adoption and diffusion of ct and mri

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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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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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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




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

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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




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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11




7/13

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




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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11




9/13

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




10/13

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,

1291

Vol.

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No. 11




11/13

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.

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THE DIFFUSION OF CT AND MRI

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adoption and diffusion of ct and mri

Documents