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Technology diffusion and health care productivity: angioplasty in the UK

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The adoption of new medical technologies is argued to be a major contributory factor to the rising cost of health care although there is little empirical work devoted to exploring the mechanism of how this process works. This study builds on recent research by Cutler and Huckman to establish the degree to which a new technology, percutaneous transluminal coronary angioplasty (PTCA), substitutes for an older one (Cutler, D. and Huckman, R., 2003, Technological development and medical productivity: the diffusion of angioplasty in New York state, Journal of Health Economics, 22, 187-217). Using patient specific data over a 15- year follow-up period the mortality and morbidity impacts of PTCA relative to coronary artery by-pass grafting (CABG) are established. In considering the substitution process, hospital level data and control for medical management of CHD improves on the empirical specification suggested by the earlier research and the analysis explicitly controls for the endogeneity problems in estimating the process of substituting one hospital technology for another. Such improvements give robust estimates of the degree to which PTCA has substituted for CABG, as opposed to expanding surgical treatment to the potential patient population. Thus PTCA, although acting to reduce treatment costs through the process of substitution for the more expensive procedure is shown to increase overall costs through increasing the potential patient population that could be treated for CHD with surgery.

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