Medical Technology and the Health Care System A Study of the Diffusion of Equipment-Embodied Technology (1979) / Chapter Skim
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ALTERNATIVE APPROACHES TO TECHNOLOGY MANAGEMENT
ALTERNATIVE APPROACHES TO TECHNOLOGY MANAGEMENT
Pages 46-67
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From page 46... ...
But as long as reimbursement policies provide incentives (or at least no disincentives) to overadopt hospital clinical and ancillary technology and provide inadequate incentives to adopt coordinative technology, all other policies to manage the introduction of new technology must counteract these effects of the reimbursement system.
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From page 47... ...
If, as in the case of coordinative technology such as computerized medical information systems, the ultimate market for the technology is highly uncertain, venture capital certainly will not be forthcoming. The development of
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From page 48... ...
The need for more information on the extent to which public support of research and development augments or merely substitutes for private sector commitments has been recognized by others.1^2 In the view of this committee, funding of large-scale technological development projects by the federal government is a reasonable approach, particularly for coordinative technologies. In the past, the National Center for Health Services Research funded large-scale demonstration projects for development of medical information systems and telemedicine.
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From page 49... ...
into three categories: Class I devices need only comply with the general regulatory controls of the law; Class II devices are additionally subject to performance standards promulgated by FDA; and Class III devices are subject to premarket approval requirements, including demonstration of effectiveness by well-controlled investigations, including clinical investigation "where appropriate."9 The regulatory scope of the medical devices law is wide. The federal government holds the authority to prevent introduction of virtually any new technology that depends on a new medical device.
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From page 50... ...
Therefore, even if cost-effectiveness were a criterion for premarket approval, decreased health care costs could not be assured in the absence of utilization controls. Premarket testing cannot always detect rarely occurring but serious hazards.
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From page 51... ...
A study of drug companies by Caglarcan et al.15 finds that companies that concentrate research and development funds in relatively few areas of research tend to produce more new chemical entities in the 4 succeeding years than do companies with more diversified research efforts. This finding suggests that even if premarket approval does increase development costs per new product, innovation rates need not be affected.
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From page 52... ...
Because premarket regulation offers little effective control over the actual use of technology that has been approved, consideration of economic criteria such as cost-effectiveness or net social benefit is inappropriate. DIRECT REGULATION OF THE ADOPTION AND USE OF EQUIPMENT-EMBODIED TECHNOLOGY A commonly suggested mechanism for altering patterns of adoption and use is the exercise of direct control over these decisions
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From page 53... ...
At present, some Blue Cross plans refuse to reimburse health care providers for services that have been disapproved by the CON agency. Capital expenditures review is essentially a negative instrument; it can be used to slow the diffusion of new equipmentembodied technology, but it cannot easily be used to speed the adoption of underdiffused technology.
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From page 54... ...
It is also important that the HSA or local hospitals be able to accumulate capital spending allocations over multiple years to enable the implementation of especially large projects that may be needed. Apart from the structural problems described above, the agencies suffer from a lack of timely information to assist in decision making, particularly in regard to new equipment-embodied technology.58 Assuming that the structural and implementation problems are overcome, capital expenditures review nevertheless presents serious generic problems.
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From page 55... ...
Third, certificate of need unquestionably adds to the cost of adopting new technology, both good and bad, and thus further biases capital expenditure decisions against the introduction of potentially cost-reducing coordinative technology such as medical information systems. The question of whether direct regulation of capital investments by providers is a good approach to control the tendency to overadopt clinical and ancillary hospital technology ultimately rests on one's philosophy toward regulation.
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From page 56... ...
Consequently, a comprehensive program of noncoverage would have to be augmented by detailed utilization review. Third-party payers could be more circumspect in paying for new clinical and ancillary procedures.
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From page 57... ...
Nine state governments were administering rate-setting programs affecting from 8 to 90 percent of state hospital revenues. These state programs impose binding rates of payment under various payers, usually including Medicare, Medicaid, and Blue Cross.12 The proposed hospital revenue limitations under the Administration's hospital cost-containment legislation121 is a PR system.
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From page 58... ...
More study of this approach to prospective rate setting is needed. Theoretically, PR should have a salutary effect on the adoption and use of new clinical and ancillary technology, since it requires hospitals to weigh alternative uses of funds.
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From page 59... ...
It has been suggested that requiring all hospital-based physicians to enter into salary agreements as a condition for third-party payment is a solution to the perverse incentives operating in hospitals.142 But it is not clear that this would significantly affect adoption and use of new technology. Certainly, for example, the impetus to the use of anesthesia is not the anesthesiologist, but the surgeon.
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From page 60... ...
In principle, capitation rewards providers for efficient use of resources in producing the services covered by the capitation rate and penalizes inefficient providers. The most common form of capitation payment is the health maintenance organization (HMO)
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From page 61... ...
Most contract for hospital services with institutions serving a wider population. Thus, equipment adoption decisions are generally made by hospitals with reference to the larger population, and valid inferences about HMO adoption behavior are not possible.
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From page 62... ...
The regulation of the number of residency positions offered in any specialty or subspecialty is in the hands of the Liaison Committee on Graduate Medical Education, which represents five medical professional organizations. Self regulation by the profession appears to be a viable alternative.
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From page 63... ...
Provider education may be directed at the physician as gatekeeper of the use of new technology, at the hospital as primary adopter of new clinical and ancillary technology, or at organizations of professionals, including such quasi-public agencies as professional standards review organizations (PSRO's)
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From page 64... ...
In fact, with few exceptions noted in previous sections, federal legislation has already authorized direct control of many decisions regarding the diffusion of equipment-embodied technology through three major laws -- the Medical Devices Amendments of l975 (P.L.
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From page 65... ...
Those whose initial cost is $l00,000 or more and intended for hospitals must usually be granted a certificate of need. Finally, the use of equipment-embodied technology may ultimately be controlled by utilization review criteria developed and administered by PSRO's.
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From page 67... ...
Reform of the reimbursement system to promote appropriate incentives relative to the adoption and use of equipmentembodied technology is preferable to direct regulation of such decisions. In particular, limitations on third-party payer coverage of unproven clinical and ancillary technology, prospective reimbursement of hospitals, and especially capitation payment merit further exploration.
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