THE DIFFUSION OF NEW MEDICAL TECHNOLOGY IN THE PRESENCE OF HEALTH INSURANCE: THE CASES OF RENAL DIALYSIS AND HOME TOTAL PARENTERAL NUTRITION

Adoption of new medical technology is a major factor in recent growth of medical expenditures. This research examines the medical technology diffusion process, focusing on hemodialysis and home total parenteral nutrition (HTPN). In both cases, patient care has been largely funded through Medicare. The number of patients in treatment--and related federal expenditure--has greatly exceeded original estimates of medical "need".;Empirical analysis of Medicare ESRD program data uses multiple regression to examine caseload composition among 691 dialysis providers over a five year period 1978-1982. Change in patient selection criteria, the dependent variable, is measured by determining the annual proportion of newly enrolled dialysis patients in each of three categories: persons age 65 and above, diabetics, and persons with cancer. Independent variables control for demand for medical care, local supply of dialysis treatment, Medicare's relative payment level, the dialysis provider's status as a for-profit or not-for-profit facility, passage of time, and other factors.;Results indicate that the proportion of patients age 65 and above is positively associated with the supply of dialysis treatment and also with the provider's status as a for-profit clinic. The level of Medicare reimbursement appears inversely related to both the proportion of patients with cancer and 65 and above. Passage of time, a proxy for learning and technical improvement, is positively linked to an increased proportion of diabetic patients.;A somewhat similar empirical analysis is performed for HTPN providers, much constrained by a paucity of data. Results confirm that caseload expansion is associated with a broadening of criteria for patient selection.;Broadening of criteria physicians use to select suitable candidates for treatment has been a major factor in the unexpectedly high levels of utilization for both dialysis and HTPN. The objective of this research is to model the patient selection behavior of a representative physician in an environment resembling the Medicare renal dialysis program. Validity of the model is tested using data from the Medicare end-stage renal disease (ESRD) program. A preliminary assessment of the model's generalizability is performed using data on HTPN patients.