Introduction to health economics for digital health startups

July’s Lunch&Learn saw Dr Renee Romeo from King’s Health Economics join us for an enlightening introduction to health economics for digital health startups. Health economics is a discipline that seeks to examine the cost effectiveness of health interventions (whether that is a public health intervention or a digital health technology for example) and can be used to justify making these health interventions more widely available and make sure that they are accessible to a wider population. 
Renee explained the difference for the health tech company between making a business case for the digital intervention and pure health economics. If a startup is looking to raise capital, they will need to provide a business case to investors. This would involve looking at the potential cost savings to the NHS (or the private healthcare systems) and extrapolating that to size the potential market for your intervention. Health economics is a more complex beast.

Health economics is concerned with  issues related to efficiency, effectiveness and value in a patient group or the general population. As a startup you will need to be able to provide evidence which shows that what is gained in terms of benefits from adopting your technology outweighs the money that was spent on it. Establishing the relationship between investing in your device, how it impacts on the health and wellbeing,  and the need for longer terms support provided by the NHS and non-NHS services such as hospital- based services, community-based services, and employment is useful for commissioners of services.
Renee made the point that with an increasingly financially constrained NHS, difficult decisions have to be made. Even if healthcare budgets were increased, by taking money from other services, there would still not be enough to pay for everything that we need. Therefore for a technology to be adopted by the NHS, a startup needs to:

  • Show the technology works (its effectiveness)
  • Prove it is better that what currently exists
  • State the total and per patient costs of the technology
  • Show if the technology cheaper or more expensive than existing technologies
  • Its cost effectiveness (value for money)

Value for money can be examined in two ways by health economists. Firstly, is the device/technology worth the money that was spent on it? Secondly, are the benefits from these device/technology worth at least what is paid for them? And crucially, does the longer term savings offset the initial investment?
Renee then shared three case studies to bring health economics in practice to life. The first was a partnership between Airedale Hospital NHS Foundation Trust in East Lancashire and a telemedicine company who installed equipment allowing with a two-way video link 24/7 between patients in 300 care homes and a clinic based in a Telehealth hub at Airedale Hospital. The aim of the project was to improve health care provided to residents and to reduce unnecessary hospital visits. The health economic evaluation comparing service use before and after the implementation of the telemedicine showed:
• 35% reduction in hospital admissions
• Visits to A&E fell by 53% and
• Hospital bed days fell by 58%
The second case study looked at Yeovil District Hospital NHS Foundation Trust which provides care for approximately 185,000 increasingly elderly people across South Somerset, and North and West Dorset. The study found that 4% of local people were using 50% of the health and social care budget. The project installed some simple technology into these people's’ homes at the cost of only 90p with which they could contact a health care professional. This early warning system has led to:
• 75% reduction in hospital admissions
• Staff able to intervene earlier in care, for example changing patient’s medication, with associated cost savings.
The final case study looked at an app called UpToDate. This app allows clinicians to come up with treatment recommendations on more than 10,500 conditions across 23 specialities. Health economists at Harvard have calculated that the app has reduced the length of stay by 0.167 of a bed day per inpatient which translates in savings to a large teaching hospital of £2.2m annually or 9,000 bed days.
You can find out more about the services that King’s Health Economics offer on their website and thanks again to Renee for sharing her wisdom.