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Managed Care and Medical Technology Growth

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  • Laurence Baker
  • Joanne Spetz

Abstract

Many questions about technology growth and development in health care call for a broad-based characterization of technology availability. In this paper, we explore the possibility of producing aggregated estimates of technology availability by constructing an index of technology availability in hospitals. Our index is based on the number of services provided by a hospital, weighted by how rare those services are. We use the index to examine the relationship between managed care and technology availability in hospitals. We find that managed care may have slowed technology growth in the mid 1980s, but in the early 1990s we find little evidence that technology growth in areas with high-HMO market share is any slower than growth in lower market share areas. To the extent that our index captures variation in the costs of new technologies, this finding leaves open the question of whether managed care can help control long term cost growth by slowing technology adoption. We also discuss the general strengths and weaknesses of indices of the type we develop. One concern arises from the considerable variation across individual technologies. We profile several individual technologies and note that conclusions drawn from the aggregated index may not apply to each of the constituent technologies. Nonetheless, this exercise shows that it is feasible to develop and analyze hospital technology indices if aggregated information about technologies is appropriate to the research question.

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  • Laurence Baker & Joanne Spetz, 1999. "Managed Care and Medical Technology Growth," NBER Working Papers 6894, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:6894
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    1. 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.
    2. Baker, Laurence C., 2001. "Managed care and technology adoption in health care: evidence from magnetic resonance imaging," Journal of Health Economics, Elsevier, vol. 20(3), pages 395-421, May.
    3. 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.
    4. 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.
    5. 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.
    6. Hill, Steven C. & Wolfe, Barbara L., 1997. "Testing the HMO competitive strategy: An analysis of its impact on medical care resources," Journal of Health Economics, Elsevier, vol. 16(3), pages 261-286, June.
    7. 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.
    8. Weisbrod, Burton A, 1991. "The Health Care Quadrilemma: An Essay on Technological Change, Insurance, Quality of Care, and Cost Containment," Journal of Economic Literature, American Economic Association, vol. 29(2), pages 523-552, June.
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    Cited by:

    1. Spetz, Joanne & Maiuro, Lisa Simonson, 2004. "Measuring levels of technology in hospitals," The Quarterly Review of Economics and Finance, Elsevier, vol. 44(3), pages 430-447, July.
    2. Laurence C. Baker, 2000. "Managed Care and Technology Adoption in Health Care: Evidence from Magnetic Resonance Imaging," NBER Working Papers 8020, National Bureau of Economic Research, Inc.
    3. Mas, NĂºria & 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.
    4. Bokhari, Farasat A.S., 2009. "Managed care competition and the adoption of hospital technology: The case of cardiac catheterization," International Journal of Industrial Organization, Elsevier, vol. 27(2), pages 223-237, March.
    5. Okunade, Albert A. & Murthy, Vasudeva N. R., 2002. "Technology as a 'major driver' of health care costs: a cointegration analysis of the Newhouse conjecture," Journal of Health Economics, Elsevier, vol. 21(1), pages 147-159, January.
    6. 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.
    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. Laurence C. Baker & Ciaran S. Phibbs, 2000. "Managed Care, Technology Adoption, and Health Care: The Adoption of Neonatal Intensive Care," NBER Working Papers 7883, National Bureau of Economic Research, Inc.
    9. Yu-Chu Shen, 2009. "Do HMO and its for-profit expansion jeopardize the survival of hospital safety net services?," Health Economics, John Wiley & Sons, Ltd., vol. 18(3), pages 305-320.
    10. Farasat A.S. Bokhari, 2001. "Managed Care and the Adoption of Hospital Technology: The Case of Cardiac Catheterization," HEW 0110001, EconWPA.
    11. Baker, Laurence C., 2001. "Managed care and technology adoption in health care: evidence from magnetic resonance imaging," Journal of Health Economics, Elsevier, vol. 20(3), pages 395-421, May.
    12. David M. Cutler, 2000. "Walking the Tightrope on Medicare Reform," Journal of Economic Perspectives, American Economic Association, vol. 14(2), pages 45-56, Spring.
    13. Selder, Astrid, 2005. "Physician reimbursement and technology adoption," Journal of Health Economics, Elsevier, vol. 24(5), pages 907-930, September.
    14. Jos L. T. Blank & Bart L. Van Hulst, 2009. "Productive innovations in hospitals: an empirical research on the relation between technology and productivity in the Dutch hospital industry," Health Economics, John Wiley & Sons, Ltd., vol. 18(6), pages 665-679.
    15. William White & Michael Morrisey, 1998. "Are Patients Traveling Further?," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 5(2), pages 203-221.

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