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8/19/2019 Adoption and Diffusion of CT and MRI
1/13
Lippincott Williams & Wilkins is collaborating with JSTOR to digitize, preserve and extend access to Medical Care.
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The Adoption and Diffusion of CT and MRI in the United States: A Comparative AnalysisAuthor(s): Alan L. Hillman and J. Sanford SchwartzSource: Medical Care, Vol. 23, No. 11 (Nov., 1985), pp. 1283-1294Published by: Lippincott Williams & Wilkins
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8/19/2019 Adoption and Diffusion of CT and MRI
2/13
MEDICAL
ARE
November
1985,
Vol.
23,
No. 11
The
Adoption
and
Diffusion
of CT
and
MRI in the United States
A
Comparative
Analysis
ALAN
L.
HILLMAN,
MD,
AND
J. SANFORD
SCHWARTZ,
MD
This
study
examines
and
compares
the rates and
patterns
of diffusion of
computerized
tomography
(CT)
and
magnetic
resonance
imaging
(MRI)
over
the first
4
years
of their
availability.
Although early
diffusion of CT was more
rapid
than that of
MRI,adoption
of MRI in
nonhospital settings equaled
that
of CT.
Analysis
of attributes
of the
technologies
and attributesof the
regulatory,
reimbursement,
and
market environments
surrounding
the
early
diffusion of
these
technologies provides
insight
into their different diffusion
patterns.
In
particular,
he
technical
and
financial uncertainties
surrounding
MRI have
in-
hibited its diffusion
compared
with
that
of
CT.
Medicare's DRG-based
pro-
spective
reimbursement
system
and certificate-of-need
(CON)
regulation
by
states have
reduced
overall
MRI diffusion
and stimulated
purchases
of MRI
by
nonhospital organizations.
The
FDA's
premarket
approval
(PMA)
program
has
changed marketing
strategies
and influenced the diffusion of MRI to a lesser
degree.
This
analysis
identifies
problems
in how the
present
health care
system
evaluates
and
adopts
new,
expensive,
diagnostic
technologies
and
suggests
changesto make the systemmoreresponsiveto presentneeds.Keywords:tech-
nology;
diffusion; CT;
MRI.
(Med
Care
1985,
23:1283-1294)
The
increasing
intensity
of medical
tech-
nology
is one of the
primary
factors contrib-
uting
to the
burgeoning
cost of
health care
in the
United States.1
One
half
of the annual
increase
in
the
cost
of a
hospital day
is due
to
rising inputs
of
technologies
and services.2
Unfortunately,
there is evidence that the
adoption
and
diffusion
of
much medical
technology
may
not be
optimal
from
either
a
scientific
or a
social
perspective.3
As med-
From the Section of General
Medicine,
Department
of
Medicine,
and the Leonard Davis Institute of Health
Economics,
University
of
Pennsylvania.
Dr.
Hillman is a Veterans
Administration Fellow of
the Robert Wood Johnson Foundation Clinical Scholars
Program.
Address
correspondence
to: Alan
Hillman,
MD,
RWJF
Clinical
Scholars
Program,
2L
NEB
School of
Medicine/
S2,
University
of
Pennsylvania, Philadelphia,
PA
19104.
ical costs continue to rise
and
to account for
an
increasing
share of an
already severely
constrained federal
budget,
system efficiency
becomes
essential
to
forestall more severe
rationing
of
medical
resources.4-6
Under-
standing
the factors that influence the dif-
fusion of medical
innovation and
examining
the
impact
of
past
health
policy
on
that
dif-
fusion are
prerequisites
for
developing public
policy
that
encourages
more
thoughtful
technology
evaluation and
adoption.
Such
insight
also
can
help
facilitate
the efficient
allocation
of
health care
resources in
the
fu-
ture.
The
advent of two
similar medical tech-
nologies
within the
past
12
years-computed
tomography
(CT)
and
magnetic
resonance
imaging
(MRI)-offers
policy
analysts
a
unique
opportunity
to
compare
the
impact
1283
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8/19/2019 Adoption and Diffusion of CT and MRI
3/13
HILLMAN AND
SCHWARTZ
of
the
different environments
that sur-
rounded
their introduction. This
study
ex-
amines
and
compares
the
early
diffusion
patterns
of
these
technologies.
Differences
in their patterns of diffusion are examined
in
relation to the attributes
of the technolo-
gies
and the attributes of
the
environments
that surrounded their
emergence. Although
there are
important
differences
between
these two
imaging
devices that contribute to
their
divergent
patterns
of
diffusion,
their
similarities
permit
insight
into
the
impact
of
specific policy
initiatives
that
created
the
unique regulatory,
reimbursement,
and
market environments surrounding each
technology.
This
analysis suggests
areas
to
be
addressed
by
future
policy
concerning
the
diffusion of medical
technology.
Methods
Data
regarding
the diffusion of
CT were
obtained from case studies
published by
the
U.S.
Congressional
Office
of
Technology
Assessment (OTA)7'8 nd from studies of CT
diffusion
published by
Baker9 and Banta.10
Data
on the
diffusion of MRI were
obtained
from
three
sources between
December
1984
and
May
1985:
(1)
the
February
1985
Mag-
netic Resonance
Site
Survey
conducted
by
the American
College
of
Radiology
(ACR);1
(2)
telephone
interviews
with
the
marketing
departments
of all MRI manufacturers that
are marketed
in
the United
States;
and
(3)
telephone
interviews with each U.S. MRIin-
stallation.
These sources enabled
us to com-
pile
a
registry
of MRI
units
that were
oper-
ating
or
in
the
process
of
being
installed
by
December
31,
1984.
For
each
MRI unit
we
determined:
(1)
the status of its installation
and
operation;
(2)
the
type
and
strength
of
the
magnet;
(3)
the
unit's
manufacturer;
(4)
the
site
of
the
unit
(hospital-based
versus
free-standing);
(5)
the academic
affiliation of
the
hospital-based
units;
and
(6)
the own-
ership
status
of each unit.
Analysis
of
the
first
five factors
is
reported
in
this article.
Since the
installation time
for
MRI
appears
to
be
longer
than for
CT,
we chose the
con-
servative
approach
of
including
in
this anal-
ysis
MRI units
that were still
being
installed,
even though the data available for early CT
diffusion included
only fully operating
units.
Units located
in
manufacturers'
headquarters
were not
counted. The
unit of
analysis
was
the MRI
unit. Thus sites with
multiple
MRI
units were
counted
more
than once. Hos-
pital-based
units were
defined
as
lying
within
a
hospital
complex
and
having
formal
organizational
ties with it.
Academic
centers
were
defined
as
hospitals having
a
primary
affiliation with a medical school or their own
residency training program
in
diagnostic
radiology.
Initial
availability
of CT
and
MRI
was
defined as
the
month
in which the
first clinical human
imaging
prototype
of
each
technology
was
installed
in the United
States
Uune
1973 for
CT
and December
1980
for
MRI).8'12
In
addition,
we
collected data
on the
number of units
ordered and
expected
to
be
ordered in 1985. Most of the manufacturers
provided
estimates of
these
data,
usually
in
the form of
ranges
of
expected
sales
(several
manufacturers were reluctant to
offer
such
information
for
competitive
reasons).
These
estimates were used to
develop
"optimistic"
and
"pessimistic" predictions
of MRI
diffu-
sion
in
1985.
Results
Figure
1
compares
the
diffusion
rates
of
CT and
MRI
over
their
respective
first
4
years
of
clinical
availability.
The rate of diffusion
of MRI
initially lagged
well
behind the
pace
set
by
CT.
At the end
of the first
4
years
of
CT
availability
(June
1973-May
1977),
more
than
400 units were
installed,
and
the
in-
stallation rate
was
accelerating.
In
fact,
the
rate
of
diffusion
of CT
between
1975 and
1978
actually
is somewhat conservative, be-
cause
manufacturers
were
unable to
keep
pace
with demand
during
that
time
period
1284
MEDICAL
CARE
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8/19/2019 Adoption and Diffusion of CT and MRI
4/13
THE DIFFUSION
OF CT
AND MRI
(Fig.
1).
For
example,
in
1975 manufacturers
had twice as
many
orders
for
CT
units as
could
be filled.8
In
contrast,
we
found
only
151 MRI units
that were either partially or completely in-
stalled
during
the first
4
years
of
the
tech-
nology's availability
(December
1980-De-
cember
1984).
Of these 151
units,
102 were
operating by
the end of
1984,
28 were in
the
late
phases
of
installation
(site
complete
and/
or
magnet
in
place),
and
21 were in
earlier
phases
of
installation.
Only
two units were
dismantled between December
1980
and
December
31,
1984.
Furthermore,
unless
manufacturers' most
optimistic
projections
come true for
1985,
the rate of MRI diffusion
will
continue
to fall
behind
the
pace
set
by
CT.
Thus,
although
the
early
diffusion
of
1300-
1200.
1100.
1000-
900-
2
0
8)
I
E
Z
800
700
600
500
400
300.
200.
100.
7 1
(MAY'80)
CT
1042
951
475/
/
400'OPTIMISTIC'
MRI.
*325
AVERAGE
/
.250'PESSIMISTIC'
202/
..'
45/
442
10_
'73 1974
11975 1976
'
1977
1978
1
1979
1980
'
1981
1982
1983
1984
1985
YEAR
FIG.
1.
The diffusion of
CT and MRI
since the in-
troduction of
the first
clinical human
imaging prototypein the United States
(CT,
June
1973;
MRI,
December
1980).
The CT curve
refers to the
x-axis labelled
6/73;
the MRI
curve
refers
to the
x-axis labelled
12/80.
CT
data
from
Banta?1
and
OTA.7
400-
In
cl
C
0)
.0
E
z
300
200
100
325
(81%)
79
(76
(52%)
72
(19%) (48%)
HOSP AMB
CT
at 4 Years
(May'77)
HOSP AMB
MRI at 4 Years
(Dec '84)
FIG.
2.
Comparison
of the number
and
percentage
of CT and MRI units by the type of organization pur-
chasing
the unit
(hospital
versus
free-standing
ambu-
latory
organization)
at
the
end
of the first 4
years
of
clinical
availability
for each
technology.
CT data
from
OTA.8
both
technologies
followed the
pattern
of
the
early
portion
of a
sigmoid
curve
typical
of
the
diffusion of
many
new medical innova-
tions,7
the
slope
of
ascent
of MRI
was
less
than
that of CT.
There was a
striking
difference in the rates
of
early purchase
and installation of
CT and
MRI
units
among
health care
organizations
and
settings.
Whereas
only
19%
of CT
units
installed
in
the first
4
years
of
its
availability
were located
outside
of
a
hospital,8
48%
of
MRI units
were owned
by free-standing
im-
aging organizations
(FIOs)
(Fig.
2).
While
the
acquisition
of
hospital-based
MRI
units
lagged
far
behind the
purchase
of CT
units,
the
number of
FIO-based
MRI
units
approx-
imately equaled
the number
of
outpatient-
based CT units
at
comparable
points
in
time
relative to their
introduction.
In
1984,
FIO-
based
MRI
units
accounted for
57%
of all
purchases,
a
major
increase
over the
25%
placed
in
these
ambulatory settings
the
year
before.
Further,
85%
of
hospital-based
MRI
units were
purchased
by
academic
centers.
Few have
been
purchased by community
hospitals.
While
the rate and
pattern
of
diffusion
dif-
fered
strikingly
between CT
and
MRI,
both
1285
I
I
- -
I
A47
-
1....n
I
I
Vol.
23,
No.
11
O
/11
I 1/0U
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8/19/2019 Adoption and Diffusion of CT and MRI
5/13
HILLMAN AND SCHWARTZ
1000-
,
TAL
years, body
scanners had overtaken
head
scanners
in
volume
(Fig.
3).
While MRI has
/90
been
able
to
image
the
complete
body
almost
800-
from
its
clinical
introduction,
there was a
700
marked change in the diffusion rate of the
:
0
/
/
BODY
different
types
of
magnets
sold over the
first
600-
o
/4
years
of MRI's existence
(Fig.
4).
The
ear-
,
500'
1
/
liest
MRI
units were
resistive
magnets.
While
E
400
the diffusion rate of this
type
of unit
has
re-
Z 30
/
/
-
EAD
mained
unchanged
since
1981,
its market
share had
dropped
to
16%
at the end of
200'
*/1984.
During
this same
time
period,
per-
100
manent
magnets
captured
an
8%
and
grow-
.sP
,
.
ing
market
share. In
contrast,
the diffusion
73 74 75 76 77 78
rate of superconductingmagnetsaccelerated
Year
sharply
in
mid1983.
This
type
of unit ac-
counted for
76%
of all units installed
as of
FIG.
.
Diffusion
of
body,
head,
and
total CT
scan-
counted for
76%
of all units installed as of
ners
by
year.
Data
from Banta.'o
December
31,
1984 and 86% of all
magnets
installed
during
1984.
imaging
technologies
underwen
changes
in the distribution
of
type
installed.
Initially,
all
CT
units we
to
imaging
of
the head.
However,
150-
125
f0
100
?
75
0.
E
z
50'
81
82 83
84
Year
FIG.
4.
Diffusion
of
magnet, by year.
MRI
units, total,
It similar
?s of units
Discussion
re
imited
New, expensive, equipment-embodied,
within
4
diagnostic
imaging technolgies
such as MRI
and CT often are
adopted
rapidly
in medi-
cine.13-15 Medical
students,
trainees,
and
practitioners
are socialized
to
believe that
TOTAL
increased
specialization
and additional tech-
nology
are desirable.16"8This orientation has
been
reinforced
by pressures
to
practice
de-
SUPERCON-
fensive
medicine.19
DUCTING
Rapid adoption
of
expensive
innovations
such as
MRI also stems
from institutional
factors.20'21
Large hospitals,
teaching
and re-
search
institutions,
hospitals
with
highly
trained
physician
staffs,
and urban
hospitals
each are
associated
with
early adoption
of
new
technologies,2'22-24
possibly
because
they
have
greater
resources with
which to
meet
capital
and
operating expense
require-
rRESISTIVE
ments.8 The
prestige
and
high
visibility
of
PERMANENT
new
technology
s
especially
attractive
o ac-
ademic institutions
that see themselves
as
health care leaders.
These
factors, however,
do not
explain
the
observed
differences in
and
type
of
the diffusion of CT and MRI. To understand
these
differences,
we
must examine
charac-
1286
MEDICAL CARE
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6/13
THE DIFFUSION OF CT AND
MRI
teristics
of the
technologies
themselves
and
analyze
the environments
surrounding
their
emergence.
The
diffusion
of innovative
medical
technologies
such as CT
and
MRI is
a complex process, influenced by a variety
of factors related to
the
technologies
them-
selves
and
to the environments
from which
they
emerge.
While insufficient
empirical
data exist to
permit precise
determination
of
the
impact
of individual factors
on the dif-
fusion of
CT
and
MRI,
inferences can
be
made about
the
probable impact
of the cen-
tral factors
surrounding
the
diffusion
of
CT
and
MRI. These factors
are summarized
in
Tables 1 and 2.
Attributes of the
Technology
Attributes of
a
technology
are
important
determinants of its
diffusion.25-28
CT and
MRI
share
many
technologic
attributes that
tend to
stimulate
the
adoption
process.
When
introduced,
each
promised improved
diag-
nostic
capability
and increased
safety
com-
pared with existing technologies. Although
expensive,
both CT and
MRI are
integrated
easily
into a
hospital's organizational
struc-
ture,
an
important
determinant
of
technology
adoption.27'28
However,
there are
important
differences
in
the
technologic
attributes
of
these two
imaging
modalities that
may
con-
tribute to the
lagging
diffusion of
MRI
com-
pared
with
CT.
MRI
is a
revolutionary development
in
di-
agnostic
imaging
that, in its
present
clinical
form,
uses
magnetic
fields
to
image
the
den-
sity
and distribution of the
body's hydrogen
nuclei.2931Its
advantages
over other
imaging
modalities
include absence of
radiation,
lack
of
required
contrast
injection,
and minimal
patient
discomfort.
Although
current
appli-
cations are
limited to
imaging,
other
impor-
tant
potential
uses are
being explored.32
These factors
should act to
stimulate MRI's
diffusion.
However,
adoption
of MRI
may
be
suffering
because
MRI
has been intro-
duced into
an
environment
already replete
TABLE . Factors
Affecting
the
Early
Diffusion
of
CT
and
MRI
Impact
on Diffusion of
Factor CT MRI
Attributes
of the
technology
Technical
uncertainty
1 111
Marginal
clinical
advantage
tTT
T
High
cost
I
11
Perceived
profitability
TT
11
Attributes
of the
environment
Reimbursement
policy
TT
cost-based)
11
(DRGs)
Regulatory
CON
0
1
PMA
NA
0
Market
competition
0
?
For
each
factor,
its assessed
impact
on the
diffusion
of
CT and MRI is
indicated
by
the number and orien-
tation of the
arrows.
Upgoing
arrows indicate
factors
that stimulate
diffusion;
downgoing
arrows
indicate
factors that
inhibit diffusion.
The number
of arrows
(one
to
three)
indicates the
strength
of the influence.
0,
indicates
neutral
factors;
?,
unknown
effect; NA,
not
applicable.
with
CT
capability.
Whereas
MRI
might
have
represented
a more
distinct
marginal
ad-
vance had
it been introduced
before
CT,
its
marginal
efficacy
over that
of CT and
other
diagnostic
modalities
has
not been convinc-
ingly
established,3334
with the
possible
ex-
ception
of selected
central nervous
system
problems.35
MRI also is
hampered
by
more
technologic
uncertainty
than was CT at
a similar
stage
of
development.
There
is
great
uncertainty
over the relative
advantages
and disadvan-
TABLE
2.
Incentives Toward
Nonhospital
Placement of MRI
1.
2.
3.
4.
Regulatory
initiatives limited to
inpatients (e.g.,
CON, DRGs)
Federal Tax
Code
"Megacorporate"
medicine
Technology
limited
to
stable,
cooperative patients
1287
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HILLMAN AND SCHWARTZ
tages
of the
different
types
and sizes of MRI
magnets,
each
of
which,
in
turn,
is associated
with
widely
varying
clinical
claims,
purchase
prices,
and
operating
costs.
Moreover,
small
changes in MRIpulsing sequences can result
in
significant
alterations
in
image
appear-
ance,
and
optimal pulsing
sequences
for or-
gans,
diseases,
or
symptoms
are not
yet
de-
fined. Movement artifact limits the
applica-
tion of MRI at
present
to
potentially
important organs,
such as the
lungs
and
the
heart.
These
technical
uncertainties,
coupled
with
experience
stemming
from the
rapid
obsolescence
of
early
CT
units,9'36
s
delaying
MRI acquisition until experience with the
technology
accumulates,
technical standards
are
agreed upon,
the
pace
of
technologic
change
stabilizes,37
and
aspects
of the en-
vironment,
such
as
reimbursement,
are
sorted
out.
Cost differences between
MRI
and CT
units
also
help explain
why
the
adoption
of
MRI
is
lagging
behind that of CT. When
first
introduced,
CT head scanners
cost
$300,000-$400,000 and body scanners
$400,000-$500,000
per
unit.8
Siting
costs
were not
excessive.
In
contrast,
the
purchase
price
for MRI
equipment
ranges
from
$1
million for a 0.15-tesla
resistive
magnet
to
$2
million
for
a 1.5-tesla
superconducting
magnet
(tesla
refers
to
the
strength
of
the
magnet).38
Site
preparation
costs can add
up
to
$300,000-$600,000.38
Thus
total
capital
expenses
for a
MRI unit can
range
from
$1.3
to $2.6
million,
depending
on the
specifica-
tions of the
particular
unit
selected.
Estimates
of
annual
operating
expenses
differ
by up
to
hundreds of
thousands
of
dollars
in
various
analyses, depending
on the
assumptions
made.
However,
two conclusions are
appar-
ent:
(1)
resistive and
permanent
magnets
are
roughly equivalent
in
cost and
substantially
less
expensive
to
purchase,
site,
and
operate
than
superconducting
systems;
and
(2)
all
of
the
systems
are
very
expensive-approxi-
mately
50-100%
more
expensive
in
real
dollars than were
early
CT
scanning systems.
Profitability
is
another
important
factor
affecting
the decision
to
adopt
a
new tech-
nology.25'26
While innovative new technol-
ogies
such
as CT and
MRI
always pose
some
concerns regarding profitability, the cost-
based
retrospective
reimbursement
system
in
place
when
CT entered
the
market
permitted
most
institutions with CT scanners to
achieve
a
profit
from their units
early
in
the diffusion
process.8
0'39'40
In
contrast,
the
potential
profitability
of MRI
is unclear because
of the
uncertainty
surrounding
third-party
reim-
bursement
policy
(see below)
and
the tech-
nology
itself.
Profitability
of MRI
systems
will be extremely sensitive to the volume of
patient
throughput.38'41'42 echnologic
im-
provements
in
hardware and software
may
increase
throughput
and
ultimately
may
re-
duce the
charges necessary
to achieve
break-
even
performance.38'41'42
Most
important,
prospective
reimbursement
will
reduce
MRI's
profitability by limiting
the
ability
to
recover
capital
and
operating
costs.
Environmental Factors
The environments
in
which CT
and
MRI
emerged
were
similar
in
two
important
re-
spects:
both arose in
periods
of concern about
the
high
level of medical care costs and
both
were
marketed before their
efficacy
was
es-
tablished
adequately.l0'2
However,
other
components
of their
environments differed
in
important
ways
that
help
to
explain
the
observed
patterns
of diffusion.
Reimbursement
Policy
Reimbursement
policy
is a
major
deter-
minant
of
profitability
that,
in
turn,
is an
im-
portant
determinant
of
the rate of
technology
diffusion.43'44
CT
and
MRI entered
the
mar-
ketplace
under
very
different
third-party
reimbursement
systems.
CT
developed
at
a
time when the reimbursement
system
for
hospital
services
was
determined
retrospec-
tively,
based
on the
costs or
charges
for
per-
1288
MEDICAL
CARE
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8/19/2019 Adoption and Diffusion of CT and MRI
8/13
THE
DIFFUSION
OF
CT AND
MRI
formed services. Such a
system
has
been
shown
to stimulate
the diffusion
of
new
technologies,
including
that
of
CT.7
Even
though
CT
represented
the first
medical
technology for which Medicare reimburse-
ment was withheld
pending
demonstration
of clinical
efficacy,
this
policy
did not
over-
come the
significant
stimulus
to
diffusion
generated
by
cost-based
reimbursement.7
In
contrast,
MRI arose in an environment
in
which reimbursement
for
hospital
services
is dominated
by
Medicare's
diagnosis-related
group
(DRG)-based
prospective
payment
system.
Under
DRGs,
the
payment
a
hospital
receives for a patient's care is determined
mainly by
the
patient's
diagnosis.
It is not
influenced
by
whether
or
not
specific diag-
nostic or
therapeutic
services
are
provided.
This
payment
mechanism
alters the incen-
tives for
acquiring
and
using
new technol-
ogies,25'45-52
hus
shifting technologies
from
being
revenue
producers
to cost
producers.
Concern
that the DRG
system
will
be ex-
tended to
include
outpatient
care,
physicians'
fees, and other
payors
extends its influence
beyond
the
inpatient
Medicare
setting.
Many
private
insurers
have
adopted
a
conservative
"wait-and-see"
approach
with
respect
to
reimbursement for
MRI.
The
DRG-based
prospective
reimbursement
system
affects
the
adoption
and diffusion of a
new medical
technology
such
as
MRI in
two
ways:
(1)
by
its
capital
cost
reimbursement
policy
and
(2)
by
the
degree
and
frequency
with
which
rates for
specific
DRG
categories
in which
the
costs of care are
influenced
strongly by
the
technology
are
adjusted.45
The as
yet
un-
determined
DRG
policy
on
hospital
reim-
bursement for
capital
costs
especially
inhibits
the
rate of
adoption
and
diffusion of
MRI
by
generating significant
financial
uncertainty.
While these
factors
have
slowed the dif-
fusion
of
MRI,
specific
attributes of the
sys-
tem alter
its
impact
on
adoption
decisions.25
The additional
reimbursement
teaching
hospitals
have
received for
the
costs
of
stu-
dent
and
trainee
education
may
reduce the
impact
of DRG
reimbursement
on these
hospitals
and
may
explain,
in
part, why
most
MRI
units
purchased by hospitals
have been
placed
in
these institutions.
Also,
the con-
ditions under which many of these university
hospitals purchased
their
systems
(discounts
by
manufacturers and manufacturer
rebates
for
research and
consultation
services)
re-
duced
their financial
risk.
Likewise,
since
DRGs do
not
at
present
cover
ambulatory
services,
the trend toward
ambulatory siting
of MRIunits in FIOs is a
predictable,
though
unintended,
effect of
DRG
reimbursement.
MRI is
particularly
well-suited
to
such
"un-
bundling" since it is noninvasive, is most
appropriate
for
stable,
cooperative patients,
and is contraindicated
in
patients
who
are
unable
to
lie
still or who
require
metallic
monitoring
or
life-support systems
(Table
2).
Siting
of
medical
technology
outside
of
hos-
pitals
shifts costs
and
risks from
hospitals
to
radiologists
and other
investors
who
con-
tinue to
receive cost-based
reimbursement.
Since
hospitals
receive the same level
of DRG
reimbursement for
inpatient
admissions re-
gardless
of
where the test is
done,
hospital
costs
might
be
lower,
but
total Medicare
costs
(inpatient plus outpatient) might
be
higher.
Although
Medicare
currently
does
not reim-
burse for
outpatient
MRI
studies,
several
private
insurers
have started to
reimburse on
a limited
basis. The
expectation
that
others,
including
Medicare and
Blue
Shield,
will
follow suit
in
the
future
enhances
the desir-
ability
of
siting
MRIoutside of
hospitals.
Of
course,
the advent
of
DRGs for
outpatient
services
would
dilute this
incentive.
The
Federal
Tax
Code is another
financial
incentive
stimulating
the
trend
toward non-
hospital,
entrepreneurial
purchases
of
MRI
scanners.
Investors can
obtain a
large
in-
vestment
credit,
rapid
depreciation,
and
other tax
benefits
by
leasing
these
units
to
nonprofit hospitals.
Under
such
tax-oriented
leasing,
hospitals
derive
the
benefit
of lower
lease
payments
and
avoid
the need
to obtain
certificate-of-need
(CON)
approval,
while
1289
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8/19/2019 Adoption and Diffusion of CT and MRI
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HILLMAN
AND
SCHWARTZ
still
being
able to offer
their
patients
the
de-
sired
service.52
Regulation
A
second
major
environmental influence
that
helps
to
explain
the
different
patterns
of
diffusion
of CT
and MRI
is
governmental
regulation.
Certificate-of-need
(CON)
pro-
grams
to review
hospitals' capital expendi-
tures were established
in
1974,
contempo-
raneously
with
the
early
diffusion of CT.
Al-
though
several
studies
have shown that
CON
regulation
can
influence the nature and
extent of technology adoption,53 the earliest
years
of
CT
development largely
escaped
effective
CON
regulation.
By
1978,
only
35
states had CON
mechanisms
and,
although
requirements
were
strengthened
in
1978,54
CON
programs
in most states still
cover
only
purchases
of
technology by hospitals.
This
loophole
has allowed
private
physicians,
investor
groups,
and
others to establish CT
facilities
in
free-standing
ambulatory
set-
tings, including mobile facilities.55Not only
was
CON
ineffective
in
the first
period
of
CT
diffusion,
but the
rapid
diffusion
of CT
in 1975
may
have been
due,
in
part,
to
an-
ticipatory
behavior
by hospitals
hoping
to
acquire
the
device
before
full
CON
review
took
hold.9'0
By
the time
MRI
emerged
in
1981,
the
CON
program
already
was
established,
al-
though
a
deregulation
trend at the federal
level (as evidenced
through
the Omnibus
Budget
Reconciliation
Act
of
1981 and the
Health
Planning
Block
Grant
of
1982)
loos-
ened CON
requirements
to some
degree.
Through April
1984
(the
most recent
data
available),
CON review
agencies
had re-
ceived 168
applications
for
permission
to
purchase
a MRI
system,
of which 65
appli-
cations were
approved,
27
were
disap-
proved,
3
were
exempted,
and 73
were de-
ferred or
pending.56
As of
April
1984,
17
states
and
the District
of Columbia
had de-
veloped
formal
guidelines
to arrive at MRI
decisions;
16 states were
in the
process
of
developing
guidelines;
and
17
states
had
no
guidelines
at all.56
Only
6 of the 10 federal
health
planning
regions
had
approved any
MRIsystems. Thus, despite the deregulation
trend,
the CON
process
has
discouraged
the
diffusion and
adoption
of
MRI
hospital-
based
scanners
in
many
states.
Since CON
review still is not
required
by
outpatient
facilities or
physician
offices
in 43
states,
MRI
systems
can be obtained
in these
jurisdictions
through
the
ambulatory
route
if
approval
of
hospital
requests
is difficult or
impossible
to obtain.
Indeed,
48%
of MRI
scanners installed as of December 1984 were
located outside of a
hospital (Fig.
2).
This is
a
very high figure, especially
for such an
ex-
pensive
device,
and
it indicates
that
CON
legislation
probably
is
acting
in
concert
with
other factors
(Table
2)
to divert
MRI
from
the
hospital
to the
ambulatory
setting.
Market Factors
Market factors also may help explain
differences
in
the
patterns
of
early
diffusion
between CT
and MRI. The health
care en-
vironment
is
becoming
more
competitive
and
entrepreneurial.57'58
ompetition
among
hospitals
for
patients
and
physicians
may
encourage adoption
of medical
technol-
ogy,36'59
nd one of the effects
of the Medi-
care
DRG
system
has
been to increase
the
competitive
pressures
on
hospitals.
Some
hospitals
see advanced
technology
as a
means
by
which to attract
patients
and
maintain
high
occupancy
rates.
These
pres-
sures
may
be
counterbalancing
obstacles
to
the
adoption
of
MRI to some
extent.
Cor-
porate
structure
and
for-profit
orientation
increasingly
are
infiltrating
the
delivery
of
medicine,
a trend
that
has been
termed
"megacorporate"
health
care,60
and
proprie-
tary
interests have
had
a central
role
in ush-
ering
MRI into the
outpatient
setting.
The FDA
premarket
approval
process
(PMA),
established
in
1976,
also
has
influ-
1290
MEDICAL ARE
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THE DIFFUSION OF CT AND MRI
enced market
strategies.
This
process requires
that the
FDA
approve
new
medical
devices
that are
not
substantially equivalent
to
ex-
isting
devices
(class
III
designation).55
Under
an investigational device exemption (IDE),
manufacturers
of
class
III
devices must col-
lect data
on
the device's
safety
(risks
and
complications)
and technical effectiveness
(its
ability
to do
or
measure what
it
claims)
be-
fore
they
can market the device for
profit.
While
MRI is the first
new
class
III
diagnostic
technology
to
arise
under
the
FDA PMA
program, empirical
data
to
date
suggest
that
this
program
has done
little
to inhibit
the
development or adoption of MRIsystems.12
Despite
the claims of some
manufacturers,
the
data
clearly
indicate that there has been
widespread
placement
of MRI
units
by
manufacturers under
IDE.
However,
the
IDE and PMA
processes
re-
quire
that
manufacturers establish
a
research
and
investigative
relationship
with
medical
providers
to
gather
the clinical data
necessary
to
satisfy
the
FDA's class III
requirements12
and to continue to refine the evolving tech-
nology.
Similarly, hospitals
increasingly
are
entering
into
commercial
and
risk-sharing
relationships
with
external
organizations
that
can
operate
devices
such
as
MRI
and
CT ex-
empt
from
CON
and
DRG
purview.
Thus
industry
and
purchasers
now share
several
common
interests and
incentives.
The PMA
program
could
influence
MRI
manufacturers
by
conferring
competitive
market
advantages
to those manufacturers
who
receive
early
premarket
approval.12
This
competitive
environment
also
may
affect
the
MRI
industry
by
accelerating
the
standard-
ization
of
MRI
systems
and
reducing
the
number of
manufacturers
as
purchasers
shop
comparatively
for
the
most
cost-effective
products.45
The
changing
distribution of
magnet
types
already,
in
part, may
be evi-
dence
of
this
phenomenon.
The MRI
indus-
try
will be forced to
spend
a
larger
fraction
of
research
and
development
funds than
otherwise
would
be
spent
on
evaluating
and
advertising
the
cost-effectiveness of
their
units.
(Alternatively,
some
manufacturers
may
be
attempting
to
segment
the MRI
mar-
ket into a
high field-strength
research and
spectroscopy market and a lower field-
strength
diagnostic
one.)
Moreover,
pur-
chasers will seek to
protect
their investments
by
opting
for units
that offer a
reduced risk
of
early
obsolescence.
Conclusions
In an
optimal
medical
care
system,
new
technologies
and
innovations would
be
adopted rapidly once theirsafety and efficacy
are established and
once favorable
cost-ef-
fectiveness ratios are
anticipated.
The
tech-
nologies
would
be
purchased
and
sited
in
the
most efficient and
appropriate settings
and would be available
equally
to
everyone
in
need.
Payment
would reflect the
actual
costs
of
appropriate
and efficient
medical
care at all
times,
regardless
of
which
tech-
nologies
are
used
and whether
they
are
cost-
saving or cost-increasing.
This
analysis
of
the
early
diffusion
of CT
and MRI
identified
several areas
where the
present system
deviates
from the ideal.
Most
experts
believe that
available data
regarding
the
clinical
efficacy
of
MRI
do
not
warrant
widespread
adoption
outside of
research
settings.34
Indeed,
MRI's
early
diffusion
lagged
behind that
of CT
partly
because
of
the
technical
uncertainty
surrounding
MRI.
However, the
adoption pattern
of MRI is
fortuitous to the
degree
that
uncertainty
as-
sociated with
DRG
reimbursement
policy
and
CON
regulation
contributed to its
slower
diffusion.
Delayed
adoption
secondary
to
uncertainty
of
future
regulations
is
not an
indication
of an
appropriately
functioning
system.
In
fact,
MRI
appears
to have
diffused
more
widely
at
present
than
can be
justified
on
clinical
merits.
For
regulatory
and reimbursement
policies
to
operate
appropriately
and
for
appropriate
clinical
decisions
to be
made
by providers,
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HILLMAN
AND SCHWARTZ
timely
and accurate information
on the
safety,
efficacy,
and
cost-effectiveness
of
new
technologies
must be
made
available.
This is
particularly challenging
when
rapidly
changing technologies ("moving targets")
such as MRI'2'61'62
re
involved.
The
present
system
does not meet
these
requirements
despite
the existence
of several
technology-
assessment
agencies
and
groups.63'64
he ac-
tivities of these
agencies
and
organizations
remain both redundant
and
poorly
inte-
grated.
Most are structured
to
synthesize
and
integrate
existing
information
on
safety,
ef-
ficacy,
and
cost;
few resources
exist to
sup-
port the development, collection, and anal-
ysis
of
primary
data.
The limited
support
for
collecting
data to
compare
MRI with
other
diagnostic
modalities
is small relative
to
the
data
needs and dollar
amounts
spent
on the
purchase, siting,
and
operation
of these
units.
The
opportunity
for
providers
to
"game"
the
system
is
enhanced
in
the
present
un-
coordinated
regulatory system,
with the fre-
quent
net result of increased costs
in
excess
of commensurate benefits. The better the
coordination
among
CON
regulation,
third-
party
reimbursement
policy,
FDA
premarket
approval,
and federal tax
policy,
the
greater
the
synergy
and cohesion
among
these
pro-
grams.
The less coordinated these
programs,
the
greater
the
opportunity
for
providers
to
exploit loopholes
by
which
to circumvent
system
controls
and
thereby
undermine
pol-
icy
objectives.
The
present
trend toward
purchase
and
operation
of MRI
by
FIOs
is,
in
part,
an
example
of such
opportunities
and
the resultant behavior
and,
in
part,
a
re-
sponse
to
tax and reimbursement
incentives.
Finally,
the
impact
of
specific
regulatory
and reimbursement
policies
on the
adoption
and diffusion
of new
medical
technologies
such
as MRI must be
monitored
and ana-
lyzed.
The
voluntary registry
maintained
by
the American College of Radiology provides
an
opportunity
to track
the
diffusion
of this
technology,
document
changes
in market
trends,
and
accumulate information
on
pur-
chasers.
However,
its
voluntary
nature and
the absence
of
data on when units are
or-
dered reduce its
potential
usefulness.
Our
survey of actual MRI sites identified several
errors and
inaccuracies
in
the ACR data
set.
It
is
clear
that a
voluntary
registry
is not suf-
ficient
to
track
the diffusion
of
MRI with the
timeliness and
degree
of
detail
required
by
policymakers.
A
compulsory registry,
ad-
ministered either
by
a
private
organization
(e.g.,
ACR)
or
a
governmental
agency
(e.g.,
FDA,
NIH)
with
adequate funding
for staff-
ing
to
permit
more extensive data collection
and validation is required.
If
the
medical
system
is to
profit
from
ex-
periences
with diffusion of
new
technologies,
the
present
technology
management system
must
be altered.
Efficient
and
optimal
tech-
nology
diffusion
policy requires
better
col-
lection
of
primary
information
on both clin-
ical
and
regulatory
issues.
Most
important
is
the
pressing
need to
support
earlier,
more
rigorous
scientific
evaluations
of
safety
and
clinical
efficacy. Similarly,
concurrent
pri-
mary
data are needed to
analyze
the
impact
of
policy
initiatives
on
providers'
adoption
decisions and manufacturers'
development
and
marketing
decisions.
While
these
re-
quirements
are not
new,
today's
environ-
ment of increased
competition
coupled
with
vestiges
of
regulation
magnifies
the
need
for
a
cohesive
system.
Perhaps
health
care
goals
would be better
served
by
dismantling
CON
programs,
the
impact
of which
may
be to
distort
diffusion
patterns
in
our
newly
com-
petitive system.
When
the
next
generation
of
imaging
technology
is
developed,
the
health
care
system
should
not be faced
with
the same
uncertainty
and
inefficient
resource
allocation
that
exist
today.
Acknowledgments
The
authors
are indebted
to
Drs.
Bernard
Bloom,
Randall Cebul, John
Eisenberg,
and William Kissickfor
their
helpful
suggestions
and
to Ms.
Amy
Laub
for
her
administrative
assistance.
1292
MEDICALCARE
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THE DIFFUSION OF CT AND MRI
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