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MEDICAL INNOVATION AT THE CROSSROADS VOLUME III Technology and Health Care 1R An Era of Limits Annetine C. Gelijus, Editor Committee on Technological Innovation in Medicine INSTITUTE OF MEDICINE _ ~ National Academy Press Washington, D.C. 1992

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NATIONAL ACADEMY PRESS 2101 Constitution Avenue, N.W. Washington, D.C. 20418 The Institute of Medicine was chartered in 1970 by the National Academy of Sciences to enlist distinguished members of the appropriate professions in the examination of policy matters pertaining to the health of the public. In this the Institute acts under both the Academy's 1863 congressional charter responsibility to be an advisor to the federal government and its own initiative in identifying issues of medical care, research, and education. The Committee on Technological Innovation in Medicine was established in 1988 by the Institute of Medicine to design a series of workshops that would (a) provide more fundamental knowledge of the process by which biomedical research findings are translated into clinical practice and (b) address opportunities for improving the rationality and efficiency of the pro- cess. This volume consists of the proceedings of the third workshop in the series, "The Changing Health Care Economy: Impact on Physicians, Patients, and Innovators," held April 18-19, 1991. This workshop and its proceedings were supported by the Howard Hughes Medical Institute, Pfizer, Inc., and the Health Industry Manufacturers Association. The opin- ions and conclusions expressed here are those of the authors and do not necessarily represent the views of the National Academy of Sciences or any of its constituent parts. Library of Congress Cataloging-in-Publication Data Technology and health care in an era of limits / Annetine C. Gelijns, editor; Committee on Technological Innovation in Medicine, Institute of Medicine. p. cm . (Medical innovation at the crossroads; v. 3) Proceedings of a workshop held April 18-19, 1991, supported by the Howard Hughes Medical Institute, Pfizer, Inc., and the Health Industry Manufacturers Association. Includes bibliographical references and index. ISBN 0-309-04695-5 1. Managed care plans (Medical care) Congresses. 2. Medical care- United States Congresses. I. Gelijus, Annetine. II. Institute of Medicine (U.S.). Committee on Technological Innovation in Medicine. III. Howard Hughes Medical Institute. IV. Pfizer Inc. V. Health Industry Manufacturers Association. VI. Series. [DNLM: 1. Cross-Cultural Comparison-congresses. 2. Delivery of Health Care United States congresses. 3. Health Policy-United States congresses. 4. Technology, Medical congresses. W1 ME342F v. 3] Ra413.H39 1992 36.1 dc20 DNLM/DLC92-22704 for Library of CongressCIP First Printing, August 1992 Second Printing, February 1993 Third Printing, September 1993 Available from: National Academy Press, 2101 Constitution Avenue, NW, Washington, D.C. 20418 Copyright 1992 by the National Academy of Sciences Printed in the United States of America The serpent has been a symbol of long life, healing, and knowledge among almost all cultures and religions since the beginning of recorded history. The image adopted as a logotype by the Institute of Medicine is based on a relief carving from ancient Greece, now held at the Staatli- chemuseen in Berlin.

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Committee on Technological Innovation in Medicine GERALD D. LAUBACH, Chair, Former President, Pfizer, Inc. SUSAN BARTLETT FOOTE, Health Advisor, Office of Senator Dave Durenberger, U.S. Senate BEN L. HOLMES, Vice President and General Manager, Medical Products Group, Hewlett-Packard Company WILLIAM N. HUBBARD, JR., Former President, the Upjohn Company LUCIAN LEAPE, Lecturer on Health Policy, Harvard School of Public Health KENNETH MELMON, Arthur L. Bloomfield Professor of Medicine and of Pharmacology, Department of Medicine, Stanford University School of Medicine H. RICHARD NESSON, President, Brigham and Womens Hospital UWE E. REINHARDT, James Madison Professor of Political Economy, Woodrow Wilson School of Public and International Affairs, Princeton University NATHAN ROSENBERG, Professor of Economics, Stanford University MICHAEL SOPER, National Medical Director, CIGNA JOHN E. WENNBERG, Professor of Epidemiology, Department of Community and Family Medicine, Dartmouth Medical School iii

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In PROJECT STAFF D1vis10n of Health Care Services K~1 D. Yordy, Director Kathleen N. Lohr, Deputy Director Donald Tiller, Adminislrative Assistant Frogr~~ ~ ~/~gfc~' ~ fig ~cf~ Annetine C. Geltns, Program Director Holly Doeskins, Research Assistant Helen Rogers, Senior Protect Assistant Leah remade, SO Editor Division of Health Sciences Policy Ruth Ellen Bulger, Director David Turner, SO Officer

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Acknowledgments The Committee on Technological Innovation in Medicine wishes to acknowledge the many individuals and organizations who contributed to this volume. In particular, we thank John E. Wennberg, who was the main committee member responsible for this project, and without whose guidance and insights this book would not have seen the light of day. The papers in this volume were originally presented at the Institute of Medicine (IOM) workshop, "The Changing Health Care Economy: Impact on Physicians, Patients, and Innovators" (see Appendix A). The committee greatly appre- ciates the opportunity provided by the Howard Hughes Medical Institute, Pfizer, Inc., and the Health Industry Manufacturers Association to investi- gate the dynamics of technological innovation in medicine. It also recog- nizes the significant contributions of the moderators, discussants, and work- shop participants to the issues discussed here. Finally, and in particular, the committee would like to express its grati- tude to the IOM staff who facilitated the work of the committee. We especially thank Annetine C. Gelijns, who directs the program on techno- logical innovation in medicine, for her assistance in conceptualizing and editing this volume. The committee also appreciates the support of David Turner and Ruth Ellen Bulger, respectively staff officer and director of the Division of Health Sciences Policy, in organizing and shaping the work- shop. Holly Dawkins provided excellent substantive and procedural contri- butions to the committee's work. We are also grateful for the logistical

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Al A CKNOWLEDGMENTS support and manuscript preparation provided by Helen Rogers. The manu- script's final form owes a great deal to the thorough copyediting of Leah Mazade. Among other IOM members who contributed to this publication are Kathleen N. Lohr, deputy director of the Division of Health Care Ser- vices, Karl D. Yordy, director of the Division of Health Care Services, Richard A. Rettig, senior staff officer of the Division of Health Sciences Policy, and executive officer Enriqueta Bond. GERALD D. LAUBACH Chair Committee on Technological Innovation in Medicine

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Contents LIST OF ABBREVIATIONS . xi PART I: SETTING THE STAGE 1. INTRODUCTION Gerald D. Laubach, John E. Wennberg, and Annetine C. Gelijns.......... INNOVATION AND THE POLICIES OF LIMITS IN A CHANGING HEALTH CARE ECONOMY John E. Wennberg 9 PART II: MANAGING CARE IN THE UNITED STATES THE GROWTH OF MANAGED CARE IN THE PRIVATE SECTOR Michael Soper and David Ferriss.................... MANAGING MEDICAL PRACTICE: THE POTENTIAI OF HMOs Edward H. Wagner.................................... . . V11 37 51

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. . . V111 CONTENTS COST-CONTAINMENT EFFORTS IN THE PUBLIC SECTOR: OREGON'S PRIORITY LIST H. Gilbert Welch and Elliott S. Fisher 63 PART III: MANAGING CARE IN THE UNITED KINGDOM AND CANADA 6. PRIORITY SETTING IN A NEEDS-BASED SYSTEM Alan Williams ............................................................................ 7. THE MEETING OF THE TWAIN: MANAGING HEALTH CARE CAPITAL, CAPACITY, AND COSTS IN CANADA Morris L. Barer and Robert G. Evans .......... PART IV: IMPLICATIONS FOR PROVIDERS 8. NEW TECHNOLOGY ADOPTION IN THE HOSPITAL Paul F. Griner.................. 9. PHYSICIANS' ACQUISITION AND USE OF NEW TECHNOLOGY IN AN ERA OF ECONOMIC CONSTRAINTS Bruce J. Hillman......................... PART V: IMPLICATIONS FOR PATIENTS 10. THE PATIENT'S STAKE IN THE CHANGING HEALTH CARE ECONOMY Albert G. Mulley, Jr........... 11. WHAT IS IT LIKE TO BE A PATIENT IN THE 1990s? Charles E. Silberman.................................................................... PART VI: IMPLICATIONS FOR INNOVATORS ...... 79 97 .123 '33 .............. 153 165 12. MANAGED CARE AND PHARMACEUTICAL INNOVATION Frederick W. Telling 201 13. CURRENT STRATEGIES FOR THE DEVELOPMENT OF MEDICAL DEVICES Ben L. Holmes ............................................................................. .219

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CONTENTS 14. THE CHANGING HEALTH CARE ECONOMY: IMPACT ON SURGICAL TECHNIQUES Frank G. Moody........................................................ PART VII: CONCLUDING OBSERVATIONS 231 15. SUMMING UP: REFLECTIONS ON MEDICAL INNOVATION AND HEALTH CARE REFORM Harvey V. Fineberg 249 APPENDIXES A. WORKSHOP AGENDA B. CONTRIBUTORS.......... INDEX IX .257 .261 269

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List of Abbreviations ABMT ACS ADRDA AIDS AHCPR AMA BPH CNS CON COP CPT CPT-4 CSS CT DON DRG ECG FDA FTEs GHC GNP GP autologous bone marrow transplantation American Cancer Society Alzheimer's Disease and Related Disorders Association acquired immune deficiency syndrome Agency for Health Care Policy and Research American Medical Association benign pro static hyperplasia central nervous system certificate of need Committee on Prevention, Group Health Cooperative of Puget Sound Current Procedural Terminology Current Procedural Terminology, 4th edition Cancer Surveillance System computed tomography determination of need (in Massachusetts) diagnosis-related group electrocardiogram Food and Drug Administration full-time-equivalent employees Group Health Cooperative of Puget Sound gross national product general practitioner x~

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. . X11 HCA HCFA HMO HP ICD-9 ICI ICU IND IOM IPA MRI MS NHS NIH PMA PORTs POS PPRC PPS PTCA QALY R&D RBRVS RCT :-PA UCLA VHA LIST OF ABBREVIATIONS Hospital Corporation of America Health Care Financing Administration health maintenance organization Hewlett-Packard International Classification of Disease, 9th edition Imperial Chemical Industries intensive care unit investigational new drug Institute of Medicine independent practice association magnetic resonance imaging multiple sclerosis National Health Service, United Kingdom National Institutes of Health premarket approval patient outcome research teams point of service Physician Payment Review Commission Prospective Payment System percutaneous transluminal coronary angioplasty quality-adjusted life year research and development resource-based relative value scale randomized, controlled clinical trial tissue plasminogen activator University of California, Los Angeles Voluntary Hospitals of America