Opportunity Cost in Health Care: a Favourite Research Topic for OHE

Article by: Chris Sampson

OHE’s Chris Sampson is leading a new Research Topic published in Frontiers in Health Services, titled ‘Opportunity Costs in Health Care: Cost-effectiveness Thresholds and Beyond’. The Research Topic is open for submissions, and the editors are inviting research and commentary on a range of issues that the OHE team has been tackling for many years.

Opportunity cost is a fundamental concept in economics. It underlies all that we do and is sometimes the elephant in the room for health technology assessment (HTA). Without a good understanding of opportunity cost, it’s unlikely that health care resources will be allocated fairly and efficiently.

Defining ‘opportunity cost’ is simple enough; it is represented by the value of the choices we don’t make. For instance, the opportunity cost of investing in programme A – if it exhausts our budget – is what we could have achieved with programme B, which could not be provided.

But the reality is not so simple.

We seldom have a clear understanding of the next best alternative for expenditure in health care. The challenge operates on multiple levels. For starters, there is often a great deal of uncertainty – especially for new technologies – which means we cannot be confident about the magnitude of opportunity costs. It is also difficult to predict how an investment will impact on the current provision of care; disinvestment decisions are rarely observed, and changes made by local commissioners are not so clearly defined as the decision problems considered in HTA. Recent research has sought to identify cost-effectiveness thresholds by examining expenditure and outcomes data, but can a fixed threshold represent opportunity costs across diverse technologies and clinical settings?

A new Research Topic for the journal Frontiers in Health Services will bring together disparate strands of research on opportunity costs in health care. The editors – Chris Sampson, Ashley Leech, and Borja Garcia-Lorenzo – are inviting a wide variety of submissions. The overall purpose of the Research Topic is to improve the extent to which opportunity costs can be fully recognised in health care resource allocation decisions. Methodological, theoretical, and applied research studies – both qualitative and quantitative – are all needed to advance policy and practice.

OHE has led research on this top for many years, with a particular focus on cost-effectiveness thresholds. As the first empirical estimates of a cost-effectiveness threshold for England were published in 2013, we shared our concerns about the methods. And we went on to explore some of the assumptions inherent in this approach. In particular, we considered that different providers in different clinical areas might achieve health outcomes with varying levels of efficiency, which may lead to bias and more uncertainty in the estimates than previously acknowledged.

But our interest in thresholds predates the empirical work, and we have been considering economic and ethical issues for many years. We’ve also sought to explore the challenge of understanding opportunity costs from different angles. For example, our research in Wales and in Scotland sought to understand how disinvestment and displacement might operate in the NHS, and what that might mean for opportunity costs.

Cost-effectiveness thresholds are used in different ways around the world, often alongside modifiers that implicitly or explicitly assume a different opportunity cost for certain technologies. With a growing interest in cost-effectiveness thresholds, we’ve been developing new approaches. In particular, we’ve explored the implications of accounting for bargaining power in the identification of a cost-effectiveness threshold.

There’s also the challenge of considering opportunity costs beyond health. To this end, we’ve recently been researching how different government departments value life. Most recently, we’ve been exploring the role of vaccines in maintaining health system capacity; how should we measure opportunity cost when investments may help prevent overloading of the health care system?

In 2016, we published a paper identifying a research agenda for cost-effectiveness thresholds. Some of the topics that we proposed remain under-researched. And cost-effectiveness thresholds are just one way of thinking about opportunity costs; might methods such as multi-criteria decision analysis (MCDA) or programme budgeting and marginal analysis (PBMA) have a role here?

Our new Research Topic seeks to move the debate forward by bringing together leading researchers from within and outside the field of health economics. If you’re currently working on relevant research and would like to contribute, head over to the Research Topic webpage and enter your details.

For more information, contact Chris Sampson at OHE.

Posted in General, Health Technology Assessment, Research | Tagged Spotlight on OHE