The Determinants of Technological Change in Heart Attack Treatment
This paper examines the sources of expenditure growth in heart attack treatment. We first show that essentially all of cost growth is a result of the diffusion of particular intensive technologies; the prices paid for a given level of technology have been constant or falling over time. We then examine the reasons for this technology diffusion. We distinguish six factors that may influence technology diffusion: organizational factors within hospitals; the insurance environment in which technology is reimbursed; public policy regulating new technology; malpractice concerns; competitive or cooperative interactions among providers; and demographic composition. We conclude that insurance variables, technology regulation, and provider interactions have the largest quantitative effect on technological diffusion. These factors affect both technology acquisition and the frequency of technology use.
Published: With Joseph D. Newhouse and Dahlia Remler, published as "Are Medical Prices Declining? Evidence for Heart Attack Treatments", Quarterly Journal of Economics, Vol. 108, no. 4 (November 1998).