Essays on consolidation and technology diffusion in medical care

This dissertation is composed of three essays examining organizational consolidation and technology diffusion in medical care. The empirical analysis focuses on the use of two treatments for coronary artery disease (CAD)—coronary artery bypass graft (CABG) surgery and percutaneous transluminal coronary angioplasty (PTCA)—in hospitals in the State of New York.; Chapter 1 examines the private and social implications of hospital acquisitions. With respect to cardiac procedures, I find that acquiring hospitals increase their market share in target markets following consolidation and that these gains are held for at least two years. The resulting movement in volume across providers leads to increases in both the average quality—as measured by risk-adjusted mortality—and average cost of care for CABG patients in target markets. Overall, the New York evidence suggests that hospital integration represents a relatively cost-effective means of improving the quality of cardiac care.; Chapter 2 considers the use of competing technologies within the firm. In this study, PTCA represents the innovation, and CABG is the incumbent technology. After controlling for the characteristics of patients, the relative quality of the two procedures at a given facility, and other hospital-level characteristics, I find evidence of “entrenched” use of the incumbent technology. Specifically, hospitals with influential CABG surgeons appear to have significantly higher long-run use rates for CABG relative to PTCA. This effect is particularly strong for patients with mild CAD (i.e., those near the traditional margin between CABG and PTCA).; Chapter 3, co-authored with David Cutler, addresses a puzzling feature of many medical innovations—they simultaneously appear to reduce unit costs and increase total costs. We consider the impact of the diffusion of PTCA over the past two decades on total inpatient costs and outcomes. We find that the relationship between growth in PTCA rates and CABG rates is initially positive (i.e., PTCA growth is associated with increased total costs), but becomes less so over time. Our preliminary analysis of the impact of PTCA growth on mortality for cardiac patients does not provide evidence of significant effects on quality. While further analysis is required to make conclusive statements regarding the overall effects of PTCA on productivity, our results highlight the possibility that such assessments may change over a technology's useful life.