Is Managed Care Restraining the Adoption of Technology by Hospitals?

45 Pages Posted: 3 Jul 2007

See all articles by Núria Mas

Núria Mas

University of Navarra - IESE Business School

Janice Seinfeld

Universidad del Pacifico

Date Written: 2004

Abstract

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 on medical technology adoption during the period 1982-1995. We analyze annual data on 5390 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 its effect is stronger for those technologies diffusing in the 1990s, when the managed care sector is 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 have created a unique data set with information on the cost-benefit for each of the thirteen technologies and 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.

Keywords: managed care, health,hospital, technology

Suggested Citation

Mas, Núria and Seinfeld, Janice, Is Managed Care Restraining the Adoption of Technology by Hospitals? (2004). IESE Business School Working Paper, Available at SSRN: https://ssrn.com/abstract=997984 or http://dx.doi.org/10.2139/ssrn.997984

Núria Mas (Contact Author)

University of Navarra - IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

Janice Seinfeld

Universidad del Pacifico ( email )

Av. Salaverry 2020
Región Metropolitana
Lima 18, Santiago Lima 11
Peru

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
82
Abstract Views
659
rank
400,069
PlumX Metrics