Glossary of Value Assessment Terms
Click here for an infographic on value terminology.
Below is a list of plain language definitions of terms used in value assessment.
Base case analysis: An economic model that the researcher/research team believes includes the most likely set of assumptions and inputs. It produces what are called the base-case results. After running this base-case model, additional testing, such as a sensitivity analysis (see below), may be performed to compare how the results from the base case analysis change using different assumptions and input values.1 See the NHC’s module: Tools for Dealing with Uncertainty in Economic Analysis.
Budget impact analysis: When a new product becomes available, an organization, like a health plan or hospital, will want to estimate the impact purchasing that new product will have on its budget. The estimate of that impact will need to consider the costs for specific treatments with usual care today versus an estimate of the cost of treatments with the new treatment added. Estimates consider how many people will use each of the treatments available and the costs for those treatments.2,3 See the NHC’s module: Budget Impact Analysis
Burden of illness: The combined costs, in dollars and other impacts, as the result of a disease. This includes pain, lost wages, caretaker costs, mental health effects, and more.4 Studies that measure the “burden” of illness aim to examine things like the cost to the individual patient, possibly the cost to the employer, payer or insurance company, or even the cost to society.5 (Also known as “burden of disease”)
Clinical benefit: The positive effect of a treatment or an intervention on a patient’s health. For example, improvement in symptoms, mobility, or other aspects of a patient’s quality of life that is most meaningful to them, can be considered a clinical benefit.6,7
Comparative effectiveness research (CER): CER compares the effectiveness of two or more interventions or approaches to health care, examining their risks and benefits. Comparing two or more interventions distinguishes CER from other types of clinical research, for example research where one treatment is compared to a placebo.8 See the NHC’s module Getting to Know the Lingo.
Cost effectiveness: In the context of pharmacoeconomics, cost effectiveness compares the results of different interventions by measuring a chosen outcome, usually in units (for example, life-years gained, deaths avoided, heart attacks avoided, or cases detected). Alternative interventions are then compared in terms of cost per unit of effectiveness in order to assess how it provides value for money. This economic evaluation can inform decision-makers determine where to allocate limited health care resources, and discussions on pricing.9 Some value frameworks incorporate cost-effectiveness analysis alone or with and other criteria in their recommendations. See the NHC’s module Unlocking the Mysteries of the Quality-Adjusted Life Year (QALY) and Getting to Know the Lingo.
Confidence interval: A confidence interval (CI) is a statistical estimate. It helps to convey how certain a researcher is in the estimates they found in their results. The confidence interval can be calculated to give a range for the treatment effect that will be seen in the population. When the range is narrow there is more confidence that the number is a good estimate. When the range is wide there is less confidence that the number is a good estimate. For example, if the estimate is an average of 15 years (CI 14-16) as compared to and average of 15 years (CI 7-27), there is more confidence in the first estimate because the range is narrow at 14-16.9
Direct cost: The cost to an organization for providing the test, treatment, procedure, or service. The costs can be either “direct medical costs” (e.g., cost of medication) or “direct non-medical costs” (e.g., paid caregiver time).10 See the NHC’s module Getting to Know the Lingo.
Effectiveness: A measure of how well a treatment works in the real world (e.g., Does it work outside a controlled trial?).11 See the NHC’s module Getting to Know the Lingo.
Efficacy: A measure of how well a treatment works under ideal circumstances (e.g., Does it work in a controlled setting, such as a randomized controlled trial?). For example, if a procedure is very successful at treating a disease, but only if administered by a top surgeon in a patient with no complications or co-morbidities, it would be efficacious but not necessarily effective in the real world.12 See the NHC’s module Getting to Know the Lingo.
Health economics: A special field of economics that focuses on understanding and analyzing the efficiency, effectiveness, values, and behaviors involved in the delivery and use of health and health care. Most health economic work involves assessing costs, how dollars are spent, and the outputs/accomplishments from that spending related to the benefits patients receive from the treatment.1
Health economics and outcomes research (HEOR): HEOR is a field of scientific research. Health care decision makers are often faced with the need to make choices between treatment options, including drugs, devices, and other health care services. However, the benefits and costs of these options can vary dramatically and can be economic, clinical, both, or can include things that are hard to measure directly. HEOR can help healthcare decision makers—including clinicians, governments, payers, health ministries, patients, and more—to adequately compare and choose among the available options.13
Health-related quality of life (HRQoL) measure: A type of patient-reported outcome measure that has many dimensions represents a patient’s overall view of the effect of illness and treatment on their physical, psychological, and social aspects of life. A HRQoL measure typically evaluates whether a patient experiences difficulty completing normal activities (e.g., work, caring for children, etc.) and how these difficulties affect their relationships with family, friends, and social groups. It is important to note that the measures (questionnaires) used to collect HRQoL can either be specific to a certain disease, like breast cancer, or can be about health in general.9,14 See the NHC’s webinar: What is the difference between health-related quality of life (HRQoL) and patient-reported outcomes?
Health technology assessment (HTA) (Also known as value assessment): An interdisciplinary process to evaluate the social, economic, organizational, and ethical issues for a health intervention or health technology (such as a drug) and can involve a review of:
- clinical evidence compared to existing care,
- cost effectiveness, and
- social and ethical impacts on the health care system and the lives of patients.9,15
The process advises whether or not a health technology should be used, and if so, how it is best used and which patients are most likely to benefit from it. Assessments vary, but most look at the health benefits and risks of using the technology. They can also look at costs and any other wider impacts that the technology may have on a population or on a society. They can also look at the relationship between costs, benefits, and risks, and make recommendations about value and pricing.
Heterogeneity of treatment effect (HTE): Individuals differ in how they respond to the same medicine. This can be a result of complicated interactions between how the medicine works and a patient’s individual characteristics. These characteristics can include their genes, their diet, the environment that they live in, other diseases or conditions that they might have, other medications, and behaviors, including adherence to treatment. Clinical trials typically report results only on a narrow, relatively similar patient population, making it difficult to know if individuals who are different from those in the trial will respond to the treatment in the same way.16,17 See the NHC’s module: Heterogeneity of Treatment Effect.
Indirect cost: Costs incurred by society as a result of the impact of disease, illness, and treatments, excluding those that are for medical care. They include loss of ability to engage in normal daily activities, work, domestic responsibilities, volunteering, and social and recreational/ leisure engagements.10,18 See the NHC’s module Getting to Know the Lingo.
Patient preference: When faced with differ choices, patients have personal views of how desirable or undesirable those choices are. In health care, patient preference is a measure of that level of desirability of the alternatives or choice among health outcomes or treatments (e.g., different drugs). There are various techniques used in research to measure patient preferences.19,20
Perspective: The perspective or point-of-view in an economic analysis determines which types of costs and health benefits are included in the evaluation. Perspectives include: patient, hospital or clinic, health care system, or societal.21
An analysis based on a health care system perspective might only include costs incurred by the health system (e.g., costs for medicine, administration, and monitoring). The broadest is the societal perspective which includes things like a patients’ loss of productivity due to the inability to work. Many types of costs exist–but not all costs are included in all perspectives.
PICOTS framework: A tool designed to assist researchers and others in clearly stating a research question. “PICOTS” is an acronym that stands for the key parts of the research question— 1. Patient population (P), 2. Intervention or issue of interest (I), 3. Comparator(s) or comparison intervention(s) (C), 4. Outcome of interest (O), 5. Time (T), and 6. Setting (S). The It helps to ensure that a research question is clearly defined, specific, and patient centered.22,23
Outcome-based contract: A type of contract between a pharmaceutical manufacturer and a payer. For example, payment by the payer to the company for a drug is based, at least in part, on whether or not patients achieve agreed-upon outcomes when on the drug. If the outcome measure is not met, the company may need to refund some payments back to the payer.24
Patient-centered outcomes research: A type of outcomes research that focuses specifically on the outcomes of interest to patients and stakeholders, and includes their perspectives throughout the entire research process.8
Quality-adjusted-life year (QALY): The quality-adjusted life year (QALY) is a measure used in health economics to compare the impact of two of more treatments. It is intended to summarize the additional number of years a person might live as a result of receiving a treatment and takes into account the quality of that person’s life during those years. It does this by measuring how important various factors are to patients, such as symptoms, pain, and psychological health.9 See the NHC’s module: Unlocking the Mysteries of the Quality-Adjusted Life Year (QALY).
Reference case: A formal statement developed by a value assessment or health technology assessment body outlining what they consider appropriate methods and assumptions for developing economic models. For example, a summary of a reference case will include considerations for selecting appropriate comparators, the costs to include, a time horizon, etc.1
Sensitivity analysis: A process researchers use to check if and how much results of an economic analysis might change if the inputs or assumptions are modified.10 For example, if an estimated cost is increased by 10% or 50%. Sensitivity analyses provide insight on how sound or changeable the study findings are – for example – if the findings stay close to the original findings even when data inputs are modified, then the analysis is viewed as more stable or sound. See the NHC’s module: Tools for Dealing with Uncertainty in Economic Analysis.
Scenario analysis: A type of sensitivity analysis that explores what happens when we change the model or the methods assumptions. For example, changing a model’s time horizon from one year to five years. Scenario analyses can be used to identify how good a treatment would need to be to be of high value. See the NHC’s module: Tools for Dealing with Uncertainty in Economic Analysis.
Time horizon: The time horizon is an element of an economic evaluation that describes the duration over which health outcomes and costs are measured. Selecting the time horizon is a very important step in economic evaluation. There are different factors considered when selecting the time horizon including the disease, the intervention of interest, and the purpose of the analysis. For example, if the disease in question is a chronic disease with continuous medical management, like type 2 diabetes, then selecting a longer time horizon for the economic model would be appropriate. It’s important to note that the same time horizon should be used for both health outcomes and costs.1
Utility: Utility values are intended to represent how patients value different health states (e.g., perfect health, having fatigue, being in pain, being unable to walk are all health states). All health states are assigned a number – usually between 0 and 1, where perfect health is equal to 1 and death is equal to 0. To assign where the other health states (e.g., fatigue or pain) lie between 0 and 1, researchers ask patients and members of the general public to rate the desirability of these health states using methods such as a questionnaire. Utility values are also known as “health state preference values” and are used to calculate the impact of treatments on patients’ quality of life. See the NHC’s module: Unlocking the Mysteries of the Quality-Adjusted Life Year (QALY).
Value: The value of a treatment is commonly viewed by health care payers (i.e., both public and private insurers) in terms of its effectiveness and cost.25 Generally, this considers the treatment’s effects, both positive and negative, and the costs and cost savings associated with the treatment and its impact. For patients, value is individualized and disease dependent, and can evolve with the disease trajectory or stage of a patient’s life.26,27
Value assessment (Also known as health technology assessment): A multidisciplinary process intended to evaluate the clinical, social, economic, organizational, and ethical impact of a health intervention or health technology (such as a drug) and can involve a review of:
- clinical evidence compared to existing care, also known as comparative clinical effectiveness,
- cost effectiveness, and
- social and ethical impacts on the health care system and the lives of patients.9,15
The process advises whether or not a health technology should be used, and if so, how it is best used in the health care system, and which patients are most likely to benefit from it. Assessments vary, but most look at the health benefits and risks of using the technology. They can also look at costs and any other wider impacts that the technology may have on a population or on a society. They can also look at the relationship between costs, benefits, and risks, and make determinations about value for money. See the NHC’s module: Value Frameworks.
Value framework: A tool used by some organizations to evaluate the costs and benefits of new treatments. These tools often include things like a comparison of clinical effectiveness, a cost-effectiveness analysis, or other components or calculations. The tool is used to produce a value assessment, report, or recommendation. The resulting recommendation that comes from using the value framework may be used to guide reimbursement, shared decision-making, or other choices.27 See the NHC’s module: Value Frameworks.
Value-based contracts/contracting: Value-based contracts (sometimes referred to as risk-sharing agreements or outcome-based contracts) are a type of payment model where biopharmaceutical manufacturers and payers agree to link coverage and reimbursement levels to a drug’s performance and/or how frequently it is utilized.28
Value-based insurance design (V-BID): A type of insurance where patients’ out-of-pocket costs, such as copays and deductibles, are aligned with the impact that treatment or service has. For example, “high-value” treatments such as diabetes medications should have low or no copays. Other treatments considered “low-value” such as something with questionable efficacy should have a high copay.29
- YHEC – York Health Economics Consortium. Glossary of Health Economic Terms. https://yhec.co.uk/resources/glossary/. Accessed December 19, 2019.
- Sullivan SD, Mauskopf JA, Augustovski F, et al. Budget impact analysis-principles of good practice: report of the ISPOR 2012 Budget Impact Analysis Good Practice II Task Force. Value Health J Int Soc Pharmacoeconomics Outcomes Res. 2014;17(1):5-14. doi:10.1016/j.jval.2013.08.2291
- Wright D. Budget Impact Analysis. York Health Econ Consort. https://www.yhec.co.uk/glossary/budget-impact-analysis/. Accessed July 25, 2019.
- Hessel F. Burden of Disease. In: Encyclopedia of Public Health. ; 2008:94-96. https://link.springer.com/referenceworkentry/10.1007/978-1-4020-5614-7_297. Accessed July 25, 2019.
- Onukwugha E, McRae J, Kravetz A, Varga S, Khairnar R, Mullins CD. Cost-of-Illness Studies: An Updated Review of Current Methods. PharmacoEconomics. 2016;34(1):43-58. doi:10.1007/s40273-015-0325-4
- Lee JJ. Defining Clinical Benefit in Clinical Trials: FDA Perspective.
- Richard Pazdur MD. PROs: Defining Clinical Benefit From the Patient’s Perspective. Cancer Network. https://www.cancernetwork.com/oncology-journal/pros-defining-clinical-benefit-patients-perspective. Published May 1, 2006. Accessed December 19, 2019.
- Research We Support. https://www.pcori.org/research-results/about-our-research/research-we-support. Published August 12, 2014. Accessed July 22, 2019.
- Glossary. EUPATI. https://www.eupati.eu/glossary/. Accessed June 28, 2019.
- Single A, Ahern E, Culyer T, et al. HTAi consumer and patient glossary: A beginner’s guide to words used in health technology assessment. HTAi. https://htai.org/wp-content/uploads/2018/02/PCISG-Resource-ENGLISH-PatientandConsumerGlossary-Oct09.pdf. Published October 2009.
- Neumann PJ, Thorat T, Shi J, Saret CJ, Cohen JT. The changing face of the cost-utility literature, 1990-2012. Value Health J Int Soc Pharmacoeconomics Outcomes Res. 2015;18(2):271-277. doi:10.1016/j.jval.2014.12.002
- Cost-Effectiveness in Health and Medicine. Second Edition, New to this Edition: Oxford, New York: Oxford University Press; 2016.
- ISPOR – About HEOR. https://www.ispor.org/heor-resources/about-heor. Accessed December 19, 2019.
- What is the difference between health-related quality of life (HRQoL) and patient-reported outcomes? National Health Council. https://www.nationalhealthcouncil.org/blog/what-difference-between-health-related-quality-life-hrqol-and-patient-reported-outcomes. Published June 27, 2019. Accessed December 19, 2019.
- WHO | Health technology assessment. WHO. https://www.who.int/medical_devices/assessment/en/. Accessed March 15, 2019.
- Segal J, Weiss C, Varadhan R. Understanding Heterogeneity of Treatment Effects in Pragmatic Trials With an Example of a Large, Simple Trial of a Drug Treatment for Osteoporosis. Center for Medical Technology and Policy http://www.cmtpnet.org/docs/resources/Segal-Heterogeneity-in-Pragmatic-Trials.pdf.
- The Myth of Average for Patients Infographic | National Pharmaceutical Council. https://www.npcnow.org/publication/myth-average-patients-infographic. Accessed July 25, 2019.
- Health Economics: Types of Cost. communitymedicine4asses. June 2014. https://communitymedicine4asses.com/2014/06/07/health-economics-types-of-cost/. Accessed July 22, 2019.
- Food and Drug Administration. Patient-Focused Drug Development Glossary. https://www.fda.gov/Drugs/DevelopmentApprovalProcess/ucm610317.htm. Accessed April 25, 2019.
- ISPOR – Health Preference Research. https://www.ispor.org/member-groups/special-interest-groups/health-preference-research. Accessed December 19, 2019.
- Wright D. Perspective. York Health Econ Consort. https://www.yhec.co.uk/glossary/perspective/. Accessed July 2, 2019.
- The PICOTS Framework: How to Write a Research Question. https://www.pcori.org/engagement/engagement-resources/Engagement-Tool-Resource-Repository/picots-framework-how-write. Published July 31, 2019. Accessed December 19, 2019.
- Stillwell SB, Fineout-Overholt E, Melnyk BM, Williamson KM. Evidence-Based Practice, Step by Step: Asking the Clinical Question: A Key Step in Evidence-Based Practice. AJN Am J Nurs. 2010;110(3):58. doi:10.1097/01.NAJ.0000368959.11129.79
- Outcomes-Based Pharmaceutical Contracts: An Answer to High U.S. Drug Spending? | Commonwealth Fund. https://www.commonwealthfund.org/publications/issue-briefs/2017/sep/outcomes-based-pharmaceutical-contracts-answer-high-us-drug. Accessed May 7, 2019.
- Porter ME. What Is Value in Health Care? N Engl J Med. 2010;363(26):2477-2481. doi:10.1056/NEJMp1011024
- Perfetto EM, Oehrlein EM, Boutin M, Reid S, Gascho E. Value to Whom? The Patient Voice in the Value Discussion. Value Health J Int Soc Pharmacoeconomics Outcomes Res. 2017;20(2):286-291. doi:10.1016/j.jval.2016.11.014
- The Patient Voice in Value: The National Health Council Patient-Centered Value Model Rubric. National Health Council https://www.nationalhealthcouncil.org/sites/default/files/Value-Rubric.pdf.
- Value-Based Contracts | National Pharmaceutical Council. https://www.npcnow.org/issues/access/provider-reimbursement/risk-sharing-agreements. Accessed July 25, 2019.
- University of Michigan V-BID Center. About V-BID. University of Michigan V-BID Center. http://vbidcenter.org/about-v-bid/. Accessed July 25, 2019.