Increasing health care costs in the United States, and the factors contributing to them, are strongly debated issues among academics and policy makers. Among these factors, technological change in medicine has been widely regarded as the primary driver of cost growth. However, one factor that has been largely ignored in the literature and ought to be considered an open question is the effect of increased competition among HMOs on hospital competition. This paper differentiates between two notions of the effects of managed care on hospital technology: (i) HMOs discourage the adoption of technology by all hospitals, and (ii) HMOs rationalize the adoption of technology in hospitals. These notions are differentiated by stating competing hypotheses regarding the effect of HMO penetration and the effect of HMO competition on a hospital's probability to adopt, as well as the time to the first and follow-on adoptions in a given hospital market. Using data on cardiac catheterization laboratories from all short term general community hospitals, and data on HMO penetration and competition, preliminary results indicate that whereas HMO penetration does not effect the probability of adoption, a hospital is more likely to adopt cardiac catheterization facilities as the competition within HMOs increases. Further, the results indicate that the probability of follow-on adoption in a local hospital market also increases as the HMO market becomes increasingly competitive. The findings reported here are also found to be consistent with the traditional medical arms race literature.
Learning Objectives:
Keywords: Health Care Managed Care, Technology
Presenting author's disclosure statement:
Organization/institution whose products or services will be discussed: None
I do not have any significant financial interest/arrangement or affiliation with any organization/institution whose products or services are being discussed in this session.