To buy or not to buy. Technology acquisition under prospective payment

Managed care and technology adoption in health care: evidence from magnetic resonance imaging

This paper empirically examines the relationship between HMO market share and the diffusion of magnetic resonance imaging (MRI) equipment. Across markets, increases in HMO market share are associated with slower diffusion of MRI into hospitals between 1983 and 1993, and with substantially lower overall MRI availability in the mid- and later 1990s. High managed care areas also had markedly lower rates of MRI procedure use. These results suggest that technology adoption in health care can respond to changes in financial and other incentives associated with managed care, which may have implications for health care costs and patient welfare.

The clinical-economic trial: promise, problems, and challenges

The clinical-economic trial is a study design that is appearing with greater frequency in medical and public health literature. Some experienced investigators view these trials with skepticism; to policy makers they represent a promising step in the control of rising health care costs. The success of clinical-economic trials in meeting the important goal of more rational and efficient use of health care resources will depend on the strengths and limitations of the research method. As part of a report to the Office of Technology Assessment of the U.S. Congress on new health care assessment techniques, we describe the reasons why economic data collection and analysis are being considered in clinical trials, identify and discuss various designs and methods for gathering economic trial data, and evaluate the strengths and limitations of different methods for providing sound data for decision making on appropriate use of health care interventions. Because of the potential significance and increasing visibility of such research, experts in research methods should give more attention to methodological research for clinical-economic trials. Future efforts should be directed at comparing different techniques for collecting data, examining the incremental value of precision in economic measurements and ensuring appropriate interpretation of data from clinical-economic trials.

Technology acquisition in Canadian hospitals: how is it done, and where is the information coming from?

A 1990 nation-wide survey on technology acquisition in Canadian hospitals, based on 509 Anglophone and 55 Francophone hospital questionnaires and 193 hospital equipment request forms, revealed that 53% of capital funds were used to replace existing equipment, with the remainder spent on new purchases. However, very little regional planning was taking place. Most of the institutional acquisition decisions were made by committees, 17% of which were classified as medical staff, 25.1% as administrative, 32.4% as board committees and 22.5% as mixed. Although administration was heavily represented, medical staff were frequently present and nursing was just as likely to have at least minimal representation. However, technical experts usually played a minimal role. This omission, combined with the limited information asked for on equipment request forms and the limited availability and use of technology assessment information, suggests that acquisition decisions in many Canadian hospitals are likely to be based on inadequate information.

Early adoption of cyclosporine and recombinant human erythropoietin: clinical, economic, and policy issues with emergence of high-cost drugs

The discovery of new drugs and their introduction into US markets will become an intense area of focus should health care reform result in Medicare insurance coverage for prescription drugs. Particular attention will be focused on high-cost drugs. Two high-cost drugs, cyclosporine and recombinant human erythropoietin (rHuEPO), introduced into the clinical management of patients with kidney disease during the past decade, provide some experience concerning the forces affecting the use of expensive drugs in a cost-conscious health care system. The decision to prescribe a drug will depend on provider's judgements of the drug's clinical benefits and costs compared with those of other possible therapies. It may also depend on payment policy. Both cyclosporine and rHuEPO were adopted rapidly and extensively by providers of end-stage renal disease care following US Food and Drug Administration approval, despite their high costs. Both drugs were remarkably effective, relatively safe, and able to be administered without great difficulty compared with the therapies they have replaced. There was no additional payment to hospitals for the initial use of cyclosporine, which was introduced in 1983 at the time when Medicare's prospective payment was established, since choice of immunosuppressive agent did not affect the fixed, per-admission payment determined by the diagnosis-related group for kidney transplantation. Medicare coverage for continuing outpatient use of cyclosporine was not initially provided, in contrast to rHuEPO, which was introduced in 1989 with Medicare outpatient coverage and payment of 80% of the allowed charge. Despite their high costs and different methods of insurance payment both drugs achieved a rather quick and high penetration rate into their respective populations.(ABSTRACT TRUNCATED AT 250 WORDS)

Net costs from three perspectives of using low versus high osmolality contrast medium in diagnostic angiocardiography

OBJECTIVES

We conducted an economic analysis to assess the extent to which a reduction in adverse drug reactions induced by low osmolality compared with high osmolality contrast media during diagnostic angiocardiography would result in savings to hospitals, society and third-party payers that would offset the substantially higher price of low osmolality contrast medium.

BACKGROUND

Substitution of low osmolality for high osmolality contrast media in the approximately 1 million diagnostic angiocardiographic procedures performed each year in the United States could substantially increase health care costs. Cost-effectiveness estimates should include savings that might occur through reduced costs of managing adverse drug reactions.

METHODS

In a randomized clinical trial of 505 persons under-going diagnostic angiography with either high osmolality or low osmolality contrast medium, we measured and compared 1) material costs of contrast media, and 2) costs from three perspectives of incremental resources used to manage contrast-related adverse drug reactions. We also performed sensitivity analyses to examine the effect of different assumptions with regard to relative risk, absolute risk and costs of adverse drug reactions on estimates of net cost of use of high osmolality and low osmolality contrast media.

RESULTS

One-hundred thirty-seven (54.2%) of 253 patients receiving high osmolality contrast medium and 44 (17.5%) of 252 patients receiving low osmolality contrast medium experienced adverse drug reactions. The average cost (from society's perspective) of resources used to manage adverse drug reactions per patient undergoing angiography was significantly (p = 0.0001) greater for high osmolality (mean $249) versus low osmolality (mean $92) contrast medium. Differential costs (from the hospital's perspective) were $67 greater for high osmolality contrast medium. Charges and professional fees (from the payer's perspective) were $182 greater for high osmolality (mean $312) than for low osmolality (mean $130) contrast medium (p = 0.42, NS). The higher differential and average costs of managing adverse drug reactions with high osmolality contrast medium offset 33% and 75%, respectively, of the $207 difference in mean material costs, but these estimates are sensitive to infrequent high cost cases.

CONCLUSIONS

Although low osmolality contrast medium is not cost-saving in diagnostic angiocardiography, its higher price is partially offset by lower management costs of adverse drug reactions. The cost offset for the hospital is lower than that for society and may not be realized by third-party payers. These methods and results may be useful in establishing clinical and payment guidelines for use of alternative contrast media in diagnostic angiocardiography.

The diffusion of two diagnostic technologies among hospitals in New York state

Using combined data from an independent survey by the American Hospital Association and the State of New York, the diffusion of two diagnostic technologies--the automated chemistry analyzer and the computed tomography (CT) scanner--among hospitals in New York State was analyzed. A linearized form of the logistic function was estimated using cumulative diffusion data for each. Diffusion patterns of both technologies fit the logistic curve well, with the coefficient of diffusion for the CT scanner being greater than that for the automated analyzer. Further analysis examined characteristics of early adopters of each technology. Similar hospital characteristics (e.g., high volume of admissions and medical school affiliation) were important in explaining early adoption of both technologies.

Update on assessment activities. United States perspective

The purpose of this paper is to present an update on biomedical technology assessment activities from a United States perspective. In 1985, I described in detail (a) a primary vehicle for technology assessment--the Consensus Development Program (CDP) of the National Institutes of Health (NIH)--and also discussed, in a second paper, (b) the transfer of consensus-enhanced scientific information and some of its impact on U.S. medical practice. Here, I focus on what has transpired during the past year: the changes in the climate in which U.S. technology assessment efforts are being conducted, the consequences of these changes, and the challenges that they pose for all concerned with the provision of quality health care. The first part of this paper centers on the broader framework within which technology assessment plays a role in the United States. Later, it addresses the specific technology assessment and transfer activities in which the NIH is engaged.

Health maintenance organizations: just what the doctor ordered?

Following its recent reorganisation of the management of the hospital sector of the NHS, the Government is currently engaged in a review of the primary health care sector. Certain of its proposals may be interpreted as suggesting movement towards a system modelled on American-style Health Maintenance Organizations (HMOs). This article seeks to explore the context in which HMOs have developed, to assess their current performance and to evaluate their potential impact on the health delivery system. It suggests that they must be understood primarily in the context of initiatives aimed at reducing health expenditure, and finds that the cost advantages claimed for them are achieved through reduced utilization rather than through greater efficiency. It also argues that this reduced utilisation is likely to increase inequalities in health care.

Changes in payment policies: impact on physicians' office testing

Recent changes in payment policies include powerful pecuniary incentives to move care from expensive hospital settings to cheaper outpatient sites. Physicians face competition from a growing number of alternative providers in the diagnostic testing marketplace. Given that a concurrent trend involves aggressive utilization review with stiff penalties for noncompliance, physicians are challenged to practice appropriate restraint in ordering and performing tests.

The diffusion of magnetic resonance imaging scanners in a changing U.S. health care environment

Technological aspects and early clinical experiences are arousing great enthusiasm over magnetic resonance imaging (MRI). However, influences such as regulation, reimbursement, and increasing competition also are playing important roles in determining the diffusion of this new technology. Of these considerations, competition among providers seems the most important. Competition related to MRI is manifested as direct competition over MRI services, using MRI to improve a provider's strategic position and competition among specialties. In making decisions concerning MRI acquisition and operation, providers are drawing upon their experiences with computed tomography (CT) to help them determine when would be the best time for acquisition, how to decide whether acquisition is appropriate, and how best to acquire, operate, and market the technology.

Lack of validity of diagnosis-related group payment systems in an intensive care population

Case mix based on diagnosis-related groups (DRGs) was studied over 3 years for duration of stay and mean charges for a pediatric intensive care unit (PICU) and a general ward (WARD) population. Case mix variation for 2403 PICU and 14,552 WARD patients was analyzed, and a subset of 856 PICU and 2222 WARD patients examined for variations in duration of stay and mean charges in nine DRGs. Whereas case mix by DRG was consistent over time for both groups, the PICU case mix differed consistently from WARD case mix (P less than 0.001). After adjustment for inflation and for differences in case mix, average stay for the PICU was 10.7 days, versus 6.1 for the WARD (P less than 0.025), with a mean charge of $7172 per PICU and $2946 per WARD patient (P less than 0.01). Furthermore, the case mix-adjusted differences in duration of stay and mean charge between the PICU and WARD populations increased over time. Pediatricians will need to address DRG-based reimbursement systems that place intensive care units, and their institutions, at a significant financial disadvantage.

How can patient education contribute to improved health care under prospective pricing?

Clinicians and policy makers are faced with one central dilemma under prospective pricing: how to maintain high quality of care with restricted financial resources. Patient education is one element of care which has been proposed to have the ability to improve the quality of care, while reducing costs for some conditions. This paper reviews the empirical evidence which touches on this question, including preoperative education, home care education, cooperative care units, diabetes patient education, and others. The evidence indicates that patient education can improve the quality of care, while in some cases also reducing the cost of providing medical care. This conclusion has important policy implications under conditions of reduced resources for medical care, as is occurring under prospective pricing in the United States.

Payment reform in the United States

Concern over rising health care costs has prompted dramatic reform in the United States health care financing system. The United States is moving from a period where providers determined prices into a period where payors set prices; and in certain locations into a period where prices are set by providers, and consumers choose among providers based on price and other factors. Also presented is an analysis of the interrelated events that brought about the changes. Among the factors are the oversupply of physicians and other providers the improvement of case-mix measures and other measures of hospital output, and the political climate toward payment reform. The paper concludes with specific lessons for other countries.

Prospective pricing system and its effect on the principles and practice of infectious diseases

The health care industry in general and hospitals in particular face an uncertain future as the federal government moved with unusual speed to enact sweeping Medicare legislation. These changing patterns of reimbursement reverse key economic incentives by which hospitals have been driven since the federal program for the elderly began 18 years ago. "Reasonable" cost reimbursement has been replaced by a policy that requires Medicare to establish and fix prices in advance, on a cost-per-case basis, using as a measure 467 categories called "diagnosis-related groups." These changes will present new challenges for the health care industry and will need innovative approaches to meet them. The prospective pricing system attempts to reverse the escalation of health care costs. Under this system, hospitals can realize greater profits only by reducing costs, not by incurring them. The prospective payment system will have profound effects on the practice of infectious diseases, and the potential impact on hospitals, the pharmaceutical industry, physicians, and patients will have to be studied in detail.

The diffusion of magnetic resonance imagers in the United States and worldwide

Magnetic resonance (MR) imaging is an exciting new diagnostic modality that has created tremendous interest in the medical profession. Although not unparalleled, the excitement engendered by MR imaging conjures up memories of the “CAT fever” induced by introduction of X-ray computed tomography (CT) scanners in 1973 (19).