ON ADDITIVE METHODS TO SHARE JOINT COSTS*

The Shapley value theory is extended to cost functions with multiple outputs (or to production functions with multiple inputs) where each output is demanded by a different agent and the level of demand varies. Beyond the Additivity and Dummy axioms (Shapley's original axioms) we insist that the cost-share of an agent should not decrease when she increases her demand (Demand Monotonicity). This property rules out the Aumann-Shapley pricing formula, as well as any method charging average cost for homogeneous goods. We characterize the class of cost sharing methods satisfying Additivity, Dummy, Demand Monotonicity and Cross Monotonicity. The last says that when outputs i and j are cost complements (resp-cost substitutes) the cost share of i is non decreasing (resp-non increasing) in the demand of j. Two prominent methods in the class are the Shapley-Shubik method (i.e. the Shapley value of the Stand Alone cost game) and serial cost sharing (which extends to multiple goods a formula due to Moulin and Shenker). They are characterized respectively by a lower bound and by an upper bound on individual cost shares.     

Commons with increasing marginal costs: random priority versus average cost*

Indivisible units are produced with increasing marginal costs. Under average cost, each user pays average cost. Under random priority, users are randomly ordered (without bias) and successively offered to buy at the true marginal cost. Both average cost (AC) and random priority (RP) inefficiently overproduce. RP tends to overproduce less, but which game collects more surplus depends much on the demand configuration. We show that a key to compare the welfare properties of the two mechanisms is the crowding factor, i.e., the number of potential users over the number of units of output users can afford: The more crowded the commons, the more RP outperforms AC. In the quadratic cost case, beyond the threshold value of 2.4 for the crowding factor, RP strongly outperforms AC; beneath it AC only mildly outperforms RP. Thus the RP mechanism manages crowded commons better than AC.     

The core in an oligopoly market with indivisibility

Summary. This paper studies the core in an oligopoly market with indivisibility. It provides necessary and sufficient conditions for core existence in a general m-buyer n-seller market with indivisibility. When costs are dominated by opportunity costs (i.e., a firm's variable costs are sufficiently small), the core condition can be characterized by the primitive market parameters. In a 3-2 market with opportunity cost, the core is non-empty if and only if the larger seller's opportunity cost is either sufficiently large or sufficiently small. Received: June 9, 1999; revised version: October 22, 1999     

Hospital economic impact from hemostatic matrix usage in cardiac surgery

Objective:

Improved health outcomes can result in economic savings for hospitals and payers. While effectiveness of topical hemostatic agents in cardiac surgery has been demonstrated, evaluations of their economic benefit are limited. This study quantifies the cost consequences to hospitals, based on clinical outcomes, from using a flowable hemostatic matrix vs non-flowable topical hemostatic agents in cardiac surgery.

Research design and methods:

Applying clinical outcomes from a prospective randomized clinical trial, a cost consequence framework was utilized to model the economic impact of comparator groups. From that study, clinical outcomes were obtained and analyzed for a flowable hemostatic matrix (FLOSEAL, Baxter Healthcare Corporation) vs non-flowable topical hemostats (SURGICEL Nu-Knit, Ethicon–Johnson &; Johnson; GELFOAM, Pfizer). Costing analyses focused on the following outcomes: complications, blood transfusions, surgical revisions, and operating room (OR) time. Cardiac surgery costs were analyzed and expressed in 2012 US dollars based on available literature searches and US data. Comparator group variability in cost consequences (i.e., cost savings) was calculated based on annualized impact and scenario testing.

Results:

Results suggest that if a flowable hemostatic matrix (rather than a non-flowable hemostat) was utilized exclusively in 600 mixed cardiac surgeries annually, a hospital could improve patient outcomes by a reduction of 33 major complications, 76 minor complications, 54 surgical revisions, 194 transfusions, and 242?h of OR time. These outcomes correspond to a net annualized cost consequence savings of $5.38 million, with complication avoidance as the largest contributor.

Conclusions:

This cost consequence framework and supportive modeling was used to evaluate the hospital economic impact of outcomes resulting from the usage of various hemostatic agents. These analyses support that cost savings can be achieved from routine use of a flowable hemostatic matrix, rather than a non-flowable topical hemostat, in cardiac surgery.     

Prices in Mixed Cost Allocation Problems

We consider mixed cost allocation problems, i.e., joint cost problems that involve two types of heterogeneous outputs, divisible and indivisible. The Aumann–Shapley price mechanism is extended to this setting. We also present a set of properties which characterize this cost sharing rule. Journal of Economic Literature Classification numbers: D63, C79.     

Strong equilibrium in cost sharing connection games

We study network games in which each player wishes to connect his source and sink, and the cost of each edge is shared among its users either equally (in Fair Connection Games—FCG's) or arbitrarily (in General Connection Games—GCG's). We study the existence and quality of strong equilibria (SE)—strategy profiles from which no coalition can improve the cost of each of its members—in these settings. We show that SE always exist in the following games: (1) Single source and sink FCG's and GCG's. (2) Single source multiple sinks FCG's and GCG's on series parallel graphs. (3) Multi source and sink FCG's on extension parallel graphs. As for the quality of the SE, in any FCG with n players, the cost of any SE is bounded by H(n) (i.e., the harmonic sum), contrasted with the Θ(n) price of anarchy. For any GCG, any SE is optimal.     

Cost effectiveness of oseltamivir treatment of influenza: a critique of published methods and outcomes

Objective: The objective of this review was to determine, from a systematic assessment of published data, the cost effectiveness of the neuraminidase inhibitor antiviral medication oseltamivir in comparison with usual care (i.e. over-the-counter medication such as analgesics and antipyretics for symptomatic relief) for the treatment of influenza. How the findings of each of the studies considered related to the methods used for each analysis and the assumptions made were specifically reviewed.

Results: The online search found 80 individual articles, 66 of which did not meet the pre-defined screening criteria. The 14 studies remaining reported cost, cost-effectiveness and cost-utility analyses for oseltamivir treatment in various groups: healthy adults and adolescents, children, elderly, and individuals at increased risk.

Conclusion: Despite the range of values assumed for key probabilities such as the diagnostic certainty of influenza among people presenting with influenza-like illness, and how much work time is lost due to illness in healthy adults, base-case analyses consistently showed oseltamivir treatment to be cost effective or even cost saving for the four population groups studied, a conclusion that is in-line with previous reviews on this topic. However, clarity was frequently lacking in the published data in terms of various model assumptions and results, particularly with regards to the exact distributions of the constituting elements of savings and of quality-adjusted life years gained.     

Cost effectiveness of memantine in Alzheimer's disease in the UK

Objective: This analysis assesses the cost-effectiveness of memantine for the treatment of moderate-to-severe Alzheimer's disease (AD) in the UK.

Methods: This cost-utility analysis was based on a Markov model. The model simulated 5-year progress of patients with AD until they need full-time care (FTC), defined as a patient becoming either dependent or institutionalised. Transition probabilities were based on a predictive equation, derived from the London and South-East Region epidemiological study. Resource use, utilities and mortality were obtained from the same study. Memantine efficacy was based on a meta-analysis of six large trials. The model compared memantine to its alternative in the UK, i.e. no pharmacological treatment or background therapy with acetylcholinesterase inhibitors.

Results: Memantine was found to delay the need to FTC by 6 weeks compared with current practice in the UK. It was associated with increased quality-adjusted life-years and cost savings to the healthcare system (probability of this outcome was 96%). The projections were made assuming that benefits from the 6-month treatment were sustained over time, which is regarded as the main limitation. The model underwent extensive sensitivity analyses, which confirmed the base-case findings.

Conclusions: The model suggests that memantine delays the need for FTC and decreases cost. It can be regarded as a cost-effective choice in the management of moderate and severe AD.     

Prize sharing in collective contests

The characteristics of endogenously determined sharing rules and the group-size paradox are studied in a model of group contest with the following features: (i) The prize has mixed private–public good characteristics. (ii) Groups can differ in marginal cost of effort and their membership size. (iii) In each group the members decide how much effort to put without observing the sharing rules of the other groups. It is shown that endogenous determination of group sharing rules completely eliminates the group-size paradox, i.e. a larger group always attains a higher winning probability than a smaller group, unless the prize is purely private. In addition, an interesting pattern of equilibrium group sharing rules is revealed: The group attaining the lower winning probability is the one choosing the rule giving higher incentives to the members.     

Cost estimation of patients admitted to the intensive care unit: a case study of the Teaching University Hospital of Thessaly

Objective: This study aimed to estimate the cost of patients admitted to the Intensive Care Unit (ICU) of the Teaching University Hospital of Thessaly (TUHT) in 2006 and to demonstrate discrepancies between actual hospitalisation cost and social funds’ reimbursement.

Methods: Cost analysis was performed using a macro-costing approach, which focused on the estimation of nominal and actual cost per ICU patient. Data were derived from the annual records of resources consumed in each hospital unit and from hospital balance sheets. Sensitivity analysis was also performed by inflating nominal costs to present values.

Results: There were 312 patients admitted to the ICU. Mean actual cost per ICU patient was estimated at €16,516, whereas actual reimbursement from social funds was only €1,671. This means that reimbursement accounted for just 10% of the actual hospitalisation cost. Once nominal costs were inflated to present values, the reimbursement accounted for 25% of the actual hospitalisation cost. The major cost drivers of ICU hospitalisation were personnel costs followed by infrastructure, hotel services and pharmaceutical expenditure. These results may be limited by a lack of consideration for clinical outcomes along with a high level of aggregation in cost data.

Conclusion: Reimbursement should be re-adjusted in order to balance public hospital deficits and make public-private mix viable. This way, intensive care capacity would increase and allow a more equitable distribution of healthcare resources.     

Decentralized pricing in minimum cost spanning trees

In the minimum cost spanning tree model we consider decentralized pricing rules, i.e., rules that cover at least the efficient cost while the price charged to each user only depends upon his own connection costs. We define a canonical pricing rule and provide two axiomatic characterizations. First, the canonical pricing rule is the smallest among those that improve upon the Stand Alone bound, and are either superadditive or piece-wise linear in connection costs. Our second, direct characterization relies on two simple properties highlighting the special role of the source cost.     

The cost implications of the use of telmisartan or ramipril in patients at high risk for vascular events: the ONTARGET study

Abstract

Background:

The recently published ONTARGET trial found that telmisartan was non-inferior to ramipril in reducing CV death, MI, stroke, or heart failure in patients with vascular disease or high-risk diabetes. The cost implications of ramipril and telmisartan monotherapy use based on the ONTARGET study are reported here.

Methods and Results:

Only healthcare system costs were considered. Healthcare resource utilization was collected for each patient during the trial. The authors obtained country-specific unit costs to the different healthcare care resources consumed (i.e., hospitalizations events, procedures, non-study, and study drugs) for all enrolled patients. Purchasing power parities were used to convert country-specific costs into US dollars (US$ 2008). The total undiscounted costs of the study for the telmisartan group was $12,762 per patient and is higher than the ramipril group at $12,007 per patient, an un-discounted difference of $755 (95% confidence interval [CI], $218–$1292); The discounted costs for the telmisartan group was $11,722 compared with $11,019 for the ramipril group; a difference of $703 (95% CI, $209–$1197). The difference in costs is exclusively related to the acquisition cost of telmisartan over generic ramipril.

Limitations:

This analysis only considered direct healthcare system costs. Costs accrued outside the hospital were not collected. Combination therapy was excluded since it would likely be more expensive than ramipril alone, with no additional benefit and a risk of some harm.

Conclusions:

Based on these results, it is suggested that for the ONTARGET patients, the use of telmisartan instead of ramipril increases costs by 6.3%. These findings suggest that the choice to put patients on telmisartan should be justified based on the patient’s susceptibility to specific adverse events to minimize the cost implications.     

Costs of hospital visits among patients with deep vein thrombosis treated with rivaroxaban and LMWH/warfarin

Background:

For many years, the standard of care for patients diagnosed with deep vein thrombosis (DVT) has been low-molecular-weight heparin (LMWH) bridging to an oral Vitamin-K antagonist (VKA). The availability of new non-VKA oral anticoagulants (NOAC) agents as monotherapy may reduce the likelihood of hospitalization for DVT patients.

Objective:

To compare hospital visit costs of DVT patients treated with rivaroxaban and LMWH/warfarin.

Methods:

A retrospective claim analysis was conducted using the MarketScan Hospital Drug Database for care provided between January 2011 and December 2013. Adult patients using rivaroxaban or LMWH/warfarin with a primary diagnosis of DVT during the first day of a hospital visit were identified (i.e., index hospital visit). Based on propensity-score methods, historical LMWH/warfarin patients (i.e., patients who received LMWH/warfarin before the approval of rivaroxaban) were matched 4:1 to rivaroxaban patients. The hospital-visit cost difference between these groups was evaluated for the index hospital visit, as well as for total hospital-visit costs (i.e., including index and subsequent hospital visit costs).

Results:

All rivaroxaban users (n?=?134) in the database were well-matched with four LMWH/warfarin users (n?=?536). The mean hospital-visit costs were $5257 for the rivaroxaban cohort and $6764 in the matched-cohort of patients using LMWH/warfarin. The $1508 cost difference was statistically significant between cohorts (95% CI?=?[?$2296; ?$580]; p-value?=?0.002). Total hospital-visit costs were lower for rivaroxaban compared to LMWH/warfarin users within 1, 2, 3, and 6 months after index visit (significantly lower within 1 and 3 months, p-values <0.05)

Limitations:

Limitations were inherent to administrative-claims data, completeness of baseline characteristics, adjustments restricted to observational factors, and lastly the sample size of the rivaroxaban cohort.

Conclusion:

The availability of rivaroxaban significantly reduced the costs of hospital visits in patients with DVT treated with rivaroxaban compared to LMWH/warfarin.     

Impact of adoption of a decision algorithm including PCA3 for repeat biopsy on the costs for prostate cancer diagnosis in France

Abstract

Objective:

A recent expert study (RAND Appropriateness Method (RAM)) including a panel of 12 European urologists reported that the PCA3 score may be instrumental in taking appropriate prostate biopsy (PBx) decisions, mainly for repeat PBx. This study determined the cost/benefit balance of introducing PCA3 in the decision-making for PBx in France.

Methods:

Two RAM models, without and with PCA3, were retrospectively applied to a sample of 808 French men who had PBx in 2010 (78% first, 22% repeat). Outcome measures included the proportion of PBx that could have been avoided (i.e., judged inappropriate) in the French sample according to both RAM models, and the estimated impact of application of these models on the annual number of PBx and associated costs for France (based on most recent published data).

Results:

Complete profiles were available for 698 men. In the model without PCA3, 2% of PBx were deemed inappropriate. Knowledge of PCA3 would have avoided another 7% of PBx. Repeat PBx would have been avoided in 5% of cases without PCA3 and in 37% with PCA3. For France, application of the RAM model including PCA3 would result in 18,345 fewer repeat PBx. It would be budget-neutral in the unlikely hypothesis of no complications or no costs incurred by complications and would save €1.7 million for a mean cost for complications of €100/procedure or €5 million for a mean cost for complications of €280/procedure, calculated based on US and Canadian data.

Limitations:

Limitations of the study are the theoretical nature of the analysis and the fact that PCA3 distributions had to be derived from other sources.

Conclusions:

Adoption of RAM expert recommendations including PCA3 for repeat PBx decisions in clinical practice in France would reduce the number of repeat PBx and control costs.     

Productivity cost model of the treatment of rheumatoid arthritis with abatacept

Background: The cost of the biological drug abatacept may be partly offset by reductions in the cost of productivity losses due to employee absences and reduced effectiveness at work because of rheumatoid arthritis (RA).

Methods: This was a 1-year productivity cost model based on epidemiologic and economic data. The setting was private industry in the US and the primary outcome measure was the difference in the costs of lost productivity and drug treatment with and without abatacept (‘cost difference’).

Results: The lost productivity cost of RA for a firm of 10,000 was $1.69 million, largely due to the cost of RA-related absenteeism ($1.55 million) rather than to worker displacement ($0.12 million) or care-giving for spouses with RA ($0.02 million). In the base case analysis (excluding presenteeism), 37% of the acquisition cost of abatacept was offset by reductions in the cost of RA-related productivity losses. In some industry groups (Utilities and Finance), and in models that included presenteeism, reductions in lost productivity costs exceeded the abatacept cost.

Conclusions: Much of the acquisition cost of abatacept may be offset by reductions in the cost of productivity losses due to RA. Abatacept treatment could be cost saving in some industry groups.     

Cost-utility of pregabalin as add-on to usual care versus usual care alone in the management of peripheral neuropathic pain in Belgium

Abstract

Background and objectivess:

The cost effectiveness of pregabalin as an add-on to the standard treatment of Belgian patients with post-herpetic neuralgia (PHN) had been demonstrated in a previously published Markov model. The purpose of this study was to update that model with more recent cost data and clinical evidence, and reevaluate the cost effectiveness from the payer’s perspective of add-on pregabalin in a wider set of NeP conditions.

Methods:

The model, featuring 4-week cycles and a 1-year time horizon, consisted in four possible health states: mild, moderate or severe pain and withdrawn from therapy. Three versions of the model were developed, using transition probabilities derived from pain scores reported in three placebo-controlled studies. The two treatment arms were ‘usual care’ or ‘usual care?+?pregabalin’. Resource use and utility data were obtained from a chart review and unit costs from recent published data. The final outcome of the model was the incremental cost per quality-adjusted life-year (QALY) gained when adding pregabalin to standard care.

Results:

Based on 1000 simulations, two versions of the model showed that pregabalin was dominant respectively in 94.8% and 67.2% of the simulations, while the incremental cost per QALY was below €32,000/QALY in respectively 99.1% and 94.6% of the simulations. The third version did not show cost effectiveness, despite an incremental cost of only €300 after 1 year. However, in the corresponding study, patients seemed less responsive to GABA analogs, since 55% of them had failed to respond to gabapentin before study inclusion.

Limitations:

The studies upon which the model is based have a short follow-up time as compared to the model horizon. The endpoints of two studies were only provided at the aggregated level and do not necessarily reflect the real practice.

Conclusion:

Based on this analysis, it can be concluded that from a Belgium payer perspective pregabalin offers a slight increase in quality of life in the studied populations as compared to standard care. Pregabalin is cost effective in the majority of cases except in one published clinical study, despite a low incremental cost per year (€300).     

Costing the Job Compact*

The budgetary cost of any government program should be measured by its impact on the public sector budget balance, over its effective timeframe. Typically, official cost estimates focus on the value of outlays only, and thus create a misleading impression of the opportunity cost of some policy initiatives. This paper offers estimates of the budgetary cost of the Job Compact, using a simple labour force transition flows model of unemployment. Deadweight, displacement and effectiveness impacts are explicitly addressed. We find that, depending on the values chosen for displacement and effectiveness parameters, budgetary cost can be greater or less than outlay estimates. However, for plausible values of these parameters, the budgetary cost is calculated to be substantially lower than official estimates, and may even be negative.     

Influence and inefficiency in the internal capital market

I model inefficient resource allocations in M-form organizations due to influence activities by division managers that skew capital budgets in their favor. Corporate headquarters receives two types of signals about investment opportunities: private signals that can be distorted by managers, and public signals that are undistorted but noisy. Headquarters faces a tradeoff between the cost of attaining an accurate private signal and the value of the information the signal provides. In contrast to existing models of “socialism” in internal capital markets, I show that investment sensitivity to Tobin's Q is higher than first-best in firms where division managers hold equity (a result consistent with evidence presented in Scharfstein, 1998). When managers face high private costs from distorting information (equity holdings), headquarters may commit to investment contracts that place “too little” weight on private signals and “too much” weight on public signals (i.e. Q). This result has implications for managers in the design of capital budgeting processes and incentive compensation systems.     

A contribution to the empirics of convergence in real GDP growth: the role of financial crises and exchange-rate regimes

This paper investigates the convergence in real gross domestic product growth focusing on the impact of financial crises (i.e. banking crises, currency crises and debt crises) and nominal exchange-rate regimes (i.e. fixed, intermediate and flexible) on convergence. To that end, we compute four convergence indicators (σ-convergence, γ-convergence, absolute β-convergence and conditional β-convergence) for 163 countries classified into four income groups during the period 1970–2011. The results suggest that (i) there is evidence in favour of σ-convergence and γ-convergence only for high-income countries; (ii) absolute and conditional β-convergence are present in each of the four income groups of the countries under study; (iii) exchange-rate regimes seem to play some role in upper-middle and lower-middle-income countries; and (iv) financial crises have a negative and significant impact on GDP growth independently of the income level of the countries.