Medical Technology: Cost Driver or Cost Saver?

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October 24th, 2012

Healthcare costs in the United States have been growing at an alarming rate. When discussing the cost drivers of healthcare, “medical technology” is a commonly named factor behind the increase in healthcare spending. Medical technology can be defined as any procedure, equipment, or processes through which medical care is delivered. The growth in health spending has surpassed the growth rate of gross domestic product (GDP), inflation and population combined with healthcare expenditures projected to reach 20% of GDP by 2015.  These facts have forced the healthcare industry and policy makers to analyze the disparity of healthcare inflation compared to other industries while seeking ways to control costs while maintaining or improving quality.

Doctor Viewing Scans

Advances in technology have spurred the creation of new surgical procedures, drugs and medical imaging devices, such as computed tomography (CT scans), magnetic resonance imaging (MRIs), and positron emission tomography (PETs). Over time, advances in technology have improved healthcare outcomes and have had a positive impact on curing, detecting and preventing disease. Heart disease, for example, is more accurately treated with higher performing testing and medication, dropping heart related mortality rates over the last 20 years by nearly half.

If advances in medical technology have lead to so many improvements in care, then why is it viewed so negatively in relation to healthcare spending? The problem lies not in the technology itself, but in the over-utilization of the technology. This is caused in part by the fee-for-service (FFS) system that we use to pay for healthcare services. The FFS payment model inadvertently incentivizes the overuse of technology and services by basing reimbursements solely on the volume of care delivered. The overuse of medical technology not only raises costs, but can also put patients at greater risk through unnecessary exposure to radiation (during imaging) and undergoing invasive procedures. Without restructuring our payment system to be based on value instead of volume, we will never reach the full potential of medical technology to improve care while lowering costs. Changing reimbursement incentives is key to aligning the utilization of technology and services with providing true value.

So, the question to consider is not if medical technology itself increases or decreases costs — but how can we begin to correct the misuse and over utilization of medical technology in order to reduce spending. Taking the full picture into consideration, it is clear that blaming medical technology for the growth of healthcare costs is not addressing the root problem- the fee-for-service payment system.