Active Projects

The impact of technological innovation on utilisation and costs

Technological change is considered the main driver of healthcare costs. Yet it is puzzling that a number of new technologies are simultaneously associated with lower unit costs and higher total costs. Treatment expansion and substitution provide a possible explanation for this: new technologies tend to be complements rather than substitutes for older technologies. A greater focus on changes in utilisation besides unit costs may provide important insights into why technological change is increasing costs, and what can be done about it.

Project Facts

Start date: January 2010
End date: January 2013
Investigators Professor James Barlow and Dr Steffen Bayer
Staff Employed Tiago Cravo Oliveira
Status Active

Project Partners

Partly funded by Fundação para a Ciência e a Tecnologia, Portugal

Project Partners

Imperial College Business School
Tanaka Building
South Kensington Campus
London SW7 2AZ
E: t.cravo-oliveira09(at)imperial(dot)ac(dot)uk

Some technological innovations increase costs because they require more capital (e.g. costly magnetic resonance imaging devices), more labour (e.g. time from physicians), and more associated expenses (e.g. training and education), than older technologies. For the treatment of acute myocardial infarction, for example, all of these costs did not exist forty years ago, when the treatment was one week of bed rest in a coronary care unit. On the other hand, technologies which simultaneously substitute for older treatments and expand the number of procedures undertaken have an ambiguous impact on total costs, even when unit costs are lower. Computed tomography (CT) angiography, for example, is considered a safer and less expensive procedure than the traditional invasive catheter angiogram. Since the technology has been in use, both substitution (receiving CT angiography instead of catheter angiography) and expansion (e.g. receiving both CT angiography and traditional angiography) have taken place. In these situations, current economic evaluations methods might underestimate the expansion effect, producing significantly different results depending on the level of utilisation. In this PhD project, we investigate the mechanisms through which new technologies lead to changes in utilisation (i.e. the degrees of substitution and expansion), and how economic models can be integrated with a dynamic framework to produce results which are more accurate and provide a richer picture.