QUALITY ADJUSTED LIFE YEARS (QALY)—THE FORGOTTEN DENOMINATOR


William Matzner, MD
Dr. William Matzner, Simi Valley, California
Author’s NOTE: The health promotion and wellness industry has often been asked to illustrate more quantitatively derived results if for no other reason than to justify budgetary increases based solely on the intuitive hypothesis that healthy people work better than unhealthy people. If better measured, wellness programming could stand to gain even broader support, larger budgets and a more prominent seat at the executive table. After all, who among those of us in the wellness business could argue against having a chief health officer in every corporation and organization. It really does make sense, but how many of those do you know? I, frankly, know none. 

Cost Effectiveness Analysis allows us to present highly credible (that’s credible to the actual financial leaders in organizations) economic evaluation that does, as a number of you have asked, take into account actual clinical costs along with more qualitative factors as well. That’s what separates CEA from ROI, the ability for a group of critical evaluators to agree on a range of measures, apply both real and assumed “value” to those measures and then calculate the Cost Effectiveness of programming.

My between the lines read of may articles addressing ROI in wellness is that a fear exists among practitioners that when measured critically, wellness programming will come up short on a purely economic scale. I believe otherwise, that when measured critically, those holding the corporate purse strings will see greater value in wellness spending than they currently, and often grudgingly, allow. Further, well developed Cost Effectiveness Analysis will allow wellness professionals to better allocate spending among more qualitatively valuable and more quantitatively valuable programming. 

Cost Effectiveness Analysis (CE Analysis) has been shown to be a useful tool in medicine to look at the true effectiveness of certain new (or even older) treatments. More recently I have written that it can prove to be a useful and flexible tool for looking at the effectiveness of various programs used in Corporate Health and Wellness programs. And as these corporate Health and Wellness programs become more common, CFOs want data to justify corporate spending for these programs.

At first glance, it appears that CE models developed for these programs involved simply looking at costs and decision tree analysis.  However, the denominator of the CE analysis takes into account the QUALITY of life, not just the prolongation of life delivered by the treatment.

The Quality Adjusted Life Year  (QALY) is a year of life that is lived in perfect health. It takes into account the length of time and the health related quality of life (HRQL). The latter is given a numeric value between 0 and 1. This HRQL can be estimated by a survey or can be calculated from life tables and other published studies.  The value of HRQL has its roots in expected utility theory, a well developed economic theory.

A specific example may help. Let us say that we are measuring a wellness program that reduces stress. At first, someone could say that the cost difference in such a program is small with respect to productivity, days lost etc. and that a decision tree will not point you towards implementing such a program. BUT, this doesn’t take into account the difference in effectiveness.  Let us say that a stress free life has a QALY of 1.0. However all the stress that one has at work may be severe enough to cause high blood pressure and release of adrenaline such that life would be less pleasurable and the QALY is reduced to 0.8. This would INCREASE the CE ratio by 20% (1/0.8). This leaves the non treatment side essentially costing 20% MORE, just because the quality is of life during stress is that much less.

The beauty and the flexibility of this approach is that we can turn subjective feelings and data about health and life into a NUMERIC value, and then use this to place in the denominator.

For example, there has been much recent discussion about stress in the workplace and how reducing stress may be an important mission for corporate health and wellness programs. A stress value or measure can easily be built into the model so that a stressful life has less QALY.  In this way the denominator becomes smaller and the CE ratio becomes larger (like adding a cost because the quality of life as a result is less).

The denominator in CE analysis, the QALY, can reflect pain and suffering as a result of problems like COPD or heart disease, the pain and debility of having surgery, or as we have alluded to, the mental and physical stress involved in a job. All these factors lead to a QALY less than one, making any treatment less effective once these subjective measures are taken into account. 

There seem to be two camps of those interested in corporate health and wellness—one that wishes to look at the objective benefits of programs, and another that wishes to emphasis overall well being and less stress. Using the CE approach, we can quantify the subjective benefits and then produce a calculation to show (via the numbers) real measurable benefits to making such programs better. This will give even more validity to the usefulness of Corporate Health and Wellness programs and hopefully to their acceptance by CFOs and their counterparts. 

About William L. Matzner, M.D., PhD, FACP 

Dr. William Matzner works in the area of healthcare economics consulting at Healthcare Analytics, LLC, in California. He graduated Phi Beta Kappa from Stanford University. He received his M.D. with Honors from Baylor College of Medicine. In 1988, he was the Solomon Scholar for Resident Research at Cedar Sinai Medical Center. Dr. Matzner subsequently was awarded a PhD in Neuro Economics from Claremont Graduate University. He is board certified in Internal Medicine and Palliative Medicine. He has researched and published extensively on the issue of reproduction and immunology in medical literature. He has been in private practice since 1989, specializing in Reproductive Immunology and Internal medicine. 

Consulting Website: https://healthcareanalytics.biz 
News: https://hippocratesguild.com/dr-william-matzner 
News: https://medicogazette.com/dr-william-matzner

William Matzner, MD (Simi Valley, California), has been practicing medicine since 1989, Internal Medicine and Reproductive Immunology. M.D. with Honors from Baylor College of Medicine.

RISING COST OF HEALTHCARE IN THE UNITED STATES

William Matzner, MD
William Matzner, MD, Simi Valley, California

A recent article in the Wall Street Journal discussed the continued rise of healthcare cost in the US. By 2025 it is projected that healthcare costs will be at 18% of the GDP.  Yet research has shown that among the Organization for Economic Cooperation and Development (OECD) member countries, the US has lower life expectancy at birth and higher mortality for death from respiratory disease, coronary artery disease and diabetes than the OECD average.

A key question becomes how can we decrease the cost of healthcare while simultaneously maintaining or improving the effectiveness of treatment programs? How can an organization health system, ACO, medical group, insurer, government, measure this so as to compare choices?

This is where Cost Effectiveness Analysis (CEA) can provide clear metrics to help determine how differing approaches to healthcare programming and delivery will affect policy change. In chronic diseases such as Diabetes and Coronary Artery Disease, Markov modeling has shown to be an ideal method to determine the cost effectiveness of different treatment approaches over time. One can compare a newer method or medication, or both, to a more standard treatment and see how the cost effectiveness accumulates over time.

Since CEA uses dollars per Quality Adjusted Life Years (QALY), one can quantitatively analyze how effective different treatments or methods are toward the particular disease. This way, policies can be chosen which not only cost less, but can help patients the most over time. It takes a subjective evaluation like effectiveness and turns it into a measurable metric researchers and policy developers can analyze.

The application of CEA using Markov modeling will provide clearer guidance as to how treatment policies should be elucidated, and in the long run can help reduce healthcare costs overall while maintaining and even improving the quality of healthcare delivery and outcomes. It can also be used to quantitatively monitor the effectiveness of new policies once implemented. 

About William L. Matzner, M.D., PhD, FACP 

Dr. William Matzner works in the area of healthcare economics consulting at Healthcare Analytics, LLC, in California. He graduated Phi Beta Kappa from Stanford University. He received his M.D. with Honors from Baylor College of Medicine. In 1988, he was the Solomon Scholar for Resident Research at Cedar Sinai Medical Center. Dr. Matzner subsequently was awarded a PhD in Neuro Economics from Claremont Graduate University. He is board certified in Internal Medicine and Palliative Medicine. He has researched and published extensively on the issue of reproduction and immunology in medical literature. He has been in private practice since 1989, specializing in Reproductive Immunology and Internal medicine. 

Consulting Website: https://healthcareanalytics.biz 
News: https://hippocratesguild.com/dr-william-matzner 
News: https://medicogazette.com/dr-william-matzner

William Matzner, MD (Simi Valley, California), has been practicing medicine since 1989, Internal Medicine and Reproductive Immunology. M.D. with Honors from Baylor College of Medicine.

MONITORING THE SUCCESS OF EXISTING HEALTHCARE PROGRAMS


William Matzner, MD
Dr. William Matzner, Simi Valley, California

In the modern days of limited healthcare resources and decreased insurance reimbursements, it is not only helpful for healthcare organizations to analyze how new programs affect them economically, but also very useful to monitor the economic outcome of existing healthcare programs or treatments.

I was asked to analyze an existing disease management program by a large healthcare organization. They had developed a disease management program for COPD and wished to know if it was economically sound to continue this program.

I concluded that the most thorough way to evaluate this program was to use a Cost Effectiveness Markov Model. These models are excellent for looking at chronic on going conditions such as COPD. There are three possible disease states: Stable, somewhat sick and visiting urgent care, very sick and requiring hospitalization.

We were able to calculate not only costs associated with each state but also the quality of life as expressed in quality adjusted life years (QALY). The program was analyzed using incremental cost effectiveness ratio (ICER). 

The conclusion was that the program was successful by a significant amount, and furthermore that the savings was due to significant cost decrease in hospitalization of COPD patients involved in the program. Thus CEA can not only evaluate existing programs, but guide us into how those programs prove their effectiveness. CEA is starting to show its increased versatility in the modern healthcare economic environment. 

About William L. Matzner, M.D., PhD, FACP 

Dr. William Matzner works in the area of healthcare economics consulting at Healthcare Analytics, LLC, in California. He graduated Phi Beta Kappa from Stanford University. He received his M.D. with Honors from Baylor College of Medicine. In 1988, he was the Solomon Scholar for Resident Research at Cedar Sinai Medical Center. Dr. Matzner subsequently was awarded a PhD in Neuro Economics from Claremont Graduate University. He is board certified in Internal Medicine and Palliative Medicine. He has researched and published extensively on the issue of reproduction and immunology in medical literature. He has been in private practice since 1989, specializing in Reproductive Immunology and Internal medicine. 

Consulting Website: https://healthcareanalytics.biz 
News: https://hippocratesguild.com/dr-william-matzner 
News: https://medicogazette.com/dr-william-matzner

William Matzner, MD (Simi Valley, California), has been practicing medicine since 1989, Internal Medicine and Reproductive Immunology. M.D. with Honors from Baylor College of Medicine.

REVENUE GENERATION IN THE OUTPATIENT SETTING


William Matzner, MD, Simi Valley, California
Unlike other forms of economics, in healthcare, one cannot create increased demand for healthcare de novo as people do not seek healthcare professionals unless they are sick or injured. Therefore the pool of potential revenue is essentially fixed by the nature of various diseases and/or injuries. The problem that was suggested to me is that building a new surgery center will require much thought because the patients will come from local referrals and insurance companies, and not from a network of local physicians as had been done previously. However, the conversion of this potential revenue into increased demand for the surgery center is the key problem to solve before they would proceed with construction of the center.

Cost Effectiveness Analysis (CEA) presents a convenient and accurate way to compare revenue from physician referral vs from local and insurance referrals. One branch can compare the cost of generating the referrals from a physician referral network and its effectiveness in bringing in patients vs a branch, showing the costs in generating revenue using local marketing and insurance networks. The result will give a good idea if this new type of revenue generation is effective enough to justify the investment into a new surgery center. 

CEA provides a unique and rigorous way to compare what at first appears to be apples vs. oranges. It can provide quantitative results that can help in deciding the feasibility of new investments for the healthcare organization. 

About William L. Matzner, M.D., PhD, FACP 

Dr. William Matzner works in the area of healthcare economics consulting at Healthcare Analytics, LLC, in California. He graduated Phi Beta Kappa from Stanford University. He received his M.D. with Honors from Baylor College of Medicine. In 1988, he was the Solomon Scholar for Resident Research at Cedar Sinai Medical Center. Dr. Matzner subsequently was awarded a PhD in Neuro Economics from Claremont Graduate University. He is board certified in Internal Medicine and Palliative Medicine. He has researched and published extensively on the issue of reproduction and immunology in medical literature. He has been in private practice since 1989, specializing in Reproductive Immunology and Internal medicine. 

Consulting Website: https://healthcareanalytics.biz 
News: https://medicogazette.com/dr-william-matzner

William Matzner, MD (Simi Valley, California), has been practicing medicine since 1989, Internal Medicine and Reproductive Immunology. M.D. with Honors from Baylor College of Medicine.

MONITORING PROGRAMS AND BUDGETING IN THE NEW HEALTHCARE ENVIRONMENT

William Matzner, MD
Dr. William Matzner, Simi Valley, California
The healthcare delivery environment has changed dramatically over the last several years. Most notably is the emphasis on appropriate limitation of medical resources to those patients that truly require it by set criteria. Healthcare organizations now face unique challenges in this new environment to deliver appropriate and quality healthcare yet remain profitable. How can they determine if what they are doing is economically beneficial? Should they continue the same programs and how much money should they devote to each program to remain profitable? How can they determine this analytically?

This is a perfect scenario where cost effectiveness analysis (CEA) can provide the appropriate guidelines to make good economic decisions. In CEA, one sets up a decision tree with two or more scenarios to compare which scenario (branch) is the best economically.  CEA also has the added advantage of building the effectiveness of each decision branch into the model.

For example, suppose that your organization has a CHF disease management program as a supplement to the physician’s offices to help manage these chronically ill patients. A CEA decision tree can compare the costs to maintain CHF patients without the program, versus with the program. If the patients are clinically better with the program, this can be built into the model using Quality Adjusted Life Years (QALY). A CEA model can tell how much savings one program can bring versus another program or no program at all. This information can help in not only deciding whether to keep such a program, but also how much one can invest in the program for economic benefit to the healthcare organization. This can be critical to budgeting for subsequent years. 

This is only one example of how CEA can help healthcare organizations in medical decision making and budgeting of existing healthcare programs. 

About William L. Matzner, M.D., PhD, FACP 

Dr. William Matzner works in the area of healthcare economics consulting at Healthcare Analytics, LLC, in California. He graduated Phi Beta Kappa from Stanford University. He received his M.D. with Honors from Baylor College of Medicine. In 1988, he was the Solomon Scholar for Resident Research at Cedar Sinai Medical Center. Dr. Matzner subsequently was awarded a PhD in Neuro Economics from Claremont Graduate University. He is board certified in Internal Medicine and Palliative Medicine. He has researched and published extensively on the issue of reproduction and immunology in medical literature. He has been in private practice since 1989, specializing in Reproductive Immunology and Internal medicine. 

Consulting Website: https://healthcareanalytics.biz 
News: https://hippocratesguild.com/dr-william-matzner 
News: https://medicogazette.com/dr-william-matzner

William Matzner, MD (Simi Valley, California), has been practicing medicine since 1989, Internal Medicine and Reproductive Immunology. M.D. with Honors from Baylor College of Medicine.

HEALTH INFORMATION TECHNOLOGY



Dr. William Matzner
Dr. William Matzner, Simi Valley, California

HEALTH INFORMATION TECHNOLOGY 

The use of health information technology (HIT) has exploded over the last several years. It is now standard of care in most facilities to use electronic medical records for most all patient encounters. In the field of radiology, digital technology has lead to x-rays and CT scans being accessed on computers versus the days of the old radiograph being examined on a light box. Furthermore, access of these records is much easier so that all practitioners involved in the care of the patient can readily examine them.

The use of this technology comes at a very large cost in the development of software, and the use of computer hardware and cloud systems to implement.  Furthermore, there is cost in time and training to learn and utilize this technology.  When a new system is introduced, how can one tell if the time and complexity to learn and implement the system is worth doing because of the increase benefits in the efficiency and the ability to use medical information? How can one determine if it is a good decision to implement a new technology or continue with the existing system and medical records program?

The analysis of Broad Data, using cost-effectiveness analysis, can give much clarity to such a decision.  Using a decision tree model, various aspects of how the HIT affects patient outcomes and decision making can be analyzed and quantified. It looks not only at the costs to the patient, but also incorporates how the decision impacts the health of the patient. Thus, using this analysis can assist on figuring how best to proceed with information gathering and sharing, and how that will impact the patient. It can quantify subjective feelings about how the HIT is implemented and its usefulness, thereby opening up the possibility to have much better informed decision.

Healthcare has entered a new age. In some ways technology appears to have taken over healthcare, but by cleverly analyzing the best way to do this using cost effectiveness analysis can be of great benefit to patients. 

About William L. Matzner, M.D., PhD, FACP 

Dr. William Matzner works in the area of healthcare economics consulting at Healthcare Analytics, LLC, in California. He graduated Phi Beta Kappa from Stanford University. He received his M.D. with Honors from Baylor College of Medicine. In 1988, he was the Solomon Scholar for Resident Research at Cedar Sinai Medical Center. Dr. Matzner subsequently was awarded a PhD in Neuro Economics from Claremont Graduate University. He is board certified in Internal Medicine and Palliative Medicine. He has researched and published extensively on the issue of reproduction and immunology in medical literature. He has been in private practice since 1989, specializing in Reproductive Immunology and Internal medicine. 

Website: https://drwilliammatzner.com 
Consulting Website: https://healthcareanalytics.biz 
LinkedIn: https://www.linkedin.com/in/william-matzner-md-phd-mba-60219730 
Blog: https://drwilliammatzner.blogspot.com 
News: https://hype.news/dr-william-matzner/ 
News: https://hippocratesguild.com/dr-william-matzner 
News: https://medicogazette.com/dr-william-matzner

William Matzner, MD (Simi Valley, California), has been practicing medicine since 1989, Internal Medicine and Reproductive Immunology. M.D. with Honors from Baylor College of Medicine.

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QUALITY ADJUSTED LIFE YEARS (QALY)—THE FORGOTTEN DENOMINATOR

Dr. William Matzner, Simi Valley, California Author’s NOTE: The health promotion and wellness industry has often been asked to illustr...