Health Policy and Systems

Economic Evidence for Evidence-Based Practice

Patricia W. Stone, Christine R. Curran, Suzanne Bakken

Purpose: To explicate (a) the types of economic analyses available to nurses, (b) the
measurement of costs in different types of economic evaluations, (c) recommendations for
standardization, and (d) the assessment of economic evaluations for evidence-based practice.
Methods: Five types of economic analyses are reviewed. Recommendations for standardization
of cost-effectiveness analyses are included as well as a worksheet for use in critiquing
economic evaluations for validity and applicability to clinical settings.
Findings: Limited knowledge and a lack of consistent approaches to economic analyses are
evident in the nursing and health care literature. However, nurses have not contributed to
the conduct of rigorous economic evaluations or research to the extent found in other
health care disciplines.
Conclusions: Basing nursing practice on the best available evidence is now the expected
standard of care. Applying economic evidence to practice requires understanding the methods
used to conduct economic evaluations and to analyze the rigor of such evaluations.

JOURNAL OF NURSING SCHOLARSHIP, 2002; 34:3, 277-282. ©2002 SIGMA THETA TAU INTERNATIONAL.

[Key words: cost-utility analysis, cost-effectiveness, quality-adjusted life years,

evidence-based practice, economic evaluation]

* * *

B
asing nursing practice on the best available evidence economic analysis, one needs to compare one or more
is now the expected standard of care. According to alternative courses of action.
Sackett, Straus, Richardson, Rosenberg, and Haynes, Five different analytic tools are commonly used in assessing
(2000, p. 1), evidence-based practice is the “integration of the economic effects of new health care interventions or
best research evidence with clinical expertise and patient technology (see Table 1). In all these economic outcome
values.” But should “best practice” be done at all costs? Use evaluations, alternative strategies are compared, and the
of all effective clinical services can exceed available resources. incremental costs of the competing strategies are computed.
Thus, nurses, as well as other clinicians, need evidence about The methods differ only in how effects (outcomes) are
the cost-effectiveness of care and how to measure economic measured. In the following section, each method will be
value of interventions. briefly described, examples from nursing and health care
Applying economic evidence to practice requires literature will be provided, and the methods will be illustrated
understanding of the methods used to assess the rigor of using the following clinical research example.
economic evaluations. Thus, the purpose of this article is to Holzemer and colleagues (Holzemer, Henry, Portillo, &
discuss the types of economic analyses available to nurses Miramontes, 2000) developed the Client Adherence Profiling-
and the measurement of costs in economic evaluations. Intervention Tailoring (CAP-IT), a structured nursing
Recommendations for standardization of cost-effectiveness intervention aimed at enhancing adherence to HIV/AIDS
analyses are presented, as well as a worksheet for critiquing medications. This new intervention is being compared to
economic evaluations for validity and applicability to clinical usual care in the ambulatory setting in a randomized
settings.

Patricia W. Stone, RN, PhD, Alpha Zeta, Assistant Professor, School of Nursing;
Types of Economic Evaluations Christine R. Curran, RN, PhD, CNA, Alpha Zeta, Assistant Professor, Director,
Informatics Program, Director, Research Resources; Suzanne Bakken, RN, DNSc,
FAAN, Alpha Zeta, Alumni Professor of Nursing, Professor of Medical Informatics;
The terminology used in economic appraisal of health care
all at Columbia University, New York. The authors are grateful to Dr. William
can be confusing. All economic analyses are fundamentally Holzemer and colleagues for permission to cite their ongoing study.
about choices. Measuring the cost of a new therapy, although Correspondence to Dr. Stone, Columbia University, School of Nursing, 617 West
useful information as part of an economic analysis, is merely 168th Street, New York, NY 10032. E-mail: [email protected]
Accepted for publication May 8, 2002.
an exercise in accounting, not economics. To have a valid
Journal of Nursing Scholarship Third Quarter 2002 277
Economic EBP

Table 1. Economic Analyses

Type of economic analysis Description Outcome measure
Cost-minimization analysis (CMA) Costs are compared between alternatives only. Not measured
Assumes equal effects.
Cost-consequence analysis (CCA) Costs and effects are listed separately. $ and separate list of outcomes
Effects between alternatives may have different measures.
Cost-effectiveness analysis (CEA) Consequences are measured in the same units Cost-effectiveness ratio such as
between alternatives. $/outcome or $/LY gained
Cost-utility analysis (CUA) Effects include both quantity and quality measures. $QALY gained
Cost-benefit analysis (CBA) Effects are measured as a single dollar measure. $
Note. $=dollars or other currency. LY=life year. QALY=quality-adjusted life year.

controlled trial. Effects of interest to the investigators include resistance). Seminal work on early discharge of low-birth-weight
length of life, quality of life, adherence to therapeutic regimen, infants whose care was managed by advanced practice nurses
viral load, and viral resistance. However, if effective, clinicians (APNs) compared to traditional care is a nursing example of a
may more easily use it in practice if the economic analyses CCA (Brooten et al., 1986).
are understood. With permission of the principal investigator,
we use this example to illustrate alternative approaches to Cost-Effectiveness Analysis
economic analysis. In cost-effectiveness analysis (CEA), outcomes are
measured in the same units between alternatives, such as
Cost-Minimization Analysis dollars per life-year ($/LY) gained or cases avoided. Costs
In a true cost-minimization analysis (CMA), only costs are and effects are then summarized in a cost-effectiveness ratio,
evaluated. The alternatives are assumed to offer equivalent which is calculated using the following formula: Cost-
outcomes. For example, in the clinical research scenario, if a effectiveness ratio = (C1-C2)/(E1-E2) where C1 equals the cost
CMA were the method chosen, the researchers would assume of the new intervention, C2 equals the cost of the comparator,
equivalent outcomes from the CAP-IT intervention and usual E1 equals the effect of the new intervention, and E2 equals
care. Therefore, only the costs of the two alternatives would the effect of the comparator.
be calculated and compared; potential differences in Examples of CEA can be found in the nursing literature
adherence rates and other effects of interest would not be (Bissinger, Allred, Arford, & Bellig, 1997; Stone & Walker,
included. Because CMA is based on the assumption that 1995). However, like many published CEAs, the methods
clinical outcomes are the same, it is essentially a search for employed in these analyses have been found wanting because
the least costly alternative—the minimal cost strategy. of lack of adherence to recommendations, for example, using
However, CMA is rarely an appropriate method of analysis a standard outcome measure such as $/LY (Chang & Henry,
because outcomes are not often considered equivalent. 1999).
A review of literature indicated that most economic In our clinical research scenario, the researchers could chose
evaluations labeled as CMAs were designed to measure some one main outcome of interest and calculate a cost-
level of effectiveness of the strategies being compared. For effectiveness ratio. As with CCA, the costs associated with
example, while measuring the incremental costs of practice CAP-IT and usual care would be calculated. The CEA ratio
guidelines for arterial blood gases in intensive care, the would indicate the differences between CAP-IT and usual
authors also included a measure of appropriateness of test- care in costs and in effects on the target measure (e.g., $/
ing (Pilon et al., 1997). Therefore, this analysis is not a adherence rate). Additionally, if the researchers hypothesize
true CMA. that length of life might be extended for participants receiving
the structured CAP-IT nursing intervention, using $/LY gained
Cost-Consequence Analysis would be appropriate.
In a cost-consequence analysis (CCA), the consequences In health care, $/LY gained is often used as the common unit
of two or more alternatives are measured as well as the costs, of analysis. One advantage of using a common unit for analysis
but costs and consequences are listed separately. The analyst is that comparisons can be made across groups or settings. Results
provides a matrix of the outcomes by each strategy evaluated. of separate analyses from various health care settings can then
This comparison is done so decision makers can form their be, at least in theory, compared across patient populations
own opinions about the relative importance of the findings. (Graham, Corso, Morris, Segui-Gomez, & Weinstein, 1998;
To evaluate the effects of CAP-IT using CCA, the costs related Tengs & Wallace, 2000). However, one disadvantage of $/LY
to both CAP-IT and usual care would be computed. In addition, gained is that 1 year of life in an altered health state is considered
the consequences of the two alternative interventions would equal to any other year of life. Dollars per life year gained
be measured using an appropriate scale for each consequence includes only length of survival, not quality-of-life issues such
(e.g., medication adherence rate, quality of life, viral load, viral as patient inconvenience or suboptimal health states.

278 Third Quarter 2002 Journal of Nursing Scholarship

 Economic EBP

Cost-Utility Analysis Effectiveness in Health and Medicine (Gold et al., 1996;

Cost-utility analysis (CUA) is a special type of cost- Weinstein, Siegel, Gold, Kamlet, & Russell, 1996; Siegel,
effectiveness analysis that includes measures for both quantity Weinstein, Russell, & Gold, 1996; Russell, Gold, Siegel, Daniels,
and quality of life. For the qualitative measure, individual & Weinstein, 1996) because they include both the quantity and
preferences or utilities for different health outcomes are quality of life and they require standardized measurement. Thus,
sought and included. Preferences generally indicate health comparison of people within and across disease states may be
states on a scale from 0 to 1. Perfect health is equal to 1 and possible (Neumann et al., 2000; Chapman, Stone, Sandberg,
death is a 0. Methods for eliciting utilities vary and are the Bell, & Neumann, 2000; Stone, Teutsch, et al., 2000).
focus of a unique body of science and research (Bosch,
Hammitt, Weinstein, & Hunink, 1998; Gold, Siegel, Russell, Cost-Benefit Analysis
& Weinstein, 1996; Hornberger & Lenert, 1996; Patrick, In cost-benefit analysis (CBA), outcomes are measured
Starks, Cain, Uhlmann, & Pearlman, 1994). Increasingly, according to some monetary unit. A single-dollar figure,
utilities are being collected for a variety of health states (Badia, representing costs minus benefits, is calculated. The challenge
Diaz-Prieto, Rue, & Patrick, 1996; Fryback et al., 1993; Lohr with this approach is that many situations in health care are
et al., 1996; Tengs & Wallace, 2000). The preference weights difficult to quantify financially. Some benefits require a value
are then multiplied by the amount of time experienced in judgment. Furthermore, ethical concerns complicate assigning
that health state. The outcome measure is quality-adjusted a dollar amount to the value of human life (Kenkel, 1997;
life years (QALYs). Table 2 shows the calculation of a QALY. Pauly, 1995). Because of these issues, the use of CEA is
reported more often in the literature than is CBA (Elixhauser,
Halpern, Schmier, & Luce, 1998).
To use CBA to compare CAP-IT and usual care, dollar
Table 2. Calculation of Quality Adjusted Life Years (QALY)
values would be assigned to the potential benefits (e.g., quality
Quality adjusted life years of life, decreased viral load) selected for inclusion in the
Utility Life expectancy QALYs analysis. Costs minus benefits is the metric for comparing
Person 1 0.6 x 40 years = 24 QALYs CAP-IT and usual care.
Person 2 0.9 x 40 years = 36 QALYs

Perspectives on the Analysis and Costs

The descriptions of the various economic methods, and
Expecting that a person would sustain the same quality of illustration with the case scenario, indicate similarities and
life consistently over time is not realistic. People experience differences among these analytic tools. To complete any of
changes in health status. To calculate a QALY over time, the above analyses, the researcher must assign a value to the
individual QALYs are calculated for the time spent in each inputs or costs (Luce & Elixhauser, 1990). Table 3 shows
health state weighted by the quality of life in that health state. some of the cost components frequently considered in CEAs.
These scores are then summed to arrive at an overall QALY The “worth” of cost varies depending on the perspective from
for each person. Because of the complexity of these equations, which the analysis is done (Gold et al., 1996; Stone, 2001a;
decision-analytic modeling techniques are often used (Stone, Stone, 2001b). For example, from a patient’s perspective,
1998). cost may be measured as money and time spent, whereas an
In a review of CUA literature, only one study was found in organizational administrator might include items such as
a nursing journal (Neumann, Stone, Chapman, Sandberg, & supply costs, staffing costs, and potential patients gained or
Bell, 2000). In this study, the investigators compared lost. Thinking more globally, one could also take a societal
psychiatric nurse specialists working in the community to viewpoint. This perspective requires an attempt to measure
general physician practitioner care in an office setting the actual economic value (the social opportunity cost) of
(Gournay & Brooking, 1995). Although the use of this the resources that are consumed.
methodology is commendable, many of the recommended Whether one uses a societal perspective or a health care
methods for CUA were not followed, such as correctly focus, direct health care costs should include both costs related
calculating incremental costs (Stone, 1998). An analysis of to the intervention itself and those associated with net
smoking cessation interventions, including cost-effectiveness downstream costs. For example, direct health care costs
ratios both as $/LY and $/QALY, is an excellent example of associated with a flu shot program would include the costs
how to conduct a CEA and a CUA (Cromwell, Bartosch, Fiore, of obtaining and administering the vaccine as well as
Hasselblad, & Baker, 1997). downstream costs (or savings), such as hospitalizations,
In our clinical research example, the CAP-IT researchers outpatient visits, and other treatment costs associated with
might choose to conduct a CUA because both quality of life the occurrence of flu and possible complications such as
and length of life were being measured. However, if this pneumonia. Furthermore, when conducting an analysis from
decision is not made a priori, the quality-of-life measurement the societal perspective, costs and effects are included regardless
might not be applicable (Hornberger et al., 1996). of who accrues them. Therefore, costs other than health care
Composite outcome analyses, such as $/QALY, have been costs are included, such as transfer costs. Transfer costs are
recommended by the United States Public Health Panel on Cost- resources that have been redistributed and not consumed. They

Journal of Nursing Scholarship Third Quarter 2002 279

Economic EBP

Table 3. Possible Cost Components for Inclusion in costs from different years must be calculated and placed into
a standard year format using of the consumer price index
Economic Analyses
(CPI) inflator found on the U.S. Department of Labor Web
Cost components page (http://www.bls.gov).
Direct health care costsa
Intervention
Hospitalization
Outpatient visits Recommended Standardization
Long-term care
Other health care To standardize measures within cost-effectiveness ratios,
Patient time receiving care a standard set of methodological practices, called a reference
Direct nonhealth care costs case, has been recommended (Gold et al., 1996; Russell et
Transportation
al., 1996; Siegel et al., 1996; Siegel et al., 1997; Weinstein et
Family or caregiver time
Social services al., 1996). An ideal reference case would indicate: (a) a
Productivity societal perspective (incorporating all costs and all health
Other effects regardless of who incurs them); (b) results in dollars
Note. aNot recommended for inclusion in cost-utility analyses by the per QALY gained; (c) downstream net costs (and savings); (d)
United States Public Health Service’s Panel on Cost-Effectiveness in Health discount costs and QALYs at an annual rate of 3%. Therefore,
and Medicine (Gold, Siegel, Russell, & Weinstein, 1996). Adapted from
costs other than those associated with health care are in-
Stone, Chapman, et al., 2000. Copyright 2000 by WTAHC.
cluded, such as direct nonhealth care costs (Table 3); and (e)
examination of uncertainty by conducting at least a minimal
set of sensitivity analyses varying the discount rate, utility
may be appropriate to include if the analysis is conducted from weights, and other appropriate variables. The utility or quality-
the governmental perspective, but, in general, transfer costs of-life adjustment factor should be obtained from community-
are not routinely considered to be a cost to society. based populations. Community preferences should be used
Resource utilization is often determined by using claims data because they are more likely to represent societal preferences
(Lave et al., 1994). Although claims data are not without errors rather than organizational or individual preferences. Because
or variations in coding practices, these data may be the best data on community preferences are not always available,
source available. If a financial information system is in use, may be prohibitively costly to obtain, and matter to different
specifically a cost accounting system, data should be available degrees in different analyses, the federal panel noted that
from it. Direct health care cost components, such as variable patient preferences in certain situations might be acceptable
costs (e.g., staffing and supplies) and fixed overhead costs (e.g., in a reference case analysis.
rent and percentage of administration costs), can be retrieved
from this database. For resource utilization by individuals, self- Assessing Economic Evidence for Applicability to Practice
report diaries or retrospective surveys of costs can be effective Evaluation of new services or programs generally includes
(Stone, Chapman, Sandberg, Liljas, & Neumann, 2000). consideration of costs. CEA is often used in these analyses
In the health care environment, charges generally do not because it indicates the expected benefits, harms, and costs of
equal true costs to the organization. Third-party payors alternative strategies to improve health. However, CEA
negotiate payment for services rendered based on the cost of analyses tend to be complex. To facilitate evidence-based
the service and a profit margin, in both for-profit and not-for- resource allocation decisions, guidelines for the use of
profit institutions. For the health care institution to generate economic evaluations have been developed (Drummond &
more revenue, fee-for-service customers are often asked to Jefferson, 1996; Drummond, O’Brien, Stoddart, & Torrance,
pay full charges, that is, a higher rate of pay. This practice is 1997; Drummond, Richardson, O’Brien, Levine, & Heyland,
called “cost shifting.” Therefore, when calculating 1997; Drummond, Torrance, & Mason, 1993; O’Brien,
institutional costs, an adjustment to charges is usually Heyland, Richardson, Levine, & Drummond, 1997; Sackett
necessary to show true costs to the organization. et al., 2000). A worksheet based on these guidelines is
All U.S. hospitals receiving federal reimbursement list cost- presented in Table 4. The worksheet is designed for use in
to-charge ratios (CCRs). These ratios are calculated by dividing critiquing economic evaluations for validity and applicability
the total costs in a cost center by the total charges for the same to clinical settings. It follows evidence-based practice rules,
resource. CCRs are recognized as a gross adjustment to charges. and it can help nurses assess reports for validity, significance,
They are better measures than are charges alone, but they are and applicability to a specific practice environment (Sackett
not as accurate as cost-accounting systems. et al., 2000).
Standardization of all costs to the same currency and year Economic evidence should be reviewed just as effectiveness
is essential. A helpful Web site to convert non-U.S. currency evidence has been reviewed, such as in the Cochrane
figures into U.S. dollars using the appropriate foreign collaboration collection (Mowatt, Grimshaw, Davis, &
exchange factor for that year is http://www.stls.frb.org/fred/ Mazmanian, 2001). The U.S. Preventive Services Task Force
data/exchange.html. Additionally, because $1 in 1980 does has initiated a process for systematically reviewing economic
not have the same purchasing power as a current dollar, the evidence when making recommendations about clinical

280 Third Quarter 2002 Journal of Nursing Scholarship

 Economic EBP

Table 4. A Worksheet to Assist in the Evaluation of Economic clinical services will likely exceed available resources.
Decisions about health care delivery will increasingly require
Evidence for Practice
assessing the cost-effectiveness of health care services.
I. Is this a valid economic evaluation? However, despite repeated recommendations for
1. Are the alternative courses of action well-defined? standardization, methods vary and frequent mislabeling of
2. Is the perspective of the analysis stated and appropriate costs analysis has been found, resulting in suspicions about the
considered?
credibility and comparability of studies (Gerard & Mooney,
3. Is the appropriate economic evaluation method employed?
4. If CUA methods are employed, are the preferences or utilities based on 1993; Gerard, Smoker, & Seymour, 1999; Mason, Drummond,
community or patient preferences? & Torrance, 1993; Neumann et al., 2000). Economic
5. Does the report cite good evidence on the efficacy and accuracy of the evaluations (especially CEAs and CUAs) can be valuable tools
alternatives? for nurses and health policymakers to incorporate into their
6. Are sensitivity analyses conducted on effectiveness, costs, and utility
evidence-based decisions.
estimates?

II. Are the valid results from this economic analysis important? References
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