) Transparency Practical to use: reflects relative priorities Open to inclusive & deliberative processes: key stakeholders Combined with the cost of service gives a cost-effective ranking of service developments

24. What next? Getting MCDA into practice: Reference groups Business case development inc. costing Scoring methods eg. Est. impacts Getting it into research: Multi-sectoral, cross-consortia etc. working How will GP criteria, weights, scoring etc. differ? Commonality across groups and studies?

25. THANK YOU FOR LISTENING!

26. OUR TEAM TODAY Jon Carter Julie Collier Ric Fordham Geoff Carruth Ruth Hancock Richard Little Lisa Rowe John Saxton Giles Whattam With special thanks to Cerian Hutchings