Working Paper: NBER ID: w23530
Authors: Jill R. Horwitz; Charleen Hsuan; Austin Nichols
Abstract: Little is known about how the adoption and diffusion of medical innovation is related to and influenced by market characteristics such as competition. The particular complications involved in investigating these relationships in the health care sector may explain the dearth of research. We examine diagnostic angiography, percutaneous coronary interventions (PCI), and coronary artery bypass grafting (CABG), three invasive cardiac services. We document the relationship between the adoption by hospitals of these three invasive cardiac services and the characteristics of hospitals, their markets, and the interactions among them, from 1996-2014. The results show that the probability of hospitals adopting a new cardiac service depends on competition in two distinct ways: 1) hospitals are substantially more likely to adopt an invasive cardiac service if competitor hospitals also adopt new services; 2) hospitals are less likely to adopt a new service if a larger fraction of the nearby population already has geographic access to the service at a nearby hospital. The first effect is stronger, leading to the net effect of hospitals duplicating access rather than expanding access to care. In addition, for-profit hospitals are considerably more likely to adopt these cardiac services than either nonprofit or government-owned hospitals. Nonprofit hospitals in high for-profit markets are also more likely to adopt them relative to other nonprofits. These results suggest that factors other than medical need, such as a medical arms race, partially explain technological adoption.
Keywords: hospital adoption; market competition; cardiac services; medical technology diffusion
JEL Codes: I11; I18; L1; L13; L2; L3; L8
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Competitor hospitals adopt similar services (I11) | Hospitals are significantly more likely to adopt a new cardiac service (I11) |
| Larger fraction of nearby population has access to service (R23) | Hospitals are less likely to adopt a new service (I11) |
| For-profit hospitals are more likely to adopt services (L33) | Presence of for-profit competitors influences nonprofit hospitals' adoption behaviors (L39) |
| Competitive dynamics (L13) | Decision to adopt services (L86) |