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Making the Business Case for Smoking Cessation Programs
“Smoking cessation is the gold standard of health care cost effectiveness.”
    —David Eddy, 19921

What is the business case for smoking cessation?

The business case for smoking cessation involves demonstrating the short-term financial value of evidence-based interventions to health insurance plans, payors, employers, and other tobacco control stakeholders.

The costs of smoking and cost-effectiveness of quitting are well known.2-5 However, financial barriers remain that limit the availability and promotion of cessation services. Health insurance plans, payors, and employers want evidence that interventions can reduce medical care expenditures and productivity costs for quitters in the short-run.6-8

Businesses use ROI analysis to allocate resources by comparing the implementation costs and future revenues (or savings) of alternative investments. To make the business case for smoking cessation, interventions must demonstrate a positive ROI in 3-5 years compared to existing practice.

Calculating return on investment (ROI)

AHIP and the Center for Health Research, Kaiser Permanente Northwest (CHR) have developed a business case for smoking cessation by estimating the incremental ROI of evidence-based cessation interventions. Extensive original research culminated in the creation of a user-friendly, web-based ROI Calculator that estimates the impact of smoking cessation interventions for 1-5 years.

Our findings demonstrate that investments in smoking cessation save money in the short term (2 years). This study validates that evidence-based programs can improve the health of smokers who quit and economically benefit health insurance plans and employers.

The original research

CHR researchers estimated the incremental ROI of four interventions compared to usual care (ask and advice). Based on the US Public Health Service Treating Tobacco Use and Dependence9 clinical practice guideline, the tested interventions were:
  • the “5 A’s”—Ask, Advise, Assess, Assist, Arrange;
  • 5 A’s plus nicotine replacement therapy (NRT);
  • A’s plus proactive telephone counseling;
  • and 5 A’s plus both NRT and telephone counseling.
The analysis used published data on reach, efficacy, and cost to estimate the incremental ROI of a one-year program, compared to usual care (2 A's). The smoking, health, and eligibility status of continuing smokers and new quitters were projected annually over five years, and annual medical expenditures and productivity losses were assessed.

CHR researchers estimated the following-annual probabilities by smoking intensity, age, and sex(controlling for income):
  • a smoking-related disease diagnosis,
  • quitting and relapse given disease status, and
  • disenrollment given disease and smoking status.
The probability data were estimated using electronic medical record(EMR) data for 200,000 eligible Kaiser Permanente Northwest members during 1997-2002. KPNW is a large HMO (440,000 members) serving about 20% of the Portland, OR-Vancouver, WA population. Mean annual medical care expenditures were estimated for each group with similar disease, smoking, and eligibility enrollment patterns using data from 62,000 members. Productivity savings were estimated using published data.10,11 All costs were translated into 2002 dollars and adjusted to present value terms.

The KPNW EMR captures smoking status and evaluation dates for over 90% of adults, and status is regularly recorded at routine care and many other types of visits. The model could therefore account for the temporal relationships between disease, smoking, and plan eligibility, and could better predict medical expenditures of healthy quitters.7,12,13

CHR researchers found that health plans investing $35-$410 per participant in a one-year program generated a positive ROI within 3 years. For the test health plan population, ROI per cessation service recipient for the plan was $750-$1,120 after 5 years (Table 1). For employers, ROI was positive in all years, and totaled $100-$200 after 5 years. The results indicate investments of $.18-$.79 PMPM generate positive net ROI of over $1.70-$2.20 after five years.

Table 1.
Cumulative ROI for Simulated Health Plan*
Year 5As 5As+Rx 5As+QL 5As+both
1 $(76) $(306) $(228) $(414)
2 $422 $147 $261 $35
3 $769 $489 $607 $376
4 $1,029 $756 $868 $643
5 $1,122 $858 $963 $747
*Per intervention participant compared to 2As program (usual care).
All costs in 2002 dollars and discounted to the present value.
Table 2.
Cumulative ROI for Employers*
Year 5As 5As+Rx 5As+QL 5As+both
1 $13 $27 $19 $32
2 $43 $79 $53 $87
3 $68 $122 $81 $133
4 $88 $156 $103 $169
5 $103 $183 $110 $197
*Per intervention participant compared to 2As program (usual care).
All costs in 2002 dollars and discounted to the present value.

ROI estimates were also calculated using data from a range of other health insurance plans. While the ROI estimates varied somewhat depending on local variations in regional health care costs, smoking prevalence, and disease rates, the results were still positive.

The web-based ROI Calculator

AHIP and CHR translated the original simulation model into the user-friendly web-based ROI Calculator. The ROI Calculator contains the data and functional relationships of the original simulation model, but with a simplified user-friendly interface.

Like the original model, the ROI Calculator estimates the number of participants, new quitters, and program costs for interventions lasting one year. For each intervention, the new distribution of smokers and new quitters are run through the model. The model estimates annual disease incidence, quitting and relapse, eligibility, and costs. ROI for each intervention is calculated by comparing the differences in net costs with data for usual care.

The ROI Calculator and YOU

The ROI Calculator is designed to help you quickly assess the potential benefits of common smoking cessation interventions. The preloaded data can be easily modified to reflect the key smoking and environmental factors of your current health plan's population. You can also vary key inputs. The results of your ROI analyses should help your organization evaluate the cost-effectiveness of various tobacco cessation interventions.

The original research and translation was supported by an unrestricted educational grant from the Robert Wood Johnson Foundation and cooperative agreement funding from the Centers for Disease Control and Prevention-Office of Smoking and Health.

  1. Eddy DM. David Eddy ranks the tests. Harv Health Let 1992 (July suppl.):10-11.
  2. U.S. Department of Health and Human Services. The Health Consequences of Tobacco Use: A Report of the Surgeon General. Atlanta, Georgia. U.S. Department of Health and Human Services, Centers for Disease Control and Prevention, National Center for Chronic Disease and Health Promotion, Office on Smoking and Health, 2004.
  3. Warner KE, Hodgson TA, Carroll CE. Medical costs of smoking in the United States: estimates, their validity, and their implications. Tob Contrl 1999;8:290-300.
  4. Cromwell J, Bartosch WJ, Fiore MC, Hasselblad V, Baker T. Cost-effectiveness of the clinical practice recommendations in the AHCPR guideline for smoking cessation. JAMA 1997;278:1759-1766.
  5. Curry SJ, Grothaus LC, McAfee T, Pabiniak C. Use and cost-effectiveness of smoking-cessation services under four insurance plans in a health maintenance organization. New Eng J of Med 1998;339:673-9.
  6. McPhillips-Tangum C, Bocchino C, Carreon R, Erceg C, Rehm B. Addressing tobacco in managed care: Results of the 2002 survey. Preventing Chronic Disease: Pub Health Res Pract Pol 2004;1:1-11.
  7. Warner KE, Mendez D, Smith DG. The financial implications of coverage of cessation treatment by managed care organizations. Inquiry 2004;41:57-69.
  8. Manley MW, Griffin T, Foldes SS, Link CC, Sechrist RAJ. The role of health plans in tobacco control. Ann Rev Pub Health 2003;24:247-66.
  9. Fiore MC, Bailey WC, Cohen SJ, et al. Clinical practice guideline: Treating tobacco use and dependence. Rockville, MD: Public Health Service, 2000.
  10. Warner KE, Smith RJ, Smith DG, et al. Health and economic implications of a work-site smoking cessation program: A simulation analysis. J Occup Environ Med 1996;38:981-92.
  11. Haddix A, Teutsch SM, Corso PS. Prevention effectiveness: A guide to decision analysis and economic evaluation. Oxford University Press, 2003.
  12. Wagner EH, Curry SJ, Grothaus L, et al. The impact of smoking and quitting on health care use. Arch Intern Med 1995;155:1789-1795.
  13. Fishman PA, Khan ZM, Thompson EE, Curry SJ. Health care costs among smokers, former smokers, and never smokers in an HMO. HSR: Health Svs Res 2003;38:733-749

Business Case Executive Summary (pdf version)