The Diffusion of New Medical Technology: The Case of Drug-Eluting Stents

Amitabh Chandra, David Malenka, Jonathan Skinner

Chapter in NBER book Discoveries in the Economics of Aging (2014), David A. Wise, editor (p. 389 - 403)
Conference held May 9-11, 2013
Published in June 2014 by University of Chicago Press
© 2014 by the National Bureau of Economic Research
in NBER Book Series - The Economics of Aging

There is considerable variation across hospitals and regions in the diffusion of new medical technologies. Before 2003, bare-metal stents were used by cardiologists seeking to perform revascularization for blockages in the heart. In April of 2003, the FDA approved the use of coated anti-proliferative but more expensive drug-eluting stents, designed to reduce re-narrowing of the artery at the location of the original stent. Adoption was rapid but uneven; in the year following their introduction, drug-eluting stents comprised 83% of total stents among Medicare enrollees in the top quintile of hospitals, but just 33% in the low quintile hospitals. We used the Medicare claims data to test several models of diffusion, and found empirical support for models of expertise (better quality hospitals adopt quicker) and spillover models with correlated diffusion rates. There is suggestive evidence that hospitals that gained the greatest incremental benefit from drug-eluting stents diffused more rapidly, but there is no support for either models of competition, knowledge spillovers, or profit maximization. That the most productive hospitals were those most likely to adopt new technology highlights the empirical pitfalls of estimating returns to new technologies based on instruments such as distance to hospitals.

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