Discussion Paper Details

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Title: Technological adoption in health care

Author(s): Pedro Pita Barros and Xavier Martinez-Giralt

Publication Date: November 2009

Keyword(s): health care, payment systems and technology adoption

Programme Area(s): Industrial Organization and Public Economics

Abstract: This paper addresses the impact of payment systems on the rate of technology adoption. We present a model where technological shift is driven by demand uncertainty, increased patients' benefit, financial variables, and the reimbursement system to providers. Two payment systems are studied: cost reimbursement and (two variants of) DRG. According to the system considered, adoption occurs either when patients' benefits are large enough or when the differential reimbursement across technologies offsets the cost of adoption. Cost reimbursement leads to higher adoption of the new technology if the rate of reimbursement is high relative to the margin of new vs. old technology reimbursement under DRG. Having larger patient benefits favors more adoption under the cost reimbursement payment system, provided that adoption occurs initially under both payment systems.

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Bibliographic Reference

Barros, P and Martinez-Giralt, X. 2009. 'Technological adoption in health care'. London, Centre for Economic Policy Research.