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| Journal of the New Zealand Medical Association,
18-June-2004, Vol 117 No 1196
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Economic cost of community-acquired pneumonia in New Zealand
adults
Guy Scott, Helen Scott, Maria Turley, Michael
Baker
The prime objective of economic evaluations in healthcare is
to provide policy analysts and decision-makers with information on the costs and
effects of medical interventions. Both incremental costs and effectiveness data
are required for these evaluations.
Community-acquired pneumonia is an important cause of
morbidity and mortality from infectious disease in developed countries. Both
pneumonia incidence and mortality rates increase with age. The elderly and
people with co-morbid illnesses have the highest risk of illness or death from
pneumonia.1
There are few published studies attempting to quantify
national costs of treating this disease. ‘Without such data, it is
difficult to assess whether new therapies and treatment strategies are needed to
improve patient outcomes’.2 Accordingly,
the aims of this study were to estimate the incidence and economic cost of
pneumonia in New Zealand adults.
MethodsNew Zealand age-specific
hospital admission rates (average of 3 years
2000–2002),3 2003 population
data,4 and international rates of
hospitalisation were used to estimate resource utilisations for pneumonia. The
target population was adults aged 15 years and older.
Resource utilisations related to the 2003 year. Costs
were measured incrementally from a societal perspective and reported in 2003 NZ
dollars (NZ$1=US$0.5809 mid-rate June 2003).5
Market prices (exclusive of goods and services tax
[GST]) and wages were used as proxies for unit costs. All identifiable transfer
payments were excluded from the analysis. Discounting was unnecessary as costs
related to a single year.
We have chosen to classify health costs as: (a) direct
medical, (b) direct non-medical and (c)
indirect.6 [The literature provides a number of
different cost classifications. A US authority7
classifies costs as: (a) direct costs (direct healthcare costs and direct
non-healthcare costs and the value of patient time for treatment), and (b)
productivity costs (changes in production or output). Another system described
by British and Canadian authors8 delineates
costs by sector or perspective as: (a) health sector, (b) patient and family,
and (c) other sectors.]
Hospitalisation data were only sourced from the New
Zealand Health Information Service, National Minimum Dataset, and cover public
hospital discharges. (These data are adjusted for transfers, patients whose
usual residence is outside New Zealand, and inconsistent stays.) Records were
extracted for adults with a first (primary) diagnosis of pneumonia (ICD-10-AM
2nd edition J10.0, J12-18).
Age-specific hospitalisation rates were calculated
using the average number of public hospital discharges for 2000–2002
(three years) and the mean resident estimated population at June 30 for
2000–2002. To estimate 2003 volumes, these age-specific rates
(2000–2002) were applied to the population as at 30 June 2003.
Hospitalisation rates for community-acquired pneumonia
suggest that the actual number of cases of pneumonia in the population is
between 3 and 10 times the number hospitalised. In developed countries, the
proportion of patients with community-acquired pneumonia admitted to hospital
ranges from just under 10% to just over 70%,
9–16 (Table 1).
Table 1. Hospitalisation rates for community-acquired
pneumonia (CAP)
 The proportion of patients admitted to hospital is
likely to increase with age. Accordingly, we estimated the proportion of
pneumonia cases hospitalised as follows: 20% in those aged 15–64 years,
40% in those aged 65–74 years, 60% in those aged 75–84 years, and
70% in those aged over 85 years (31% over all ages).
To establish the total number of pneumonia episodes,
the number hospitalised in each age group was divided by the proportion
hospitalised. Episodes of pneumonia managed in the community were calculated by
subtracting the number of hospitalised cases from the total number of episodes
of pneumonia in the population.
Two general practitioner (GP) consultations were
allocated per patient treated in the community, and one consultation per
hospitalised admission was evaluated in the base case (we assumed that all
hospitalised cases were first seen by a GP). The cost per GP consultation was
obtained from Statistics New
Zealand.17
A course of medicine for community treatment of
pneumonia was defined as an antibiotic and an analgesic for 10 days. A
frequently prescribed antibiotic (amoxycillin clavulate) and an analgesic
(paracetamol) formed a course of drug treatment. The medicine unit costs were
the pharmacy selling price (including dispensing fee) (Hataitai Pharmacy,
Wellington. Personal communication, 4 June 2004).
An informal telephone survey of GPs indicated that one
sputum test and one chest X-ray could be allowed for each episode of pneumonia
but variations in practice suggested a range of values should be investigated in
the sensitivity analysis. The laboratory test used for the analysis was
‘sputum (excluding
tuberculosis)’.18 Chest X-rays were
valued using the price charged by a private provider (Standard chest X-ray,
Wakefield Hospital, Wellington. Personal communication 17 April 2003).
Hospital unit costs were derived from diagnosis-related
group (DRG) costings. This is a case-mix classification system in which cases
with similar costs are categorised within broader groupings relating to the same
or similar organ or system of the body.
New Zealand uses the Australian National Diagnosis
Related Groups (AN-DRGs). The study used AN-DRG (version 3.1), which provided
the average base contract price paid to public hospitals in
2001.19 A weighted average AN-DRG cost was
derived by using hospital discharge volume data and the average contract prices
paid for AN-DRGs in 2001.
The following AN-DRGs accounted for most of the volume
of pneumonia cases: AN-DRG 170 respiratory infections/ inflammations age >54
with complications and/or co-morbidities [w cc]), 171 respiratory
infections/inflammations (age >54 without complications and/or co-morbidities
[w/o cc] or (age <55 w cc), and 172 respiratory infections/inflammations age
<55 w/o cc. This weighted average price was inflated to 2003 prices using the
Producers Price Index (Inputs for Health and Community
Services).20
Transport costs for each patient visit to a GP (to
obtain an X-ray, or to return from hospital) were based on a single trip of 2.5
kilometres by private motor vehicle at $0.62 per
kilometre.21 Base case private motor vehicle
trips were: 2 trips for each GP consultation, 2 trips per X-ray in the
community, and 1 trip home for those hospitalised. We used an ambulance call-out
charge of $61.3322 for the cost of transport to
hospital. For ambulance call-outs, the base case was 1 trip per hospitalised
case.
Production loss and leisure time foregone for all
pneumonia patients was assessed as follows: 2 weeks for those treated in the
community, and 3 weeks for hospitalised cases (1 week in hospital, 2 weeks at
home). Patients’ time for consultations and X-rays was assumed to occur
within the period off work. Productivity and leisure time foregone was valued
using average weekly earnings for males and females combined for June 2003 ($539
per week).23
Univariate sensitivity analysis (to determine the main
cost drivers) involved increasing variables of interest by 10% (holding all
other factors constant) and recording the change in total costs induced.
Multivariate sensitivity analysis using Monte Carlo
sampling24 was conducted to assess the impact
of simultaneous changes in key assumptions.
ResultsWe estimated that there were 26,826
episodes of community-acquired pneumonia in New Zealand adults in 2003; a rate
of 859 per 100,000 population (Table 2). In those persons aged 65 years and
over, the incidence of pneumonia was 1,882 per 100,000. Pneumonia caused 8,278
hospitalisations (265 per 100,000) in New Zealand adults.
It was found that pneumonia in New Zealand incurs direct
medical costs of $29 million ($1,095 per episode), direct non-medical costs of
$1 million ($26 per episode), and productivity loss of $33 million ($1,244 per
episode). Total costs amounted to $63 million or $2,366 per episode (Table 3).
The cost per case treated in the community was $1,280
compared with the total cost of a hospital treated case of $4,800 (Figure 1).
Table 2. Incidence of community-acquired pneumonia in
New Zealand adults in 2003
 Univariate sensitivity analysis demonstrated that the two
major cost determinants were productivity and hospital costs. When productivity
loss rose by 10% (holding all other factors constant) total costs increased by
5% and when hospital admissions rose by 10% total costs rose by 4% over the base
case result. If these cost drivers were altered by 20% instead of 10% the
resultant impact on total costs doubled.
For example, when productivity loss rose by 20% over the
base case, total costs increased from 5% to 10%. When the productivity loss of
those aged 65 years and over was excluded, total costs fell by 15% (Table
4).
Figure 1. Treatment pathways for community-acquired
pneumonia in New Zealand adults
 Table 3. Economic cost of
community-acquired pneumonia in New Zealand adults (base case)
 Figure 2. Multivariate
sensitivity analysis
 The multivariate sensitivity analysis using Monte Carlo
methods found that when the simulation model was run through 10,000 iterations
total costs ranged between $56 million at the 5th percentile to $72 million at
the 95th percentile (in other words, there is a probability of 90% that an
estimate would fall between the 5th and 95th percentiles). (Table 4 and Figure
2).
Table 4. Sensitivity analysis of the cost of
community-acquired pneumonia in New Zealand adults
 DiscussionThere are no actual recorded data on
the total incidence of pneumonia (and the number of cases treated in the
community in New Zealand or internationally).25
Accordingly, all estimates of incidence must be based upon recorded hospital
discharge data.
The overall incidence of pneumonia in the population is
likely to be much higher than indicated by hospitalisation data (as the majority
of patients diagnosed with pneumonia are managed at
home).26 Similarly, there are no accurate data
on the community management and treatment (diagnostic tests and drugs
used).27
We employed Monte Carlo analysis to investigate uncertainty
in our estimates of incidence of pneumonia and cost of treatment. As we did not
have sufficient information to specify the distributions relating to the inputs
under investigation, the multivariate sensitivity analysis used triangular
distributions. A triangular distribution assumes that there is an equal
likelihood of sampling any value between the ‘low’ and ‘most
likely’, and an equal probability of selecting any number between the
‘high’ and ‘most likely’ values.
As leisure time and paid (and unpaid) productive activity
have value for all people, we estimated these time costs in the same manner for
all ages. In many instances, an elderly patient may require care provided by
another family member who cannot be otherwise employed. Thus, the inclusion of
productivity and leisure time loss can be justified on both willingness-to-pay
and opportunity cost criteria. If analysed from a societal perspective, these
indirect costs are as important as the hospital costs.
If indirect costs were confined to those patients in paid
employment, productivity costs would be substantially reduced. However, this
would imply that unpaid production and leisure time activities are not valued by
society. The frictional cost method28–30
was not used to estimate productivity loss—as we wished to evaluate
the full potential cost of production and leisure time foregone (and did not
wish to deduct an allowance for the degree of scarcity of labour in the
economy). Our cost estimates are conservative, as we did not estimate intangible
costs relating to quality of life or death.
The univariate sensitivity analysis showed that hospital
costs were one of the two major cost determinants. The major generator of direct
medical costs for pneumonia is the number of hospitalisations, which will become
increasingly important as the population ages.
The results of this cost of illness study indicate that
prevention and community treatment programmes should focus on the 65 years and
older age groups. Potential savings in hospital costs alone would justify this
approach.
Author information:
Guy Scott, Economist, Massey University and ScottEconomics Ltd, Wellington;
Helen Scott, Economist, ScottEconomics Ltd, Wellington, Maria Turley,
Epidemiologist, Ministry of Health, Wellington; Michael Baker, Public Health
Physician, Wellington School of Medicine, University of Otago,
Wellington
Acknowledgements: We
thank Craig Wright, Statistician Ministry of Health (who extracted the
hospitalisation data from the National Minimum Dataset for us) and the unknown
referee (who provided valuable information and suggestions that enabled us to
improve our paper).
Correspondence: Dr
Guy Scott, Department of Applied and International Economics, Massey University
(Wellington Campus), Private Bag 756, Wellington. Fax: (04) 801 2794; email: G.Scott@massey.ac.nz
References:
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