Association for Public Policy Analysis & Management

Over the last several decades there have been rapid advances in medical technology. These advances have been accompanied by higher, and continuously growing, expenditures. The consensus in the economics literature is that medical innovation is the primary driver of health care spending growth. Physicians play a central role in medical care decisions, including when and which new medical technologies to use, and are the focal point of efforts in the U.S. to lower health care spending growth. Yet, there has been little work examining how physicians integrate new medical technologies into the health care system. Specifically, it is unknown whether physicians exhibit systematic differences in their use of new procedures, drugs, and practices across types of medical technology, and over time, and if there is a relationship between patterns of use and health care spending growth.

In this project we examine whether certain physicians are systematically drawn to new therapies and services. Using Medicare claims data, we have identified nearly 100 new treatments and procedures introduced and broadly diffused into medical practice between 2005 and 2010. We then describe variation in utilization within and across geographic regions, examine patterns of use across the types of technology, and assess the relationship between use and health care spending. To do this, we first aggregate the beneficiary-level claims data up to higher units of analysis (i.e., provider-units composed of groups of physicians who bill under the same tax ID) and then apply hierarchical modeling techniques to estimate relationships within provider-units.

Recent legislation has included provisions to encourage innovation and experimentation in the delivery and payment of care, with the goal of identifying effective strategies for lowering health care spending growth. Provider units are the target of many of these efforts, for example, the Affordable Care Act created accountable care organizations (ACOs) in Medicare. Prior work by the Institute of Medicine (IOM) suggests that aiming reforms at the clinical decision-making level may be a fruitful way to proceed to increase the value of the health care system. Whether provider units have unique patterns of utilization of new medical technologies, and how this relates to spending levels and trends has not been examined. Understanding the unique footprints of provider organizations in this respect may help develop, evaluate, and refine incentives for doctors to choose high value treatments – a first step toward bending the curve of health care spending growth.