Managed Care, Technology Adoption, and Health Care: The Adoption of Neonatal Intensive Care

Managed care activity may alter the incentives associated with the acquisition and use of new medical technologies, with potentially important implications for health care costs, patient care, and outcomes. This paper discusses mechanisms by which managed care could influence the adoption of new technologies and empirically examines the relationship between HMO market share and the diffusion of neonatal intensive care, a collection of technologies for the care of high risk newborns. We find that managed care slowed the adoption of NICUs, primarily by slowing the adoption of mid-level NICUs rather than the most advanced high-level units. Slowing the adoption of mid-level units would likely have generated savings. Moreover, opposite the frequent supposition that slowing technology growth is uniformly harmful to patients, in this case reduced adoption of mid-level units could have benefitted patients, since health outcomes for seriously ill newborns are better in higher-level NICUs and reductions in the availability of mid-level units appear to increase the chance of receiving care in a high-level center.