The Impact of Therapeutic Procedure Innovation on Hospital Patient Longevity: Evidence from Western Australia, 2000-2007

We investigate the effect of therapeutic procedure innovation in general on the longevity of all hospital patients, i.e. patients with a variety of medical conditions. The analysis is based on data on over one million discharges from public and private hospitals in Western Australia (WA) during the period 2000-2007. We can measure survival for a period as long as 8 years after admission, and we know the date each procedure was added to the Medicare Benefits Schedule.

Estimates based on patient-level data indicate that therapeutic procedure innovation increased the life expectancy of WA hospital patients by almost 3 months between 2000 and 2007, controlling for the patient's age, sex, Diagnosis Related Group (DRG, over 600 categories), Aboriginal status, marital status, insurance coverage (whether or not the patient had private insurance), postcode (over 400 postcodes), year of hospital admission, and number of procedures performed.. Estimates based on longitudinal DRG-level data also indicate that therapeutic procedure innovation increased the life expectancy of WA hospital patients, but the implied increase may be smaller--about 2 months. In either case, therapeutic procedure innovation in WA hospitals appears to have been remarkably cost-effective, because it increased the cost of medical procedures by a negligible amount.