Technology and Health Care in an Era of Limits (1992) / Chapter Skim
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PART IV: IMPLICATIONS FOR PROVIDERS
PART IV: IMPLICATIONS FOR PROVIDERS
Pages 121-150
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Part IV Implications for Providers
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This perspective reflects a mixture of knowledge of the benefits and limits of technology on the one hand and awareness of its drawing power on the other. The discussion includes selected data related to the effect of these factors on patterns of technology adoption.
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The last category of new technology represents unplanned changes in the day-to-day life of hospital practice that often have significant cost implications but that generally do not come to light until after the change has been in place for a period of time. Some examples are the use of magnetic resonance imaging (MRI)
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In the underregulated states of the Midwest, hospital cash reserves tend to be high; reserves of up to $150 million in some of the large midwestern teaching hospitals are not unusual. Conversely, in the heavily regulated hospitals of the Northeast, operating surpluses are uncommon, and for many hospitals (e.g., most New York state hospitals)
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From page 126... ...
In addition, annual capital expenditures for building improvements and equipment replacement, reasonable surrogates for overall capital outlays, were 25 percent less for the 30 Northeast hospitals than such expenditures for similar hospitals throughout the rest of the country. Comparing upstate versus downstate New York hospitals reveals another factor that may influence the adoption of new technology, namely, the hospital's share of service to the poor.
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present figures for the number of FTEs per occupied hospital bed, after adjusting for case mix, in four heavily regulated northeastern states, four underregulated midwestern states, and two states with a sizable proportion of managed care. The number of FTEs per bed in these regions are 5.2, 6.1, and 6.9, respectively.
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; variably Variable; determined by volume adequate (con) and case mix Community Controlled Unpredictable; inflationary health care costs Incentive Introduction of new technology Incentive for ambulatory alternatives to inpatient care Physician + satisfaction Manage services Controlled (pro)
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Striking differences are apparent. Two-thirds of the less regulated teaching hospitals perform bone marrow transplants, but only one-quarter of similar hospitals in the heavily regulated states undertake the procedure.
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But as the availability of hospital capital decreases, interesting financial relationships are developing in some instances between hospitals and medical staff. Some examples are joint ventures for the acquisition of and operation of new technology, or arrangements whereby staff members purchase equipment and are responsible for its operating costs, while the hospital advances money for working capital, applying standard banking practices for its repayment.
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2. A regional capital expenditures cap tied to a global operating budget appears to be the most effective method of controlling capital costs.
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The other prediction is that hospitals and their medical staffs will have to develop innovative organizational and financial relationships involving shared risk. These relationships will ensure that the adoption of new technology is the result of a balance between the hospital's competitive desire for excellence and the region's interest in helping to achieve affordability by ensuring that services that are not actually needed are not made available.
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First, in the belief that recent past experience might presage what will occur in the immediate future, the paper presents earlier research describing how physicians responded to environmental influences in deciding whether to acquire a new medical technology of the 1980s magnetic resonance imaging (MRI)
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DIFFUSION OF MAGNETIC RESONANCE IMAGING INTO CLINICAL PRACTICE This section of the paper discusses research on nonmedical influences that have affected MRI acquisition (Hillman, 1986; Hillman et al., 1986, 1987a,b)
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Corporate "detail" personnel touted real or imagined advantages of their technology vis-a-vis others and promised impending FDA approval and third-party reimbursement. In actuality, FDA approval processes and the decisions on reimbursement from a proliferating number of independent payment entities would require considerable time, and no one could actually predict when they might be concluded.
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Those interviewed by the RAND investigators generally responded quite positively to MRI. Physicians believed that although the FDA approval process clearly would be drawn out, eventually all the devices would achieve approval.
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The states, however, controlled acquisition of the technology by hospitals but not by outpatient facilities, and this quickly led to the hospitals becoming competitively disadvantaged. A further factor was that this development occurred while hospitals were busy accommodating the revenue reductions that accompanied prospective payment under Medicare and the attempts of other payers to reduce cost shifting (i.e., increasing charges to some payers to compensate for reduced payments by others)
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operations of high technology posed considerable difficulties (Brust et al., 1981~. Regardless of whether a hospital intended to actually operate an MRI facility, it nevertheless filed a CON application, expecting that by the time the process resulted in its selection, perhaps many years hence, it would be ready for the technology.
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began an extended evaluation to determine its coverage policy. Uncertainty remained about how capital reimbursement would be handled under prospective payment.
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Competition Over Magnetic Resonance Imaging The RAND investigators evaluated competition among providers in the same five states in which they had assessed the effects of regulation. In states other than Massachusetts (where, as noted earlier, regulation effectively constrained access to the technology)
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Yet in no instance did the presence of an existing facility dissuade a provider from pursuing MRI acquisition; in these cases, providers cited the existence of other facilities as evidence that if they did not hurry their acquisition, they might be left out entirely. Overall, the RAND investigators concluded that competition among providers was a potent force encouraging the early diffusion of MRI technology.
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TECHNOLOGY ACQUISITION IN THE "NEW HEALTH CARE" ERA There is a general perception among physicians that the times have grown tougher, especially over the past few years. Despite the recent experience with MRI, many observers believe that physicians might be more responsive now to environmental influences opposing technology acquisition than they were in the 1980s.
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As a result, there is a persistent, advantageous niche for entrepreneurial technology acquisition in outpatient settings by physicians and other entities, either jointly with or exclusive of hospitals. These potential providers of technologically advanced services still have access to capital, tax incentives, and mechanisms to ensure a sufficient volume of patients-most notably through self-referral and to encourage new technology acquisition (ECRI Technology Management Assessment, 1985~.
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New reimbursement policies now seek to reduce payment for technological care but do little to reduce utilization by individual physicians, who often have a financial incentive to continue or even increase the use of technology. A significant counterbalancing influence, however, is that even independent physicians increasingly participate in managed care, either as members of preferred provider organizations or as contractors to HMOs.
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Certainly, this was the case with MRI: aside from the studies required for FDA certification, no scientific assessment occurred for at least 5 years after its introduction into the United States, and little has occurred as of today (Cooper et al., 1988; Kent and Larson, 1988~. The resultant uncertainties regarding appropriate application generate unnecessary costs in excess capacity, duplicative studies, financially motivated abuse, and early obsolescence.
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Indemnity insurers, as well as HMOs, have increasingly relied on micromanagement, including precertification and the development of standardized approaches to clinical presentation, to control what they view as marginal technology utilization. The emphasis of managed care on cost containment presages a more cautious approach to new technology acquisition and utilization in the future.
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HOW MIGHT PHYSICIANS RESPOND TO THE "NEW HEALTH CARE" ENVIRONMENT? It should be evident from the foregoing that the current and expected future health care environments present physicians with a complex, often interrelated set of considerations that might affect their decisions concerning the acquisition of expensive medical devices.
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1987b. How experiences with x-ray computed tomography influenced providers' plans for magnetic resonance imaging scanners.
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1984. Adoption and diffusion of a new imaging technology: A magnetic resonance imaging perspective.
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