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1 Introduction GERALD D. LAUBACH, ANNETINE C. GELIJNS, AND HOLLY V. DAWKINS The proceedings presented here summarize the fourth in a series of Institute of Medicine workshops whose intent is to critically examine medical innova- tion that is, the process by which scientific and technological findings are trans- lated into actual benefits in clinical practice. They appear at a time when the United States is engaged in a profound debate about the future of its health care system. President Clinton only recently unveiled his Health Security Plan, the principal objectives of which are to extend access to health care to all Americans, maintain the quality of health care in the United States, and contain the escalating costs of health care (Health Security Act, 1993; The President's Health Security Plan, 19931. Although the specific shape and nature of the reform legislation that will ultimately be enacted are as yet unknown, it will have major implications for the generation and application of new medical technologies. One can discern three major strategies in the President's proposal that will attempt to shape technological change in a quality-enhancing as well as cost- reducing direction. The first set of policies focuses on changing the demand for medical care through the introduction of such mechanisms as managed competi- tion and global budgets. Volume III in this series (Institute of Medicine, 1992) explored in considerable detail the impact of such structural changes on innova- tive activities. As Weisbrod also argues in chapter 2 of this volume, such chang- es are expected to lead to more cost-effective utilization of medical technology; this, in turn, will inevitably exert a strong influence on the rate and direction of subsequent research and development efforts. At the same time, the second major strategy of the reform proposal recognizes that if technological change is to be redirected it is essential to examine the underlying scientific and engineer

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4 GERALD D. LAUBACH, ANNETINE C. GELNNS, AND HOLLY V. DAWKINS ing knowledge base and the supply-side policies that stimulate technological expansion. In the current debate, for example, considerable attention is geared toward the level of investment in basic biomedical research and the number and mix of specialists versus generalists. The third set of policies concerns strength- ening the information bases about the risks, benefits, and costs of medical inter- ventions and coupling this information more strongly to decisions about the cov- erage, adoption, and use of medical technologies. This fourth volume in the Medical Innovation at the Crossroads series fo- cuses on that third set of policies. It addresses a critical juncture in the medical innovation process: the transition of a medical technology from "experimental" to "accepted.") These days, the care a patient receives is greatly shaped by a myriad of individual coverage and adoption decisions, which can range from a physician's choice of a diagnostic test, to a hospital drug formulary committee's acceptance of a new biotechnology agent, to the decision by an insurance com- pany or health maintenance organization about whether to cover positron emis- sion tomography scanning or lung transplants. Thus, both providers and payers have become important gatekeepers and determinants of the acceptance and utili- zation of medical interventions. Despite this importance, previous volumes in this series suggest that the nature of these various coverage and adoption deci- sions is still very much a mysterious "black box." Moreover, these decisions often appear to be highly variable; for example, a health plan may cover a medi- cal technology in one region but not in another. Taken together, these observa- tions provide a strong stimulus to take a closer look at the "real world" of cover- age and adoption decisionmaking: What criteria guide these decisions? On what information are they based? Who supports the underlying assessments? Luce and Brown (chapter 3), from interviews with both providers and pay- ers, conclude that assessment activities are increasing but that the information about benefits, risks, and costs is often highly inadequate. In the absence of such information, the adoption and use of technology have been shaped by a complex set of social, financial, and regulatory forces (Fendrick and Schwartz, chapter 5~. Indeed, these forces often counterbalance the incentives to make decisions on the basis of careful technology assessments. High-technology medicine, for exam- ple, is often a source of social and professional prestige. Consequently, hospitals view new technology as a way to attract high-quality specialists and a greater number of patient referrals. Not surprisingly, the degree of competition has been found to fuel the adoption of new technologies. For instance, hospitals in close proximity to other hospitals are much more likely to have open-heart surgery facilities than isolated hospitals (Robinson et al., 1987~. Nevertheless, as Ander- son and Steinberg argue in chapter 4, hospital managers' incentives to perform technology assessments and to base their acquisition decisions on such assess- ments have increased recently. Coverage decisionmaking exhibits a somewhat similar trend. Traditionally, coverage decisionmakina has been based more on administrative procedures than

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INTROD UCTION s on the results of rigorous evaluations. The chapters in this volume underscore the fact, however, that payers are strengthening the emphasis on medical technol- ogy evaluations in their decisionmaking processes. Interestingly, cost is not yet an explicit cntenon; for example, Buto refers in chapter 6 to the lengthy, and unsuccessful, history of the proposed regulations to add cost-effectiveness to the Health Care Financing Administration's criteria for coverage. Cost has always, however, been important in selecting those technologies that will be more ngor- ously screened by payers. A striking departure from previous practice is described by a number of payers in this volume (see, in particular, Gleeson and McGivney, chapters 7 and 9 respectively). In the past, medical benefit contracts for nearly all payers, public and private, had standard provisions that specifically excluded coverage for "in- vestigational" or"expenmental" therapies (see Newcomer, chapter 10~. As a result, coverage decisions were generally binary that is, "yes or no"~eci- sions. In response, patients often successfully battled payer's decisions not to cover experimental therapies in the courtroom (see Lairson, chapter 81. This in turn prompted the development of provisional coverage, a promising mechanism through which the patient care costs associated with an experimental procedure will be covered if patients are part of a predetermined research protocol. The resulting data are then used by payers to formulate a final coverage decision. In this volume, a variety of payers discuss their recent experience with provisional coverage for autologous bone marrow transplantation for advanced breast cancer.) This new approach for coverage decisionmaking is notable in two ways. First, evaluative research is often too expensive for any single organization to perform well. Collaborative approaches involving government, insurers, hospi- tals, and manufacturers are needed. Such approaches can be problematic, how- ever. It is worth remembering that, in 1990 and 1991, six insurers put forward a proposal to financially support evaluative research at the federal Agency for Health Care Policy and Research. The antitrust concerns raised about the pro- posal were, however, perceived as a serious problem by some; in addition, other interests have long been concerned about a centralized focus for technology as- sessment. The collaboration between payers, individual hospitals, and the Na- tional Cancer Institute in the case of autologous bone marrow transplantation is therefore a promising move. The second noteworthy element of this new approach is that provisional coverage can provide a mechanism for implicitly acknowledging a fundamental ~ As this volume was being prepared for publication a notice came through the news media of a case where Health Net, the second-largest California HMO, was ordered to pay $89.1 million in punitive and compensatory damages to the family of a patient with breast cancer for whom it had not covered autologous bone marrow transplantation an experimental technology (Washington Post, 1993). We regard this decision as highlighting the critical nature of the coverage and adoption decisions discussed in this volume.

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6 GERALD D. LAUBACH, ANNETINE C. GELI]NS, AND HOLLY V. DAWKINS aspect of medical innovation. Innovation takes place not only in industrial and academic laboratories but at the bedside and is often highly incremental in na- ture. Early assessments and binary coverage decisions are unlikely to accurately capture all the benefits, risks, and costs of a medical technology. The concept of provisional coverage, however, points toward a more flexible process that allows decisions about coverage, reimbursement, and utilization to change as the tech- nology evolves. The increased demand, from both providers and payers, for better informa- tion on the value of new medical interventions is also stimulating manufacturers to invest more heavily in outcomes research and cost-effectiveness analyses (see Marshall, chapter 121. All of these activities put heavier demands on methods of technology assessment. In chapter 11, Leape comprehensively discusses the strengths and weaknesses of both experimental (e.g., randomized controlled trials) and observational (e.g., claims database) methods of assessing medical technolo- gies. The final question that then remains is, Who shall support these assess- ments? In chapter 13, Garber and Owen review the relative roles and responsi- bilities of government, payers, and manufacturers. They conclude that the current investment in technology assessment and outcomes research is highly inadequate and discuss several mechanisms for improving this situation. In sum, the imminence of health care reform should not obscure the consid- erable changes that have already taken place in the provision and financing of health care (see Foote, chapter 14~. The United States has witnessed an impres- sive degree of growth in the number of people participating in prepaid capitated arrangements, and even traditional indemnity plans have nearly all adopted such managed care tools as utilization management and review. These changes pro- vide much stronger incentives than existed in the past to assess the value of existing, as well as emerging, medical care. The chapters in this volume review the strengths and weaknesses of present coverage and adoption practices, high- light opportunities for improving both decisionmaking processes and the under- lying information base, and consider approaches to instituting the much needed increase in financial support for evaluative research. These topics will remain highly relevant in the years to come; for example, the establishment of a mini- mum benefits package raises questions about how decisions to include or exclude services in that package are best made. It is the committee's hope that the discussions in this volume will contribute some answers to such questions and to the debate about the future health care system in general. REFERENCES Institute of Medicine. 1992. Medical Innovation at the Crossroads. Vol. 3, Technology and Health Care in an Era of Limits. A. C. Gelijns, ed. Washington, D.C.: National Academy Press.

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INTRODUCTION 7 Health Security Act. 1993. Report no. PB93-233625KSV. Springfield, Va.: National Technical Information Service, U.S. Department of Commerce. The President's Health Security Plan. 1993. Report no. PB93-234979. Springfield, Va.: National Technical Information Service, U.S. Department of Commerce. Robinson, B., Garnick, D. W., McPhee, S. I. 1987. Market and regulatory influences on the availability of coronary angioplasty and bypass surgery in U.S. hospitals. New England Journal of Medicine 317:85-90. Washington Post. 1993. Family Awarded $89.1 Million From HMO in Cancer Death. December 30, p. A12.