Analysis of Cost Control of New Medical Technology

Analysis of cost containment strategies involving medical technology

Alan B. Cohen, Sc.D., at the Boston University School of Management, examined the relative effectiveness of various cost-containment strategies in controlling the adoption and use of costly medical technology.

Cohen also:

  • Developed societal- and institutional-level models of decision-making regarding technology adoption and use that considered the cost-effectiveness of specific technologies.
  • Explored the incentives facing manufacturers and providers for developing and adopting new technology.
  • Analyzed the policy implications of adopting new cost-containment strategies under different financing schemes, including fee-for-service, managed care, prospective payment and national health care expenditure limits.

Key Findings

  • Older cost control strategies (capital expenditure review and certificate of need programs, hospital rate setting, prospective payment, and utilization review) failed because they focused narrowly on certain aspects of the health care system, not the whole system.
  • The lack of a formal process for controlling the introduction of new surgical procedures into clinical practice is a serious weakness in existing policy and warrants consideration of a process parallel to those employed by the federal Food and Drug Administration to regulate drugs and devices.
  • Assessment of cost-effectiveness depends on the nature of the technology being evaluated.
  • Under managed care, technologies that have both cost-saving and quality-enhancing properties are the most likely ones to be developed and adopted.

Funding

The Robert Wood Johnson Foundation (RWJF) supported this project with a grant of $63,060 between October 1994 and June 1996.