Is Managed Care Restraining the Adoption of Technologies by Hospitals?
- Presenter:
Chair: Catherine McLaughlin; Discussant: Loren Baker Tue June 6, 2006 15:30-17:00 Room 235
Authors: Núria Mas (IESE Business School, Spain) and Janice Seinfeld (Universidad del Pacífico, Peru)
Title: Is Managed Care Restraining the Adoption of Technologies by Hospitals?
Rationale: As health care costs keep increasing, cost-control mechanisms such as the ones introduced by managed care, have become more widespread and it is crucial to understand their implications for the health care market and, in particular, for the adoption of new technologies, which are one of the main determinants of health care cost growth.
Objectives: This paper examines the relationship between managed care activity and hospitals´ technology adoption. The existing studies on this subject have been limited to only a few technologies over short periods of time. This paper extends previous work in several important dimensions: first, we examine thirteen different technologies from 1982 to 1995. Second, we distinguish between these that diffused in the eighties, when managed care was rare in the US, from these that diffused in the nineties, when managed care was already a widespread phenomenon, since we expect managed care effect to be stronger for the second group of technologies. Finally, we rank technologies according to their cost-benefit ratio since, given that managed care gives strong incentives to minimize costs, we expect its effect to be stronger for these technologies with high cost-benefit ratios.
Methodology and Results: Managed care may affect hospital´s decisions to take on new technologies by imposing financial pressure on providers, changing the incentives associated with the utilization and purchase of new technology equipment. We use a hazard rate model to investigate whether high 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 from the American Hospital association (AHA). After adjusting for hospital characteristics, demographics, regulation and local market characteristics, we find that managed care has a negative effect on hospitals´technology acquisition for each of the thirteen technologies in our study, and this effect is stronger for technologies diffusing in the 1990s, when managed care sector was at its largest. 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. We find that managed are enrollment has a significantly more negative effect on the adoption of technologies with higher cost-benefit ratios.
Conclusions: the negative effect of managed care on technology adoption may have important policy implications, such as its ability to slow down health care costs growth. Our results provide evidence that managed care contributes to costs savings in the health care market by limiting availability of technologies, especially of the more expensive ones.
