Medical Technology and the Health Care System A Study of the Diffusion of Equipment-Embodied Technology (1979) / Chapter Skim
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APPENDIX F: THE IMPACT OF STATE REGULATION ON THE ADOPTION AND DIFFUSION OF NEW MEDICAL TECHNOLOGY
APPENDIX F: THE IMPACT OF STATE REGULATION ON THE ADOPTION AND DIFFUSION OF NEW MEDICAL TECHNOLOGY
Pages 240-269
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II. Analysis of the Impact of State and Local Regulation Six principal modes of state regulation are identified and analyzed: • Certificate of need • Reimbursement controls • Medical devices regulation 240
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This paper discusses a wide range of regulatory activities at the state level, including direct control modes such as certificate of need, medical device regulation, and institutional licensure and the indirect modes such as reimbursement controls, utilization review and quality assurance programs, and personnel licensure. The analysis of these modes in Part II draws, where possible, on existing evidence of the impact of technological change; but with the exception of certificate of need, prospective reimbursement, and the Economic Stabilization Program there is little empirical evidence available.
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limit reimbursement to a level that assumed full utilization, or (3) place a ceiling on each provider's capital expenditures for new services and let individual providers decide whether to buy a CAT Scanner or some other piece of equipment.
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In the case of the health care services industry, economic regulation can also be designed to constrain total expenditures in response to what appears
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The basic human values at stake in the provision of health care services and the growing preoccupation with new technology as a means of delivering a greater intensity of medical services further contribute to the problems of constraining total expenditures. This regulatory goal is achieved in a variety of ways, including establishing prices or tariffs either across the board or differentially by service or product, by constraining total institutional revenues as a function of actual or prospective costs, or by rationing or otherwise influencing the utilization of services.
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The six regulatory programs reviewed are: Certificate of need Reimbursement controls Medical devices regulation Utilization review and quality assurance programs Institutional licensure and accreditation Personnel licensure
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Certificate of Need Certificate of need is a program of public review and approval of the capital expenditures and service changes of health care providers. Review in most states is conducted by both state agencies and local health systems agencies, with local review advisory and state review final.
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In its l975 study of the impact of the Section ll22 and other programs to control capital expenditures, Lewin and Associates7 concluded that these programs had not been particularly successful in controlling hospital investment. Fortysix percent of the 20 states and 40 areawide agencies included in the sample had approved hospital beds in excess of their published 5-year need projection.
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There is also some evidence that the process, by defining its coverage in terms of types of providers rather than types of TABLE l Approval Rates by State Agencies under Certificate of Need and ll22 Reviews for Equipment and Service Projects in Sample States Applications Percent Received Approved Equipment CAT scanners 9l 96.7 Radiological l06 93.4 Renal dialysis 24 l00.0 Cardiac catheter 9 l00.0 Other equipment 5 l00.0 All equipment 235 95.7 Services ICU-CCU l4 92.9 Renal dialysis l4 78.6 Other specialty 69 94.2 Emergency medical services l9 89.5 Other outpatient 73 97.3 Rehabilitation 28 l00.0 Other ancillary 8 l00.0 All services 224 94.6
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These materials cannot simply be adopted by a health planning agency. Rather, they are reviewed to address local circumstances and patterns of treatment.
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It is therefore not surprising that these programs seem most able to limit investment in states where reimbursement control programs have introduced separate limits on available resources. It is within this context that the proposal to limit hospital investment incorporated into the administration's cost containment program should be noted.
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All payment programs reimburse providers within specific rules. In this sense, all have reimbursement controls.
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The regulation through individual third parties is flawed by the general effects differentials in fee levels have -- refusal by physicians to treat patients, requiring additional payments of them (in the case of Medicaid and Medicare, illegally) , and encouragement of fraud.
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There is some evidence that controlling reimbursement has an impact on capital expenditure plans and, consequently, the introduction of new technology. A survey of hospital administrators on the effects of the Economic Stabilization Program at the end of the first year of the program indicated that approximately one-fifth had reduced their capital expenditure plans for that year, and that the average reductions among those was 43 percent.
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No similar constraints were found for larger hospitals, which the author speculated reflects their better access to external funds.14 Thus, the potential for reimbursement controls to influence the investment decisions of institutional providers appears to be confirmed. Not examined in these studies is the impact of alternative methods of introducing controls over the capital and operating budgets of providers.
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The hospital is free to allocate its resources at its discretion. This was the approach taken in the Economic Stabilization Program and in the administration's cost-containment proposal.
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The inclusion of new services into budgets was subject to agreement on the level of operating costs of existing services. This examination of institutional reimbursement controls makes it apparent that any control program includes an explicit or implicit policy toward capital expenditure in general and new technology in particular.
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In general, the guidelines adopted for assessing this followed the federal guidelines, so the net effect was to create a national approach to regulating medical devices with both federal and state enforcement mechanisms. In l976, the Medical Devices Amendments to the Food, Drug and Cosmetic Act were signed into law.
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A primary reason for seeking the exemption under the Medical Devices Amendments is concern over the time the federal government will take to establish standards and begin operating the program. These are enforcement issues.
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If our judgment of the extent to which state standards of demonstration are likely to be consistent with federal standards, and if the state and federal governments are prepared to coordinate their requests of manufacturers even while reserving the right to make independent judgments, the impact of this factor should not be great. Utilization Review and Quality Assurance Programs Another form of regulation that might have an impact on the adoption and diffusion of medical technology are programs to review the appropriateness of the utilization of health care services and the quality with which services are provided.
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This program was a distinct break from previous utilization review efforts in that it called for the establishment of a network of review organizations external to the individual institutions and separate from government to assume responsibility for assuring that health services reimbursed by federal or federally assisted programs under the Social Security Act are medically necessary, meet professionally recognized standards of care, and are provided in the most economical and appropriate setting. To meet this responsibility, PSRO's will review admissions to hospitals and other health facilities, certify the need for continued treatment, review extended or costly treatment, and review the patterns of practice of individual providers, institutions, and the community as a whole.
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If a PSRO adopts standards and treatment protocols that call for the routine use of the best available technology, this might create pressures on institutions for new investment to meet the recognized community standard. While there is considerable conjecture on the likely direction this standard-setting process will take, there are no current studies of the impact of PSRO's on the level of technology used in medical treatment.
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There are generally three aspects to the licensing program: a review of architectural plans of proposed facilities for consistency with the construction code, an initial licensure inspection, and periodic inspections once the facility is opened. One of the few studies of licensing programs that has been conducted concluded that regulations were stronger, less ambiguous, and more stringently enforced in matters relating to construction, maintenance, and sanitation of the physical plant than for matters relating more directly to patient care.18 It has been asserted that institutional licensure programs have intended to over specify the techniques and inputs that institutions must use.
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In determining the appropriateness of equipment and technology, both processes rely on the professional judgment of surveyors. The New York State standards for laboratory services, for example, require the extent and complexity of service to be "commensurate with the size, scope and nature of the hospital."19 The standard for radiology is comparable, calling for facilities to be available "according to the needs of the hospital." If radiotherapy services are provided at the hospital, they must "meet professionally approved standards for safety and personnel qualifications."20 JCAH standards similarly call for professional judgment, requiring, for example, in laboratories, that "equipment and instruments be appropriate for the services required,"21 or "that radiation therapy facilities shall be adequate for modern and appropriate treatment according to the needs and size of the institution."22 The character of these programs may have several influences on the introduction and diffusion of new medical technology, although analysis of these influences is currently only conjecture.
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That study identified l7 categories of allied health personnel which were licensed in at least some states. These included: Clinical laboratory directors Clinical laboratory medical technologists Dental hygienists Inhalation therapists Midwives Opticians Optical technicians Optometrists Pharmacists Physical therapists Physical therapy assistants Physician assistants Psychiatric attendants Psychologists Radiologic technologists Sanitarians Sanitarian technicians
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A recent report by DHEW on the issue, Credentialing Health Manpower, calls for a restraint in the introduction of state licensing for new categories of workers. It advises states to "entertain proposals to license additional categories of health personnel with caution and deliberation." As an alternative, the report stresses the 'role that can be played by private certification programs.
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This effect will likely be felt at both the level of aggregate capital investment and the level of individual equipment and service decisions. The regulatory modes most likely to influence the adoption and diffusion of medical technology are certificate of need and reimbursement controls.
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There is a critical need for the potential decision makers to obtain much more information than they have on the nature and scope of these issues, the effect their decisions can have, the critical issues or factors that should be considered as they establish policy in their programs, and the best available objective information and analyses by advocates of various positions on the current technological orientation and needs of the American medical system. Finally, moving from the level of policy to individual decisions, it is not at all clear that the technical capacity to make good planning, review, or investment decisions regarding the diffusion of medical technology exists within the regulatory agencies or, for that matter, elsewhere.
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and Nationwide Survey of State Health Regulation (Springfield, Va. : National Technical Information Service, l974)
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Report on Licensure and Related Health Personnel Credentialling. Washington, D.C.: U.S.
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