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Is managed care restraining the adoption of technology by hospitals?

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  • Mas, Núria
  • Seinfeld, Janice

Abstract

As health care costs increase, cost-control mechanisms become more widespread and it is crucial to understand their implications for the health care market. This paper examines the effect that managed care activity (based on the aim to control health care expenditure) has on the adoption of technologies by hospitals. We use a hazard rate model to investigate whether higher levels of managed care market share are associated with a decrease on medical technology adoption during the period 1982-1995. We analyze annual data on 5390 US hospitals regarding the adoption of 13 different technologies. Our results are threefold: first, we find that managed care has a negative effect on hospitals' technology acquisition for each of the 13 medical technologies in our study, and its effect is stronger for those technologies diffusing in the 1990s, when the managed care sector is at its largest. If managed care enrollment had remained at its 1984 level, there would be 5.3%, 7.3% and 4.1% more hospitals with diagnostic radiology, radiation therapy and cardiac technologies, respectively. Second, we find that the rise in managed care leads to long-term reductions in medical cost growth. Finally, we take into account that profitability analysis is one of the main dimensions considered by hospitals when deciding about the adoption of new technologies. In order to determine whether managed care affects technologies differently if they have a different cost-reimbursement ratio (CRR), we have created a unique data set with information on the cost-reimbursement for each of the 13 technologies and we find that managed care enrollment has a considerably larger negative effect on the adoption of less profitable technologies.

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  • Mas, Núria & Seinfeld, Janice, 2008. "Is managed care restraining the adoption of technology by hospitals?," Journal of Health Economics, Elsevier, vol. 27(4), pages 1026-1045, July.
  • Handle: RePEc:eee:jhecon:v:27:y:2008:i:4:p:1026-1045
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    Cited by:

    1. Jos L. T. Blank & Vivian G. Valdmanis, 2015. "Technology diffusion in hospitals: a log odds random effects regression model," International Journal of Health Planning and Management, Wiley Blackwell, vol. 30(3), pages 246-259, July.
    2. Núria Mas, 2013. "Responding to financial pressures. The effect of managed care on hospitals’ provision of charity care," International Journal of Health Economics and Management, Springer, vol. 13(2), pages 95-114, June.
    3. Finocchiaro Castro, Massimo & Guccio, Calogero & Pignataro, Giacomo & Rizzo, Ilde, 2014. "The effects of reimbursement mechanisms on medical technology diffusion in the hospital sector in the Italian NHS," Health Policy, Elsevier, vol. 115(2), pages 215-229.
    4. Mas, Nuria & Valentini, Giovanni, 2012. "The importance of technology in the consolidation of hospital markets. The case of the United States," IESE Research Papers D/953, IESE Business School.
    5. Mas, Nuria, 2009. "Responding to financial pressures. The effect of managed care on hospitals' provision of charity care," IESE Research Papers D/782, IESE Business School.
    6. Sorenson, Corinna & Drummond, Michael & Bhuiyan Kahn, Beena, 2013. "Medical technology as a key driver of rising health expenditures: disentangling the relationship," LSE Research Online Documents on Economics 48043, London School of Economics and Political Science, LSE Library.
    7. David H. Howard & Yu-Chu Shen, 2011. "Comparative Effectiveness Research, COURAGE, and Technological Abandonment," NBER Working Papers 17371, National Bureau of Economic Research, Inc.
    8. Liu, Ya-Ming & Kao Yang, Yea-Huei & Hsieh, Chee-Ruey, 2011. "The determinants of the adoption of pharmaceutical innovation: Evidence from Taiwan," Social Science & Medicine, Elsevier, vol. 72(6), pages 919-927, March.
    9. Daniel Simonet, 2009. "Managed Care expansion to Asia: a critical review," Asian-Pacific Economic Literature, Asia Pacific School of Economics and Government, The Australian National University, vol. 23(2), pages 29-51, November.

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