Managed Care and the Adoption of Hospital Technology: The Case of Cardiac Catherterization

Diffusion of health care technology is influenced by both the total market share of managed care organizations as well as the level of competition among them. This paper differentiates between HMO penetration and competition and examines their relationship to the adoption of cardiac catheterization laboratories in all non-federal, short-term general community hospitals in the U.S. between 1985-1995. Results show that a hospital is less likely to adopt the technology if HMO market penetration increases but that it is more likely to adopt if HMO competition increases. Further, the competition effect is non-linear. In markets where fewer than 10 neighbors have already adopted, the probability of adoption increases with HMO competition but in markets where 10 or more neighbors have already adopted, the probability of adoption decreases with HMO competition. Thus, in markets where technology is rare, HMO penetration and competition have countervailing effects on the diffusion of technology such that the net effect could be small.