Innovation Diffusion under Budget Constraints: Microeconometric Evidence on Heart Attack in France
In: Contributions in Memory of Zvi Griliches
This paper studies the relationship between the diffusion of innovative procedures for the treatment of heart attack and the distributions of the cost and length of hospital stays. Using a sample of 5,681 stays observed in French publics hospitals, we use micro-simulation techniques in order to highlight various effects on the shifts in the overall distributions of the costs and length of stays: (i) the effect of the adoption of new techniques by hospitals (between hospital diffusion); (ii) the effect of the diffusion of technological progress within hospitals; (iii) the effect of the evolutions of patients characteristics (age x gender, co-morbidities). This decomposition approach is used in the literature relative to the relationship between education and income distribution where observed distributions are compared to counterfactual distributions built by replacing some estimated parameters with their counterparts estimated from another country or period. Our results show that between 1994 and 1997 hospitals faced two main causes of rises in costs: on the one hand, diffusion of technological progress, with increasing use of costly innovative procedures such as angioplasty; on the other hand, patients' epidemiological state worsened, since they became older and had more secondary diagnoses. These two factors induced sizeable shocks in cost distributions. During the same period, French public hospitals were financed by a global budget, and their budgets increased very slowly. International comparisons show that diffusion of technological progress for AMI treatment is similar in France and in comparable countries. How did French hospitals deal with their financial constraints? Our results show that they sharply reduced the length of stays for patients at the bottom of the distribution. This reduction in the length of stays appears to have been a condition for the diffusion of angioplasty. Obviously, such a condition cannot be sustained in the long run without jeopar
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