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Economics of Cochlear Implant Utilization

Votruba, Mark E. PhD; Sydlowski, Sarah A. AuD, PhD

doi: 10.1097/01.HJ.0000602912.91566.64
Special Section: Updates in CI Candidacy

Dr. Votruba, left, is an associate professor of economics at Case Western Reserve University's Weatherhead School of Management and the Center for Healthcare Research and Policy. His co-authored work on the importance of search frictions in health insurance markets was given the Arrow Award for Best Paper in Health Economics by the International Health Economics Association in 2012. Dr. Sydlowski is the audiology director of the Hearing Implant Program at the Cleveland Clinic in Cleveland, OH. She is a former member of the American Academy of Audiology board of directors and a past president of the Ohio Academy of Audiology. She is pursuing her executive MBA at Case Western Reserve University.

Cochlear implants (CIs) are cost-effective devices that improve the speech understanding and quality of life (QofL) of people with severe-to-profound hearing loss (SPHL). Over time, the CI candidacy criteria have expanded to include individuals with substantial residual hearing. But even within the SPHL population, CI utilization remains low (5-10%)1 for reasons that are not fully understood. Proposed explanations include limited access to CI centers, lack of standardized candidacy determination, and provider discomfort with or lack of awareness of the expanding candidacy criteria.

Table 1

Table 1

Table 2

Table 2

Table 3

Table 3

CI utilization is influenced by several economic issues, particularly cost effectiveness—an important determinant of an insurer's willingness to cover CI services. However, cost-effectiveness evidence only plays an indirect role in determining who receives CI. The decision of whether to utilize CI results from a shared decision-making process involving patients and their providers. We will consider the gaps that exist in CI cost-effectiveness evidence and other economic factors that affect patient and provider decisions related to CI use.

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Cost-effectiveness analysis strives to quantify the cost of health improvements generated by a medical intervention.2 By increasing the length or improving the quality of a patient's life, effective interventions increase the number of quality-adjusted life years (QALYs) that a patient can anticipate. By dividing the costs of treatment delivery by a patient's expected increase in QALYs, the cost-effectiveness ratio provides a measure for cost per QALY, with lower values associated with more cost-effective treatment. Economics literature suggests that $100,000 is a reasonable, even conservative, estimate for the value Americans typically place on an additional QALY,3 though insurers often apply a lower threshold (e.g., $50,000/QALY) when determining whether to cover a new treatment.

The cost-effectiveness of CI for SPHL adults (traditional CI candidacy) is well documented, demonstrating significant QofL improvement that is higher among CI recipients than in non-implanted peers and equivalent to that in normal-hearing peers.4 Although younger age is associated with greater QofL improvement, a positive effect has also been observed in older adults.5

Research has shown that a greater proportion of cost-effectiveness is achieved with the first CI in bilateral SPHL (Table 1). Studies on the incremental clinical effect of a second CI have reported only marginal increases in adults. This conservative finding is plausibly due to insufficient assessment materials used to capture the benefits of bilateral over unilateral hearing and QofL factors beyond the ability to correctly identify spoken words.6,7 The lack of adequate measures to assess benefits is similarly problematic when trying to measure the cost effectiveness of CIs in restoring bilateral hearing capability with a relatively good contralateral ear. Although cost-effectiveness is greater for those with post-lingual hearing loss and longer time horizons (time over which benefit can be expected), data pertaining to those with substantial residual hearing are missing from the literature.

Additionally, derived benefits have not been quantified in terms of reduced downstream health costs, increased productivity, avoidance of depression or cognitive decline, or other key metrics that may be important to patients who lost hearing in adulthood and still have viable working years ahead.

In the absence of peer-reviewed evidence, providers and payers are left to draw unsubstantiated conclusions and may focus on the expense of providing the device without recognizing the substantial benefits and cost-savings that can be achieved. Compounding the problem is providers’ general unawareness of the expanded candidacy criteria. Taken together, it is unsurprising that providers would focus on the incremental cost of CIs over hearing aids (HAs) and conclude that CIs are too expensive to recommend. Despite compelling clinical data, without up-to-date cost-effectiveness evidence, financial justification is challenging and may be an important barrier to CI utilization. Provider, payer, and patient focus will continue to be directed toward the increased cost of providing a CI over HA, which is an incomplete (and probably inaccurate) view.2

The premise of evidence-based medicine is that providers and patients, armed with appropriate cost-effectiveness evidence as discussed above, will reach more optimal treatment decisions. Ideally, they would choose CI when it is both clinically appropriate and cost-effective to do so. But the choices that patients and providers make are susceptible to the influence of the financial incentives offered by third-party payers through rules governing CI coverage (affecting patients) as well as the reimbursement structure and payment levels set for different treatment paths (affecting providers).

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Patient Incentives. Consider a SPHL patient who faces the prototypical choice to continue using bilateral HAs or undergo a unilateral CI (in some cases, augmented with a single hearing aid). A rational patient presumably chooses CI if the differential benefit seems sufficiently large to justify the extra costs incurred from that choice. Economists would say, “If the patient's willingness-to-pay (WTP) for the differential benefit of CI exceeds the incremental cost she bears in undertaking CI, then she increases her welfare (or utility) by choosing CI.”

Patients’ WTP for CIs could be affected by several patient-specific factors. WTP values are generally greater for higher-income patients since WTP for better health generally increases when resources are less constrained. Individual life circumstances or personal preferences could also affect WTP. For instance, a patient whose professional success depends on hearing well might place high value on the health improvement offered by CI. The same might be true for someone who greatly enjoys socializing. In addition, patients might have different information or beliefs about the incremental health benefits provided by CIs (due, for example, to information obtained from their provider, acquaintances, or the media), which would also influence their WTP for CIs.

Independent of patients’ WTP, insurance influences health care consumption decisions by determining what patients pay for care.8 CI recipients who are uninsured or don't meet their payer's guidelines for CI coverage typically face an expense of around $70,000, compared with an average expense of $3,100 from continuing the use of a hearing aid in a non-implanted ear (Table 2). Financing CIs out-of-pocket (OOP) would place a significant burden on the typical household, leading to the common view that CIs are “not affordable.”

However, CIs tends to be covered by insurance while HAs often go uncovered, which has the effect of dramatically reducing the incremental OOP cost of a CI to the patient (Table 2). SPHL Medicare beneficiaries, for instance, incur the full expense of HA OOP but only 20 percent of the expense of a CI (or less, if they have a secondary insurance). As a result, the incremental OOP cost a SPHL patient faces is generally small or even negative in some cases. The incremental OOP costs paid by those with commercial insurance are more variable due to differences in coverage generosity and variability in what private insurers pay providers. The growing ubiquity of high-deductible health plans has increased the financial burden on people with commercial health insurance when choosing CIs because these plans shift a greater share of the total CI expense onto patients.a Again, however, the incremental costs borne depend on whether their plan covers HAs and to what degree.

The financial burden of CIs is substantially less for those with commercial health insurance or Medicare than for those uninsured, which should serve to increase CI utilization rates among insured populations. Similarly, insured patients who are likely to benefit from a CI but whose hearing capability exceeds the insurer's coverage requirements are faced with the same choice as an uninsured patient. In these circumstances, patients may end up sacrificing potential health benefits because of cost. Furthermore, some insured patients, particularly those with less generous (high deductible) plans and/or lower incomes, could find themselves unwilling (or unable) to finance the incremental cost despite perceived health benefits. In such cases, medical loan programs that offer low-interest CI financing may help increase CI utilization.

Importantly, cost-effectiveness evidence suggests that there should be high CI utilization rates in the general SPHL population, even in the absence of insurance. Unilateral CI increases an average patient's QoL score by at least 0.13,9 thereby adding 2.6 quality-adjusted life years (QALYs) over a 20-year period of CI use. If QALYs are valued at $100,000 by the typical patient, then the SPHL patient's WTP for CIs should substantially exceed the CI cost incurred by an uninsured patient. While some patients could be impeded from choosing CIs due to their inability to finance the upfront OOP cost, the vast majority of SPHL patients should find CI affordable and worth the incremental expense.

We suspect that an important factor contributing to low CI utilization rates is that patients frequently operate with incorrect information about the incremental health benefits of a CI. If, for some reason, patients hold the incorrect belief that the incremental health benefits of a CI are “small,” their WTP for CI will naturally be lower, and fewer will choose a CI.b In some cases, SPHL patients may not even be aware that a CI is a viable option for their condition.

While the internet has greatly increased the public's access to medical research, most patients rely on their health care providers to inform them about available treatment options and their relative merits. Economists have long appreciated that this feature of health care opens the door for potential “agency problems” where the provider (the “agent”) might exert influence on patient decisions through the information they provide and recommendations they make.10,11 For this reason, the next section focuses on the incentives facing providers in recommending CI.

Provider Incentives. Shared decision-making is a longstanding principle in biomedical ethics.13 Under this principle, providers are expected to operate as “good agents” for their patients by accurately conveying the risks and benefits of available treatment options, thereby helping each patient reach an informed treatment decision consistent with his or her values and preferences.

In the case of cochlear implantation, it is suspected that providers are failing to provide patients with the information they need to make well-informed decisions about CI use.14 A possible explanation could be that a provider may be inadequately informed about recent clinical evidence that supports CI use. Additionally, a provider may erroneously believe that HAs are less expensive when comparing the total price of HAs with that of a CI instead of the incremental OOP costs described in Table 2. Both scenarios highlight the importance of increasing provider awareness of CI effectiveness.

A more troubling possibility is that a provider may be inclined to alter his or her recommendation based on a treatment's financial implications for the provider. While such behavior runs afoul of the principle of shared decision-making, it is well established that provider behavior is, to some degree, also shaped by financial incentives. This fact has given rise to efforts to re-design physician payment systems to promote higher-quality and lower-cost care.15

In our context, financial incentives for non-CI providers weigh in favor of recommending continued HA use over CIs. A patient referred to a CI represents less future business for the HA provider. An analogous situation arises in cardiovascular care, with evidence indicating interventional cardiologists (who can perform angioplasties and stents) are less likely than non-interventional cardiologists to refer patients for cardiac surgery, and are instead more likely to deliver those procedures for which they can provide and be paid.16 The incentive to protect one's business is likely strong among HA providers since HA sales have historically been the primary revenue generator for audiology programs.

The disincentive audiologists face toward recommending CI might be ameliorated in less fragmented delivery systems.17 When HA and CI programs are housed within the same organization, those organizations might be expected to encourage more appropriate referrals to CI, as the “lost audiology revenue” is offset by CI revenues.11 This is particularly true in medical centers that perform CI surgery since there is better reimbursement for a surgical procedure than either CI programming or HA dispensing. To date, however, most audiology programs operate independent of any connection with a CI program.

Concerns about provider referrals have led to recent efforts by CI companies to encourage more private practice audiologists to provide CI programming. To the extent audiologists are willing and able to provide these services, this structure could help minimize the revenue loss they would otherwise suffer from referring a patient for cochlear implantation. However, payment rates that are not commensurate with required expertise coupled with the time-consuming nature of managing CI patients have made providing CI services without the associated surgical procedure less lucrative for practices and may be inadequate to alter practice patterns (Table 3). To encourage more appropriate CI utilization, advocating for adequate reimbursement and creating manageable care delivery models must be prioritized. Strategic planning, including updating cost-effectiveness evidence to include non-traditional patient populations and non-hearing benefits, is essential if we are to ensure that this important hearing technology reaches those who can substantially benefit from it.

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