Understanding the financial implications of adopting digital health technologies is critical for stakeholders, including healthcare providers, policymakers, and investors. This article explores how to measure the costs involved in implementing and maintaining digital health technologies.
As a Health Economist, I have extensive experience performing economic evaluations for health technologies. I’ve worked on Health Technology Assessment (HTA) submissions involving Cost-Effectiveness Analysis (CEA) and Budget Impact Analysis (BIA) that have taken the NHS/PSS perspective for agencies like NICE, SMC, and NCPE.
I’ve also conducted analyses for digital health startups and software companies where a wider societal/patient perspective was necessary to capture the broader economic impact of digital health technologies (DHTs) through cost-benefit analyses (CBA).
This diverse experience gives me a broad understanding of the financial dynamics involved when evaluating DHTs, ultimately ensuring that all economic considerations for stakeholders are captured.
So to determine the costs associated with your DHT, first you must decide which perspective to take:
Costing Perspectives in Cost Effectiveness Evaluation
The costing perspective adopted in an economic evaluation significantly influences which costs and benefits are considered. This section outlines the various perspectives that can be taken and their implications for the assessment of digital health technologies.
The terminology used to describe these perspectives can vary across the field, and there are other terms for perspectives not covered here. We’ve aimed to highlight what we believe are the most established perspectives. The main differences between these perspectives lie in which cost (and cost-saving) items are included in an analysis (See Figure 1).
Patient Costing Perspective
This perspective focuses on the costs and benefits that patients directly experience. It can be broken down into two categories: the patient perspective and the carer perspective.
Patient Perspective: This includes only the costs that the patient personally incurs.
Carer Perspective: This extends to the costs borne by other members of the patient’s household. Although these terms are sometimes used interchangeably, this distinction can be important.
Under these perspectives, all costs that patients face when dealing with a health issue are considered. This can include:
Direct Medical Costs: Expenses not covered by health insurance, such as out-of-pocket costs, co-payments, and deductibles.
Direct Non-Medical Costs: Costs like transportation to healthcare facilities.
Productivity Costs (Indirect Costs): Monetised productivity losses from missed paid and unpaid work due to illness or treatment.
The inclusion of these cost types depends on the specific study being conducted. In the context of evaluating a health system intervention, all patient-borne costs would be included.
While this perspective is more commonly used in cost-of-illness studies or analyses of patient health expenditures and financial risk protection, it is less frequently applied in full economic evaluations. However, there is growing advocacy for including this perspective in economic evaluations, especially given the increasing focus on patient-centered outcomes in health policy research.
Within the context of DHTs, these costs could include:
Out-of-Pocket Expenses: Costs not covered by insurance, such as co-pays for telehealth consultations, purchasing devices like wearable fitness trackers or glucose monitors, and subscription fees for health apps.
Time Costs: Time spent attending training sessions, learning to use new technologies, setting up devices, and troubleshooting technical issues.
Direct Non-Medical Costs: Expenses related to transportation to facilities for training or support with using digital health tools, as well as potential costs for internet access or increased data usage.
Productivity Costs (Indirect Costs): Lost income due to time taken off work to attend training sessions or use digital health services. This could also include reduced productivity if the technology requires time-consuming maintenance or frequent interaction.
Maintenance Costs: Ongoing expenses for maintaining and updating digital health devices and software, including potential repair costs or replacement of outdated devices.
Privacy and Security Costs: Time and monetary costs associated with ensuring data privacy and security, such as subscribing to secure data storage services or purchasing additional security software.
Psychological Costs: Stress or anxiety related to learning and adapting to new technologies, especially for patients who are not tech-savvy.
Payer Costing Perspective
This perspective focuses on the costs incurred by insurance companies or government programs that fund healthcare services.
When we talk about the healthcare payer perspective, we’re referring to the expenses borne by specific third-party payers. These could be health organisations, control programs, or agencies that manage insurance programs. This perspective includes costs related to treatment, disease management, and other healthcare services covered by these payers.
However, it’s important to note that only the costs shouldered by these specific payers are considered. For instance, out-of-pocket payments made by patients are not included. Additionally, the payer perspective is limited to funds that have been specifically planned or budgeted for within the organisation. So, it would capture costs incurred by a specific control program but not those borne by broader healthcare providers.
In some settings, there can be multiple relevant payers, such as various insurance programs, which adds another layer of complexity to this perspective.
Within the context of DHTs, these costs could include:
Reimbursement Costs: Payments made to healthcare providers for using digital health technologies, such as telehealth consultations, remote patient monitoring, and digital therapeutics. For example, the National Health Service (NHS) has conducted cost-effectiveness analyses for its telehealth programs.
Administrative Costs: Expenses related to processing claims and managing reimbursements, including the costs of updating billing systems to accommodate new digital health services.
Savings from Improved Outcomes: Reduced costs due to better disease management and prevention facilitated by digital health interventions. For example, fewer hospital readmissions or emergency visits due to better chronic disease management.
Additional examples include:
Technology Integration Costs: Expenses for integrating digital health technologies into existing healthcare systems and ensuring interoperability with other health information systems.
Training and Support Costs: Costs associated with training healthcare providers and administrative staff on how to use new digital health tools and managing ongoing technical support.
Data Management Costs: Expenses related to storing, securing, and managing the large volumes of data generated by digital health technologies.
Regulatory Compliance Costs: Costs incurred to ensure that digital health technologies meet all regulatory requirements and standards set by healthcare authorities.
Pilot Program Costs: Initial investment required for pilot programs to test the effectiveness and feasibility of new digital health technologies before wider implementation.
Marketing and Outreach Costs: Funds allocated for promoting the adoption of digital health technologies among both healthcare providers and patients.
Contracting and Negotiation Costs: Expenses involved in negotiating contracts with technology vendors and service providers.
Healthcare Provider Perspective
This perspective considers all the expenses that a given provider or group of providers in the health system incurs when delivering care services to patients. Depending on the context, this can sometimes overlap with the healthcare payer perspective. However, the provider perspective is usually broader in scope.
While the payer perspective only includes costs for specific parts of an organisation that have been budgeted for, the provider perspective encompasses a more comprehensive range of expenses. The difference between the payer and provider perspectives can vary depending on the context of the study. However, it’s likely that the provider perspective will offer a more complete picture of total costs, which is why it’s often used in costing exercises.
Sometimes a broader healthcare sector perspective can be taken. This accounts for all costs directly associated with the healthcare sector, regardless of who bears them. This means it includes not only the direct medical costs covered by third-party payers like national health services but also out-of-pocket payments made by patients. Costs that are not directly related to medical services or the healthcare sector are outside the scope of this perspective. For example, expenses related to patient travel or accommodation and productivity losses (indirect costs) are not included.
This distinction between healthcare payer/provider and healthcare sector perspectives is particularly important in low- and middle-income countries (LMICs), where out-of-pocket payments by patients can be a significant part of healthcare expenditure.
Within the context of DHTs, these costs could include:
Implementation Costs: Expenses related to integrating digital health technologies into existing systems. This includes costs for software, hardware, and training staff to use new tools effectively.
Operational Costs: Ongoing expenses for system maintenance, updates, and user support. These can also include costs associated with cybersecurity measures to protect patient data.
Cost Savings: Potential reductions in hospital admissions, shorter patient stays, and fewer follow-up visits due to improved disease management and prevention facilitated by digital health interventions. Additionally, the incremental cost-effectiveness ratio (ICER) is often used to assess the cost-effectiveness of these interventions by comparing the costs and health outcomes, such as Quality Adjusted Life Years (QALYs) and Disease Adjusted Life Years (DALYs).
Training Costs: Additional expenses for continuous training programs to keep healthcare providers updated on new features or upgrades in the digital health technology.
Technical Support Costs: Expenses related to hiring or contracting technical support teams to address any issues that arise with the digital health systems.
Data Management Costs: Costs associated with managing and storing large volumes of data generated by digital health technologies. This includes expenses for secure data storage solutions and data analytics tools.
Compliance and Regulatory Costs: Expenses incurred to ensure that digital health technologies meet all regulatory requirements and standards set by healthcare authorities.
Patient Education Costs: Funds allocated for educating patients on how to use digital health tools effectively, which may include instructional materials, workshops, or one-on-one sessions.
Infrastructure Upgrade Costs: Investments required to upgrade existing infrastructure, such as improving internet connectivity or purchasing additional servers, to support new digital health technologies.
Interoperability Costs: Expenses related to ensuring that new digital health technologies can seamlessly integrate with other existing systems within the healthcare facility.
Pilot Program Costs: Initial investments needed for pilot programs that test the feasibility and effectiveness of new digital health technologies before wider implementation.
Societal Perspective
The societal perspective is the broadest viewpoint in economic evaluations, capturing both direct and indirect costs to understand the wider economic impact on society.
When we talk about the societal perspective, we consider all healthcare-related costs, no matter who pays them. This includes expenses borne by patients and caregivers for things like travel and accommodation, as well as productivity losses due to illness or treatment. Additionally, this perspective can include non-health-related impacts on other sectors, such as social services, education, legal or criminal justice systems, and the environment.
In practice, how far the societal perspective is taken can vary. For instance, Kim et al. differentiated between a limited societal perspective, which includes all healthcare-related costs but excludes impacts on other sectors, and a broader societal perspective that also considers costs in at least one non-healthcare sector.
It’s important to note that there are other perspectives that fall between these categories. For example, in the UK, NICE recommends considering costs from the perspective of the NHS and personal social services (PSS). This is broader than just the health system perspective as it includes social care costs but is not as broad as the full societal perspective.
Some guidelines now suggest using a disaggregated societal perspective, where costs and outcomes are broken down by sector or by who incurs them. This allows for a more nuanced understanding from multiple perspectives.
Within the context of DHTs, the costs could include:
Direct Medical Costs: All healthcare-related expenses, such as hospitalisations, medications, consultations, diagnostic tests, and procedures.
Direct Non-Medical Costs: Costs associated with transportation to healthcare facilities, home modifications to accommodate new medical devices or equipment, and costs for internet access or increased data usage.
Indirect Costs: Lost productivity due to illness or time spent by patients and caregivers adapting to new technologies. This also includes time lost from work or other daily activities due to training sessions or medical appointments.
Additional examples include:
Caregiver Costs: Time and expenses incurred by family members or friends who provide unpaid care or support to the patient using digital health technologies.
Training and Education Costs: Costs for educational programs and materials aimed at teaching patients and caregivers how to effectively use digital health tools.
Technology Adoption Costs: Expenses related to promoting and facilitating the adoption of digital health technologies among patients and healthcare providers.
Data Management and Security Costs: Expenses for ensuring secure data storage, management, and compliance with privacy regulations. This includes costs for cybersecurity measures to protect sensitive health information.
Legal and Regulatory Compliance Costs: Expenses associated with meeting legal and regulatory requirements for digital health technologies, such as obtaining necessary certifications and adhering to data protection laws.
Social Services Costs: Impacts on social services due to changes in patient health status or needs resulting from the use of digital health technologies. This might include increased demand for community support services or mental health counselling.
Environmental Costs: Potential environmental impacts related to the production, use, and disposal of digital health devices. This can include electronic waste management and recycling programs.
Quality of Life Improvements: Economic valuation of enhanced quality of life and increased life expectancy due to better disease management or preventive care facilitated by digital health interventions.
Challenges in Measuring the Costs of Digital Health Technologies
Measuring costs accurately can be fraught with challenges, and these need to be considered to produce a robust evaluation within the chosen context and scope.
A systematic review to assess the cost-effectiveness of digital health interventions can help evaluate the impact of standardised indicators, such as Quality Adjusted Life Years (QALYs) and Disease Adjusted Life Years (DALYs), on healthcare expenditure and the quality of the evidence reported in the context of digital health technologies.
Diverse Stakeholders
Different stakeholders may have varied perspectives on what constitutes relevant costs and benefits, leading to discrepancies in assessments. For instance, healthcare providers might focus on implementation and operational costs, while patients may be more concerned with out-of-pocket expenses.
Our Recommendation: Select a perspective that aligns with your technology and the needs of regulatory or HTA bodies in the target market. Engage with stakeholders early in the evaluation process to understand their priorities and incorporate their input into your cost assessment.
Rapid Technological Evolution
Digital health technologies evolve rapidly, which can lead to challenges in keeping assessments up-to-date with current capabilities and prices. For example, a digital health tool that is state-of-the-art today might become obsolete within a few years.
Mobile health interventions (mHealth), are increasingly being integrated into healthcare strategies, necessitating regular updates to cost-effectiveness analyses.
Our Recommendation: Plan to update your evaluation as new data becomes available. Consider conducting sensitivity analyses to account for potential changes in costs over time. Regularly review market trends and adjust your cost models accordingly.
Data Availability
Accurate cost data may be difficult to obtain due to proprietary restrictions or limited access to real-world evidence. This can result in incomplete or biased cost assessments.
Our Recommendation: Seek partnerships with healthcare providers, payers, and technology vendors to gain access to proprietary data. Utilise publicly available datasets and peer-reviewed literature to supplement your data sources. Consider using proxy measures or expert opinions when direct data is unavailable.
Long-term Impact
The long-term financial implications of digital health technologies often remain uncertain due to limited longitudinal studies. This makes it difficult to predict future costs and benefits accurately.
Our Recommendation: Advocate for and participate in longitudinal studies that track the long-term impact of digital health technologies. Use modelling techniques to project future costs and benefits based on short-term data. Include scenario analyses to explore different long-term outcomes.
Interoperability Issues
Digital health technologies often need to integrate with existing healthcare systems. Lack of interoperability can lead to additional costs for customisation and integration.
Our Recommendation: Choose technologies that adhere to widely accepted standards for interoperability. Factor in potential integration costs during the initial evaluation phase. Collaborate with IT departments and technology vendors to ensure seamless integration.
Regulatory Compliance
Navigating the regulatory landscape for digital health technologies can be complex and costly. Different countries have varying requirements for data protection, clinical validation, and market approval.
Our Recommendation: Stay informed about regulatory requirements in target markets. Allocate resources for compliance activities, including legal consultations, clinical trials, and documentation. Engage with regulatory bodies early in the development process to clarify requirements.
User Adoption
The success of digital health technologies often depends on user adoption by both healthcare providers and patients. Low adoption rates can diminish expected benefits and increase per-user costs.
Our Recommendation: Invest in user training programs and support services to facilitate adoption. Conduct pilot studies to identify potential barriers and address them before full-scale implementation. Collect user feedback continuously to improve the technology and its usability.
Worked Example: Hypothetical AI Chatbot Mobile Health App
Imagine a new mobile health app which uses an AI chatbot to provide psychological support for patients with depression and anxiety. The app offers cognitive behavioural therapy (CBT) exercises, mood tracking, and personalised feedback. An economic evaluation is needed to assess the costs and benefits of implementing this app, and the societal perspective is taken as the company that developed the app want to prove the it’s value to society as part of a marketing campaign.
Assumptions
Target Population: 10,000 users diagnosed with mild to moderate depression or anxiety.
Fee Structure:
- 50% are free plan users.
- 30% are basic plan users.
- 20% are premium plan users.
Usage Rate: 75% of users will actively use the app.
Median Hourly Wage: £20.33
Tech-Savvy Users: 75% of users are tech-savvy and require 1 hour of training.
Non-Tech-Savvy Users: 25% of users are non-tech-savvy and require 3 hours of training.
Daily App Usage: 1 hour per day.
Societal Perspective Costs for an AI Chatbot Mobile Health App
We present some example scenarios below of how to conduct the costing for an example of a direct medical cost, a direct non-medical cost and an indirect cost.
Direct Medical Costs
Subscription Fees: Monthly or annual fees for accessing the app and its premium features, considered across all users.
Basic Plan: For 3,000 basic plan users, 40% pay monthly (£6) and 60% pay yearly (£60), over one year, this totals £194,400.
Premium Plan: For 2,000 premium plan users, 20% pay monthly (£14) and 80% pay yearly (£140), this totals £291,200. See example 1 below.
Healthcare System Savings: Overall cost savings for healthcare systems due to reduced demand for in-person therapy sessions and hospital visits.
Out-of-Pocket Medical Expenses: Any additional medical expenses not covered by insurance, such as co-pays for recommended complementary therapies or medications suggested by the app, aggregated across all users.
Complementary Therapy Costs: Costs for any complementary therapies (e.g., mindfulness classes, physical activity programs) recommended through the app that are not covered by insurance, considered at a societal level.
Direct Non-Medical Costs
Internet/Data Usage: Increased data usage costs due to frequent use of the app, aggregated across all users.
Increased data usage costs based on time spent using app leads to an additional £1.88 Phone data and £3.75 WiFi costs per month per user. For 7,500 active users over one year, this totals £286,875. See example 2 below.
Device Purchase: Aggregate cost of smartphones or tablets purchased by patients specifically for using the app.
Transportation: Reduced transportation costs if fewer in-person sessions are required. However, include any transportation costs for recommended in-person follow-ups or workshops.
Technical Support: Aggregate costs if professional technical support is needed to troubleshoot issues with the app.
Device Maintenance: Expenses for maintaining or repairing devices used to access the app.
Legal and Regulatory Compliance Costs: Expenses associated with ensuring that the app meets legal and regulatory requirements for data protection and clinical validation, considered at a societal level.
Indirect Costs (Productivity Costs)
These costs are mostly time-based, and can be costed as such using the average salary among your population of interest.
App Training Time: Time spent by patients learning how to use the app effectively
We assume patients spend 1 hour learning how to use the app if they are tech savvy and 3 hours learning how to use the app if they are non-tech savvy.
Using assumptions based on how many app users are tech savvy (75%) compared to non-tech savvy (25%) we estimate training costs totalling £228,682. See Example 3 below.
App Usage Time: Time spent interacting with the AI chatbot for therapy sessions.
Lost Productivity: Missed work or reduced productivity due to time spent on app-related activities during working hours.
Caregiver Time: Time spent by caregivers assisting patients with using the app or attending related activities.
Productivity Gains: Increased productivity due to improved mental health and well-being of users.
Social Services Impact: Potential impact on social services, such as reduced need for community mental health services if the app proves effective.
Intangible Costs
Adaptation Stress: Potential stress or anxiety related to adapting to new technology, especially for less tech-savvy individuals, considered at a societal level.
Privacy Concerns: Psychological impact of concerns over data privacy and security.
Environmental Impact: Potential environmental costs related to the production, use, and disposal of electronic devices used to access the app.
How Healthonomix can help?
For personalised guidance in selecting the appropriate perspective or conducting a comprehensive economic evaluation, reach out to us at Healthonomix. Contact us today to ensure your evaluations are thorough, accurate, and aligned with stakeholder needs.
