Cost Effectiveness of Clinics

1. Decision analytic approach to cost effectiveness of co-locating probation and substance abuse treatment Read► Slides► YouTube►
2. Single parameter sensitivity analysis Video►
3. Multi-parameter sensitivity analysis Video►
4. Calculate Expected cost within Excel:
• Read data from Internet explorer  into Excel Video►
• Calculate expected cost Excel►
• Set probability of null events (do before conducting sensitivity analysis) Video►

What do you know?

1. Using Excel and the data provided in Table 3, 4 and 10, calculate the expected cost of consequences associated with days clients are in probation but not in treatment.  This is done by first reading the data on cost and probabilities into Excel.  See how data can be read from Internet Explorer into Excel Then you need to multiply the probability of incurring a cost by its amount and sum over all possible consequences.  See how expected costs are calculated inside Excel.  Make sure that all calculations are done using relative cell values and not by entering the result by hand.  Make sure that probability of opposite events are calculated as one minus the event.  Make sure that cell values in the table are defined relative to marginal values.  Check that your answers correspond roughly with the answers in the table 10 to make sure that formulas lead to same answers as the reading.
2. Using Excel and the data provided in Table 3, 4 and 10 of the reading, calculate the expected cost of seamless probation and traditional probation per client per day.  These three tables show either the probability or the cost.  The expected cost can be calculated as the sum of probability of incurring a cost times the dollar amount of the cost.  For seamless and traditional probation, this is done by multiplying probability of four situations (1. In probation and in treatment, 2. In probation but not in treatment, 3. Not in probation but in treatment and 4. Not in probation and not in treatment) by the cost at each of these situations.  The cost at any of these situations is calculated as the cost of consequences (see previous question) plus cost of program (probation or treatment).  See how expected costs are calculated inside Excel.  Make sure that all calculations are done using relative cell values and not by entering the result by hand.  The expected value should be calculated as the probability of combination of probation and treatment times the cost of that combination.  Check that your answers correspond roughly with the answers in the table to make sure that formulas lead to same answers as the reading.
3. Conduct sensitivity analysis on the data by making single parameter changes in the decision tree in the section on seamless probation.  Before doing so make sure that the probability of opposite events are calculated as one minus the probability of the event.  See a video on how to do this inside Excel.  See a video on how to conduct single parameter sensitivity analysis.  Report the breakeven points for the following parameters:

 Name of parameter changed Current value Value at breakeven point Percent of change to reach break even point 1. Probability of a probation day 2 .Probability of treatment day given probation 3. Probability of technical violation given probation and treatment day 4. Probability of arrest given  probation and treatment day 5. Probability of technical violation given probation day and no treatment 6. Probability of mental health hospitalization given probation and treatment days 7. Probability of employment given probation and treatment days 8 Cost of treatment 9 Cost or seamless probation 10. Cost of arrest
4. Draw a chart showing the sensitivity of conclusions of the analysis to changes in the probability of arrest.   Put on the X-axis the probability of arrest.  On the Y-axis put the expected cost.  Draw two lines one showing how the expected cost of seamless probation changes when the probability of arrest in the seamless probation changes from 0 to 1.  Draw another line showing how the expected cost for traditional probation changes when the cost of arrest in the seamless probation changes from 0 to 1.   Note the point when the two lines meet.  This is the point at which the conclusion regarding which program is preferred is reversed.
5. Conduct a multi-parameter sensitivity analysis by simultaneously allowing following changes:
• 30% increase in the cost of arrest (from \$6,818 up to \$8,863),
• Any change in the probability of arrest in the seamless probation and treatment group (from 0 to 1)
• Any change in the probability of arrest in the traditional probation and treatment group (from 0 to 1).

Report what parameters need to change to arrive at a breakeven point, where current conclusions are reversed.  See a video on how to conduct multi-parameter sensitivity analysis.  In order to accomplish this assignment, instruct the Excel program to set the difference between the expected cost for traditional and seamless probation to zero subject to several constraints.  Include at least the following constraints:

• Cost of arrest <= 8863
• Cost of arrest >= 6818
• Probability of arrest in seamless probation & treatment group >= 0
• Probability of arrest in seamless probation & treatment group <= 1
• Probability of arrest in traditional probation & treatment group >= 0
• Probability of arrest in traditional probation & treatment group >= 0

Report if there is a combination of changes in these estimates that would set the difference of expected value of seamless and traditional probation equal to zero.

Bi-weekly assignment

Please note that this assignment is not currently assigned to students in HSCI 730.

1. Estimate the daily and per visit cost of a clinic operation.  The purpose of this assignment is to use the steps described here to analyze cost of operating a clinic.  To accomplish this task, use your own familiarity with the clinic operations to estimate the following:
• Proportion of employees working in the clinic
• Proportion of volunteers to employees within the clinic
• Proportion of patients cared for in the clinic
• Square footage used by the clinic based on your estimate of the square footage used by the clinic exclusively and the square footage shared among clinics.
• Number of clients served in the organization and in the clinic in the last year or last month.
• Panel size of clinicians working in the clinic
• Time between visits per client

Follow these steps to accomplish the cost analysis:

• Select a publicly available operating budget of a health care organization, preferably one in which you work or one in which you have a friend who is interested in your help in analyzing their costs.
• Identify the various clinics within the organization and based on proportion of employees who work in the clinic allocate the operating budget to the the cost of the clinic.  Divide the operating budget into personnel and other operating costs.   Increase the personnel expenses of the clinic proportional to the ratio of volunteers to employees within the clinic.
• Add to the clinic cost the building capital costs.  Estimate this based on your estimated square footage used by the clinic times market value of medical office space in the zip code of the clinic.    Collect this information from real estate agents in your community or through Internet.
• If the clinic relies on information systems or medical record provided by other units of the organization and not part of the operating budget you have analyzed, add this cost into the total expense proportional to number of clients served in the clinic.
• Estimate the daily clinic census from the panel size of clinicians
• Estimate the number of visits of an average client (estimate this as 1 divided by 1 plus time between visits for an average client)
• Estimate the total number of visits during the last year by multiplying the number of visits of the average client by the number of clients.
• Report the daily cost of operating the clinic and cost per visit.
• Report which source of data in your analysis needs additional precision and what steps you can take to collect this information.  Include estimate of how much time would be needed to collect this information.
2. Analyze what are the consequences of purchasing a physician primary care practice on a tertiary hospital system.  Select a clinic and tertiary clinical service group, preferably settings you are familiar with or have access to someone who is familiar with their operations.  Estimate the variables needed based on your knowledge of these organizations and publicly available data.  Follow these steps:
• Create a decision model that as its first decision node has whether the to purchase or not to purchase the primary care office.  The chance node should indicate the frequency of visits to the primary care setting, frequency of visits to specialists and the probability of hospitalization at tertiary hospital after visit to a specialist.
• Estimate the probabilities for the model and use publicly available estimates of the cost of clinic visits and hospital visits.  Adjust the cost of hospitalization based on your estimate of differences in case mix in the tertiary hospital and the types of patients needing hospitalization in the primary care setting.
• Report the expected increase in revenues if the office is purchased.
• Conduct single variable sensitivity analysis to see which estimate is most likely to affect the expected increase in revenues.  Indicate how much of the additional revenue comes from direct primary care visits and how much from subsequent referrals.
• Report on the availability of the data needed to conduct the analysis.  Where would you look for each data item and how long do you think collection of the data will take.

More

 Synthesis of evidence regarding cost effectiveness of clinical practices Cost effectiveness of diabetes treatment practices Read► Cost Effectiveness and Resource Allocation is an online journal published by BioMed Central. Programme costs in the economic evaluation of health interventions Read► Recent articles published on procedures for conducting cost effectiveness PubMed► Econometric estimation of country-specific hospital costs Cost-effectiveness of neonatal screening for Cystic Fibrosis using a decision model Books on health economics and medical decision making Amazon List►

This page is part of the course on Decision Analysis.  It was last revised on 04/03/2019 by Farrokh Alemi, Ph.D.