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Technological adoption in health care

Abstract

This paper addresses the impact of payment systems on the rate of technology adoption. We present a model where technological shift is driven by demand uncertainty, increased patients' benefit, financial variables, and the reimbursement system to providers. Two payment systems are studied: cost reimbursement and (two variants of) DRG. According to the system considered, adoption occurs either when patients' benefits are large enough or when the differential reimbursement across technologies offsets the cost of adoption. Cost reimbursement leads to higher adoption of the new technology if the rate of reimbursement is high relative to the margin of new vs. old technology reimbursement under DRG. Having larger patient benefits favors more adoption under the cost reimbursement payment system, provided that adoption occurs initially under both payment systems.

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Paper provided by Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) in its series UFAE and IAE Working Papers with number 790.09.

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Length: 34
Date of creation: 09 Nov 2009
Date of revision:
Handle: RePEc:aub:autbar:790.09
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Keywords: Health care; technology adoption; payment systems;

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Find related papers by JEL classification:
  • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
  • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
  • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)

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Cited by:

  1. David H. Howard & Yu-Chu Shen, 2011. "Comparative Effectiveness Research, COURAGE, and Technological Abandonment," NBER Working Papers 17371, National Bureau of Economic Research, Inc.
  2. Corinna Sorenson & Michael Drummond & Beena Bhuiyan Kahn, 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.

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