Is managed care restraining the adoption of technology by hospitals?
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. Managed care may affect hospitals' decision to take on new technologies if it alters local market structure and physician incentives. We use a hazard rate model to investigate whether higher levels of managed care market share are associated with a decrease in medical technology adoption during the period 1982-1995. We analyze annual data on 5,390 US hospitals regarding the adoption of 13 different technologies. This is the first time that such a broad study has been implemented. After adjusting for hospital characteristics, demographics and local market characteristics, we find that managed care has a negative effect on hospitals' technology acquisition for each of the thirteen medical technologies in our study, and this effect is strongest for technologies diffusing in the 1990s, when the managed care sector was at its largest. If managed care enrollment had remained at its 1984 level, there would be 5.3, 7.3 and 4.1 percent more hospitals with diagnostic radiology, radiation therapy and cardiac technologies, respectively. We also take into account that cost-benefit 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-benefit ratio, we created a unique data set with information on the cost-benefit for each of the thirteen technologies. We find that managed care enrollment has a considerably more negative effect on the adoption of technologies with higher cost-benefit ratios. The results suggest there may be long-term reductions in medical cost growth resulting from increased managed care enrollment.
|Date of creation:||10 May 2004|
|Date of revision:|
|Contact details of provider:|| Postal: IESE Business School, Av Pearson 21, 08034 Barcelona, SPAIN|
Web page: http://www.iese.edu/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Feldstein, Martin S, 1971. "Hospital Cost Inflation: A Study of Nonprofit Price Dynamics," American Economic Review, American Economic Association, vol. 61(5), pages 853-72, December.
- Robinson, James C. & Luft, Harold S., 1985. "The impact of hospital market structure on patient volume, average length of stay, and the cost of care," Journal of Health Economics, Elsevier, vol. 4(4), pages 333-356, December.
- Ellis, Randall P. & McGuire, Thomas G., 1986. "Provider behavior under prospective reimbursement : Cost sharing and supply," Journal of Health Economics, Elsevier, vol. 5(2), pages 129-151, June.
- Custer, William S. & Moser, James W. & Musacchio, Robert A. & Willke, Richard J., 1990. "The production of health care services and changing hospital reimbursement : The role of hospital-medical staff relationships," Journal of Health Economics, Elsevier, vol. 9(2), pages 167-192, September.
- Jason R. Barro & David Cutler, 1997.
"Consolidation in the Medical Care Marketplace: A Case Study from Masschusetts,"
NBER Working Papers
5957, National Bureau of Economic Research, Inc.
- Jason Barro & David M. Cutler, 2000. "Consolidation in the Medical Care Marketplace,A Case Study from Massachusetts," NBER Chapters, in: Mergers and Productivity, pages 9-50 National Bureau of Economic Research, Inc.
- Cutler, David M, 1995.
"The Incidence of Adverse Medical Outcomes under Prospective Payment,"
Econometric Society, vol. 63(1), pages 29-50, January.
- David M. Cutler, 1993. "The Incidence of Adverse Medical Outcomes Under Prospective Payments," NBER Working Papers 4300, National Bureau of Economic Research, Inc.
- Cutler, D.M., 1992. "The Incidence of Adverse Medical Outcome Under Prospective Payment," Harvard Institute of Economic Research Working Papers 1603, Harvard - Institute of Economic Research.
- David M. Cutler & Louise Sheiner, 1997.
"Managed Care and the Growth of Medical Expenditures,"
NBER Working Papers
6140, National Bureau of Economic Research, Inc.
- David M. Cutler & Louise Sheiner, 1998. "Managed Care and the Growth of Medical Expenditures," NBER Chapters, in: Frontiers in Health Policy Research, Volume 1, pages 77-116 National Bureau of Economic Research, Inc.
- Richard J. Gilbert and Marvin Lieberman., 1987.
"Investment and Coordination in Oligopolistic Industries,"
Economics Working Papers
8730, University of California at Berkeley.
- Richard J. Gilbert & Marvin Lieberman, 1987. "Investment and Coordination in Oligopolistic Industries," RAND Journal of Economics, The RAND Corporation, vol. 18(1), pages 17-33, Spring.
- Gilbert, Richard J., 1987. "Investment and Coordination in Oligopolistic Industries," Department of Economics, Working Paper Series qt51b0f7sq, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- James R. Baumgardner, 1991. "The Interaction between Forms of Insurance Contract and Types of Technical Change in Medical Care," RAND Journal of Economics, The RAND Corporation, vol. 22(1), pages 36-53, Spring.
- Baker, Laurence C., 1997. "The effect of HMOs on fee-for-service health care expenditures: Evidence from Medicare," Journal of Health Economics, Elsevier, vol. 16(4), pages 453-481, August.
- Pope, Gregory C., 1989. "Hospital nonprice competition and medicare reimbursement policy," Journal of Health Economics, Elsevier, vol. 8(2), pages 147-172, June.
- Hoerger, Thomas J., 1991. "'Profit' variability in for-profit and not-for-profit hospitals," Journal of Health Economics, Elsevier, vol. 10(3), pages 259-289, October.
- Meyer, Bruce D, 1990.
"Unemployment Insurance and Unemployment Spells,"
Econometric Society, vol. 58(4), pages 757-82, July.
- Newhouse, Joseph P, 1970. "Toward a Theory of Nonprofit Institutions: An Economic Model of a Hospital," American Economic Review, American Economic Association, vol. 60(1), pages 64-74, March.
- Laurence C. Baker & Martin L. Brown, 1997. "The Effect of Managed Care on Health Care Providers," NBER Working Papers 5987, National Bureau of Economic Research, Inc.
- Laurence Baker & Joanne Spetz, 1999.
"Managed Care and Medical Technology Growth,"
in: Frontiers in Health Policy Research, volume 2, pages 27-52
National Bureau of Economic Research, Inc.
- David M. Cutler & Mark McClellan, 1996. "The Determinants of Technological Change in Heart Attack Treatment," NBER Working Papers 5751, National Bureau of Economic Research, Inc.
- Joseph P. Newhouse, 1992. "Medical Care Costs: How Much Welfare Loss?," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 3-21, Summer.
- Cutler David M. & Sheiner Louise, 1998. "Managed Care and the Growth of Medical Expenditures," Forum for Health Economics & Policy, De Gruyter, vol. 1(1), pages 1-41, January.
- Goddard, Maria & Maher, Elizabeth J. & Hutton, John & Shah, Damu, 1991. "Palliative radiotherapy - counting the costs of changing practice," Health Policy, Elsevier, vol. 17(3), pages 243-256, April.
When requesting a correction, please mention this item's handle: RePEc:ebg:iesewp:d-0554. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Noelia Romero)
If references are entirely missing, you can add them using this form.