Abstract
Abstract
Background:
Advance care planning (ACP) is fundamental to guiding medical care at the end of life. Understanding the economic impact of ACP is critical to implementation, but most economic evaluations of ACP focus on only a few actors, such as hospitals.
Objective:
To develop a framework for understanding and quantifying the economic effects of ACP, particularly its distributional consequences, for use in economic evaluations.
Design:
Literature review of economic analyses of ACP and related costs to estimate magnitude and direction of costs and benefits for each actor and how data on these costs and benefits could be obtained or estimated.
Results:
ACP can lead to more efficient allocation of resources by reducing low-value care and reallocating resources to high-value care, and can increase welfare by aligning care to patient preferences. This economic framework considers the costs and benefits of ACP that accrue to or are borne by six actors: the patient, the patient's family and caregivers, healthcare providers, acute care settings, subacute and home care settings, and payers. Program implementation costs and nonhealthcare costs, such as time costs borne by patients and caregivers, are included. Findings suggest that out-of-pocket costs for patients and families will likely change if subacute or home care is substituted for acute care, and subacute care utilization is likely to increase while primary healthcare providers and acute care settings may experience heterogeneous effects.
Conclusions:
A comprehensive economic evaluation of ACP should consider how costs and benefits accrue to different actors.
Introduction
M
Advance care planning (ACP) is fundamental to guiding medical care at the EOL. ACP is the process of communication between patients, their families, and clinicians to foster understanding about illness and prognosis, clarify treatment preferences, identify surrogate decision makers, and develop care goals. ACP aims to achieve outcomes best suited to the patient and acceptable to care standards. More aggressive treatment at EOL is associated with worse patient quality of life (QOL) and greater risk for distress among caregivers.4–6 Studies also find that patients exposed to ACP often receive less intensive treatments at the EOL, resulting in reduced hospital-based costs.7,8 Evidence has been mixed regarding the effect of one element of ACP, advance directives, on expenditures and treatment at EOL; however, recent studies using large data sets have shown treatment limitation and cost savings associated with advance directives, with the largest effects in high intensity treatment regions. 9
No study, to our knowledge, has taken a comprehensive look at the economic effects of ACP, particularly with respect to its distributional consequences; that is, the way that costs and benefits of ACP accrue to and are borne by different actors. Furthermore, there has not been an exploration of the costs and benefits of ACP from a societal perspective. 10 Studies have focused on the effects of ACP on Medicare spending 9 and on the economics of palliative care11–13 and home visit models. 14 However, studies of ACP often do not include other costs affected by ACP. For example, estimated opportunity costs of informal caregiving by families and friends are $522 billion, more than double the total cost of formal caregiving, which was $221 billion in 2012.15,16 A comprehensive economic evaluation of ACP requires an accounting of costs and benefits for different actors and healthcare settings.
This article aims to provide a framework for understanding and quantifying the economic effects of ACP. We explore aspects of care affected by ACP that should be considered in a comprehensive economic evaluation. First, we review the economic rationale for ACP. Then, we present a framework for how implementation of ACP affects different actors and settings, considering their costs and benefits. We discuss how these costs and benefits can be measured and suggest data sources. We conclude by discussing why a comprehensive view of ACP's costs and benefits across actors and settings is critical for decision making about provision of ACP services.
Economic Rationale for ACP
There are two economic rationales for ACP. First, ACP can improve allocative efficiency of resources. Improving allocative efficiency in the context of EOL treatments would reduce the use of treatments that do not have a reasonable chance of achieving goals meaningful to patients, such as functional improvement. Since care at EOL is expensive17,18 and much of the investment in intensive treatments at EOL has a low probability of success or yield only incremental benefits,19,20 care that automatically escalates with increasing sickness potentially crowds out other objectives, such as dying at home. 21 ACP can increase allocative efficiency by freeing up these resources, allowing them to be reallocated toward higher value care. This reallocation of resources is likely to be mediated, at least in part, by an increase in palliative care. Although not all patients will express preferences for reduced use of aggressive treatment when exposed to ACP, available evidence indicates that ACP will generally result in less aggressive care and increased hospice use. 22
Second, ACP can increase welfare. Regardless of allocative efficiency, helping patients to make their wishes clear can increase welfare by aligning medical care to patient preferences, whether or not that care is more or less aggressive than the care that would be provided by default. 23 Standard economic models are based on the concept of utility maximization, which is rooted in individual preferences. 24 In these models, fully rational agents acting on their preferences will make choices that maximize their utility. This, in turn, maximizes societal welfare. Very sick patients are sometimes unable to communicate their preferences. In such cases, others have to act as “agents” on behalf of the patient (the “principal”). A perfect agent would make the same choices as the principal, but research shows that agents are “imperfect,” making healthcare decisions that do not necessarily align with patient preferences. 25 By helping patients to think about and clearly specify their preferences in advance, ACP can solve this “inefficiency” and may result in greater overall welfare.
A Framework to Guide Economic Analysis of ACP
We developed a framework to guide economic analysis of ACP that makes explicit the distributional consequences of the costs and benefits of ACP (Table 1). This framework breaks out costs and benefits of ACP that accrue to or are borne by six primary actors: the patient, the patient's family and caregivers, healthcare providers (mostly primary care, but may also be other outpatient or specialty care providers), acute care settings (representing high-intensity care settings like hospitals), subacute and home care settings (representing lower intensity care settings, such as hospices, nursing homes, and formal paid home care), and finally, payers. We discuss the relevant costs and benefits for each actor, what is known about their direction and magnitude, and how data on these costs and benefits could be obtained or estimated.
This framework shows how each actor perceives the time, implementation, and care costs compared with the benefits of ACP.
↑, increase; ↓, decrease; ↕, may increase or decrease; ACP, advance care planning; EOL, end of life; QOL, quality of life.
Patient
A patient's primary role in ACP is to document his or her goals and preferences. Patient costs include time costs: time spent learning about ACP, clarifying preferences and defining goals, and preparing and communicating directives. In intervention trials, these costs are not trivial, involving multiple educational sessions and complex documentation.26,27 Patient time costs can be valued by his or her opportunity costs, such as foregone wages. These time costs and wage rates can be estimated from available data such as the American Time Use Survey (Bureau of Labor Statistics) and the Health and Retirement Study (National Institute on Aging and Social Security Administration).
Patient costs will also include changes in out-of-pocket expenditures. For example, substituting home care, nursing home, or hospice settings for hospital care 10 may be associated with higher out-of-pocket costs. 28 These costs can be ascertained by surveying patients about their out-of-pocket costs or can be estimated from sources such as the Medical Expenditure Panel Survey (Agency for Healthcare Research and Quality).
ACP potentially improves patient welfare by aligning care with their preferences and improving QOL at the EOL. 29 These benefits are valued by patients.30,31 One way to account for these benefits is to convert them to monetary units using contingent valuation methods such as willingness to pay. 32 Alternatively, these benefits can be inferred by observing patient choices: if patients are willing to travel farther or incur higher cost sharing, for facilities/providers who provide care consistent with their preferences, then the monetary value associated with congruence can be indirectly estimated.33,34 Analogously, if informed patients are willing to forego potentially distressful interventions that may prolong life for a few extra days in exchange for less pain and discomfort before dying, one can combine estimates of the number of EOL days patients are implicitly willing to give up with estimates of the prorated value of a year of life (adjusted for quality) to arrive at the value they place on higher QOL at the EOL. 35
Patient's family and caregivers
The patient's family and caregivers' role in ACP is to act as a surrogate decision maker or informal caregiver if needed. Furthermore, a patient's family and caregivers are often included in ACP interventions, which suggests that their time costs of engaging in ACP should also be taken into account. 26 The family and caregivers incur additional time costs if care delivered at home by relatives or friends replaces care that might otherwise be provided in an acute or subacute care setting. 36 The estimated cost of informal caregiving is substantial ($522 billion annually in the United States). 15 Commonly used methods to value this time spent include opportunity costs (such as foregone wages) or proxy goods (such as the market rate for formal caregiving). 37 Although data on caregiver costs are rarely available, the time spent and opportunity costs of that time can be collected as part of a prospective study, along with other information on satisfaction and mental health.26,27
As with patients, ACP may cause family and caregivers to incur additional out-of-pocket costs, 28 for example, transportation costs, as a result of substituting care in acute care settings with care in subacute and home-based settings. 10 These costs can be estimated and valued the same way as patients' costs.
ACP may benefit family and caregivers through higher levels of satisfaction, and lower levels of stress, anxiety, and depression.4,31 These benefits can be quantified and valued. Standard methods exist for the valuation of health states and conversion to quality-adjusted life metrics.38,39 These can be combined with accepted thresholds for the value of a quality-adjusted life year and used to assign monetary values to changes in caregiver QOL. An alternative is to use contingent valuation methods to estimate welfare gains. 40
Healthcare providers (primary ACP implementer)
In our framework, we refer to anyone who provides ACP services or interventions in a nonacute setting as a healthcare provider. They are the patient's ACP implementer. This might include primary or specialty physicians, other clinicians, or social workers. Ideally, ACP services will be provided throughout the patient's life course in nonacute settings, such as primary care and specialist offices, but may be provided in other venues such as outpatient surgical centers and infusion centers.
These providers will incur ongoing time costs to conduct ACP for their patients. Depending on whether the provider is compensated for ACP discussions, additional time spent providing ACP may have significant opportunity costs for providers to the extent that it displaces care that might otherwise be compensated for. However, as of 2016, providers can bill Medicare for some ACP conversations 41 and increasingly private payers are also reimbursing ACP and/or palliative care. 42 Provider time costs may be valued using standard methods such as wage rates.
Providers also bear the implementation costs to support ACP, including the costs of developing materials and processes to provide ACP and the cost of training. Although program implementation costs often are not included in economic evaluations of ACP, they should. 8 Available estimates from 2005 to 2006 indicate per patient implementation costs ranging from $45226 to $1,968. 43 Costs of training, supplies, and materials can come from accounting systems, and shares of overhead and other capital costs can be allocated to the ACP intervention and included in the analysis.
The costs of ACP to providers may also include lost revenue for reduced number of visits and treatments never rendered, especially for costly treatments such as chemotherapy.
Acute care settings (high-intensity care settings, such as hospitals)
In this framework, we use the term “acute care settings” to describe any high-intensity care setting, most commonly hospitals, whose primary role in ACP is to implement the care specified, although they may incur costs due to ACP discussions, similar to healthcare providers mentioned. Acute care settings may also incur program implementation costs similar to providers, depending on the support provided.
There is some evidence that ACP reduces hospital utilization.27,43 Others report reductions in overall patient costs (including inpatient), but do not disaggregate by site of service.26,32,44 Hospital utilization data typically come from administrative data sets, and costs are based on reimbursement rates, or may come from hospital/health system accounting databases.10,45 A few studies have also used national per capita costs (e.g., Healthcare Cost and Utilization Project 29 ).
A concern that has been raised in the literature is that ACP may impose a cost on hospitals, to the extent that it reduces hospital utilization, and net profits from providing intensive care at EOL are positive, although this is not always the case. 11 There are opportunity costs to hospitals of providing EOL care: inpatient and ICU beds could be used by other, potentially more profitable, patients. This suggests that the impact of ACP on hospitals is likely to be heterogeneous: hospitals with high occupancy rates and high costs of delivering intensive EOL care will see much smaller impacts on revenue and margin (or even positive impacts) than hospitals with lower occupancy rates.
Although in the short run acute care settings may not see a strong benefit to implementing ACP, benefits are likely to increase over time as payment models evolve toward rewarding value over quantity (e.g., accountable care organizations); high-intensity settings may receive financial benefits in the form of quality-adjusted payments or quality bonuses and incentives. 11
Subacute and home care settings (low-intensity care settings, such as hospice, nursing home, or formal assisted home care)
In this framework, we use the term “subacute care settings” to describe any low-intensity care setting, such as a hospice, nursing home, or formal (paid) assisted home care, whose primary role in ACP is to implement the care specified, although they may incur costs due to ACP discussions, similar to healthcare providers mentioned. Subacute care settings may also incur program implementation costs like providers, depending on the nature of ACP support provided.
Subacute care settings are likely to benefit from ACP in the form of increased utilization and revenue.46,47 This suggests that comprehensive evaluations of ACP must include not only hospital costs48,49 but also costs of subacute care, since care utilization in these settings is likely to increase. Data on these costs may also come from administrative databases, such as the Centers for Medicare and Medicaid Minimum Data Set.
Payers
Payers are responsible for incentivizing ACP and paying for the resulting healthcare costs. If ACP reduces overall healthcare costs, then this is likely to benefit health payers by reducing utilization of acute care settings or outpatient visits. However, it may increase the utilization of subacute and formal home care, and requires compensating providers for ACP discussions under new payment models. Furthermore, if payers reimburse the provision of ACP activities and discussions, this will increase costs.
Discussion
Economic evaluations of ACP need to consider the complex arrangement of how costs and benefits of ACP and its downstream effects accrue to different actors and settings. Although ACP and the attendant reduction in care intensity have the potential to demonstrate an economic benefit to society, current economic analyses of ACP programs take a narrow perspective, often limited to hospital costs.10,22 At minimum, evaluations of interventions need to be transparent about the costs of program implementation. A comprehensive economic evaluation of ACP would consider how ACP displaces care from one setting to another to capture nonhealthcare costs, such as time costs borne by patients and caregivers. Lastly, economic evaluations need to include consideration of the benefits of ACP for patients and their family members. This may take the form of a traditional cost-effectiveness or cost–utility analysis, but could also be a cost–benefit analysis where utility benefits are converted to monetary units. Although these kinds of data collection efforts carry a high financial and administrative burden, not even acknowledging these perspectives in a study on the costs of ACP creates a misleading picture the economic implications of ACP programs.
The main contribution of this framework is that it makes explicit the distributional consequences of implementing ACP, and that monetary savings generated for one actor may represent lost revenue or increased costs for another. For example, time spent by a primary care physician engaging with a patient about ACP may not be reimbursed by the payer, but cost savings resulting from less intensive treatment at EOL may accrue to the payer. Under many circumstances, individual patients, their families and caregivers, healthcare providers, and acute care settings bear the costs of ACP implementation, whereas the monetary benefits accrue to subacute care settings and payers, and the nonmonetary benefits accrue to patients or their families and caregivers. These misaligned incentives may account for the poor integration of ACP and other EOL interventions in the U.S. healthcare system. Although many palliative care programs have been demonstrated to be cost saving, this has not necessarily translated into more provision of palliative care; the distributional consequences of those savings are probably why.
This study has several limitations: first, although we used existing systematic reviews as a starting point for our literature review, it is possible that we missed relevant studies. Second, there are other costs and benefits that are borne by actors we did include, such as reduced burnout and turnover of clinical staff if care is better aligned with patient goals. Moreover, there are other actors that are potentially affected by ACP. For example, the pharmaceutical industry drives innovation that may improve patient outcomes, but at considerable cost. 50 Many of these high-cost products are employed at or close to the EOL where the likelihood and magnitude of benefit are low, so ACP might impact their use. It should also be noted that the directionality of costs is derived from data generated in fee-for-service healthcare models in high-intensity environments. ACP in managed care environments may differ directionally.
The framework emphasizes that studies of ACP that focus on only one care venue must recognize that they are evaluating only part of a system. Although this may be an appropriate research question, it is important to recognize that demonstrated cost savings may not translate into adoption because other costs within the system have not been considered. Accounting for these costs is critical to look at the costs and benefits of ACP from a societal perspective. Ultimately, this framework serves as a roadmap for policymakers and researchers interested in understanding the economic effects of ACP as they are experienced by different actors and care venues.
Footnotes
Acknowledgments
This project was sponsored by a gift from Mary Kay Farley to RAND Health. The second author is supported by the Cambia Health Foundation Sojourns Scholar leadership program.
Author Disclosure Statement
No competing financial interests exist, except that Okapi Venture Capital, in which the fourth author is a managing director, holds equity in WiserCare, Inc., a company providing shared decision-making software focused on many clinical issues, including advance care planning.
