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The Role of Hospital and Market Characteristics in Invasive Cardiac Service Diffusion

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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 that are involved in investigating these relationships in the health care sector may explain the dearth of research. We examine three invasive cardiac services: diagnostic angiography, percutaneous coronary interventions, and coronary artery bypass grafting. We document the relationship between the adoption by hospitals of these three invasive cardiac services and the characteristics of the hospitals, their markets, and the interactions among them, from 1997 to 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; and (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 that hospitals duplicate rather than expand access to care. In addition, for-profit hospitals are considerably more likely to adopt these cardiac services than are either nonprofit or government-owned hospitals. Nonprofit hospitals in high-penetration, 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.

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Notes

  1. The cloglog transformation of baseline hazard h is − ln[ln(1 − h)], whereas the logit transformation is the log odds ln[(h)/(1 − h)]. If we add a coefficient c to the transformed hazard to get y = c − ln[ln(1 − h)], we retransform via 1 − exp[− exp(y)] for the new estimated hazard.

  2. These are large changes in market structure, but not infeasible, as such large changes are observed in only 1–5% of cases in our data, but a typical positive adoption rate is 20% (median for diagnostic angiography, with a 30% mean; 13% median and 19% mean for PCI; and 9% median and 15% mean for CABG).

  3. Compared to nonprofit hospitals, for profit hospitals are less likely to adopt CABG if their competitors do (column 8; fp*adoption rate of competitors-CABG), but this is no longer statistically significant after adjusting for being in a for-profit market (column 9).

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Acknowledgements

The authors thank Stephanie Tomlin, MIHCL, MPA and Weiping Zhou, MS in the Data Analytic Core at The Dartmouth Institute [supported by the National Institute on Aging (PO1-AG19783)] for data support, and Christopher Snyder and an anonymous reviewer for helpful comments. We also thank Jessi Bulaon, Henry Kim, Olivia Metcalfe, Matthew McCabe, Lynn McClelland, Ben Nyblade, and Matthew Parson for research assistance. Horwitz thanks the UCLA School of Law for summer research support.

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Funding was provided by UCLA School of Law.

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Authors and Affiliations

  1. UCLA and NBER, UCLA School of Law, 385 Charles E Young Dr E, Los Angeles, CA, 90095, USA

    Jill R. Horwitz

  2. Department of Health Policy and Administration, The Pennsylvania State University, 604B Ford Building, University Park, PA, 16802-6500, USA

    Charleen Hsuan

  3. Abt Associates, 6130 Executive Blvd., Rockville, MD, 20852, USA

    Austin Nichols

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  1. Jill R. Horwitz
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Correspondence to Jill R. Horwitz.

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Horwitz, J.R., Hsuan, C. & Nichols, A. The Role of Hospital and Market Characteristics in Invasive Cardiac Service Diffusion. Rev Ind Organ 53, 81–115 (2018). https://doi.org/10.1007/s11151-018-9625-0

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