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Endometriosis in the female partner is responsible for the failure to conceive in a substantial number of infertile couples. This disorder is often diagnosed and corrected with laparoscopy. The role of this procedure, however, for management of infertility due to endometriosis is controversial, in large part because it is difficult to identify patients likely to benefit from surgery and randomized studies investigating improvement in fecundity after surgical correction have been limited, somewhat contradictory, and have demonstrated only a modest effect.This analysis used a model system to investigate whether laparoscopy was a cost-effective alternative to a standard infertility treatment algorithm (SITA) in initial management of unexplained infertility. The study also characterized factors influencing the cost-effectiveness of laparoscopy. Data obtained from the medical literature or from the investigators’ practice were used to construct a mathematical model and to establish estimates for a typical base case. One-way sensitivity analyses evaluated the impact of changing key assumptions used in the base case. A range of reasonable estimates for many of the model variables was used to determine which had the greatest influence on the incremental cost-effectiveness ratio (ICER), the primary study outcome.Treatment costs and health outcomes of 4 strategies were calculated over a 1-year period in a computer simulated cohort of 1000 women with unexplained infertility. The decision tree model compared treatment costs and health outcomes of 4 treatment strategies over a 1-year period in a computer simulated cohort of 1000 women with unexplained infertility. The first strategy was a no intervention group. The second strategy, SITA, was a typical clinical algorithm for managing young infertile women. The third involved diagnostic laparoscopy (LSC) with expectant management and the fourth was diagnostic laparoscopy with infertility therapy.The model data showed that the preferred strategy was LSC with expectant management, which had the lowest ICER at $128,399 per live birth. Factors that had no significant effect on the results were risk and cost of multiple pregnancies, cost of fertility treatments, prevalence of endometriosis, and penalties for high-order multiples. When the dropout rate per fertility treatment cycle was less than 9% (ICER = $123,980 per live birth), SITA became the preferred strategy.These findings demonstrate that laparoscopy followed by expectant management is cost-effective in the management of unexplained infertility, especially when dropout from fertility treatments is likely to exceed 9% per cycle.