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Investigating Health Technology Diffusion in New Zealand - How Does it Spread and Who Stands to Gain? - WP 06/05

2  Literature – What determines health technology diffusion?

An international body of work already exists that seeks to explain the diffusion of health technologies across countries i.e. why some adopt a procedure sooner than others (McLellan and Kessler, 1999). A number of incentives were identified which influence the process of technological change:

  • The degree to which costs are borne by patients – Substantial out of pocket payments put a limit on technological growth.
  • Generosity of payments to hospitals – Fixed global budgets are associated with a strong limit on technological growth whereas fee-for-service payments have the opposite effect.
  • Generosity of payments to physicians – Where physicians are mainly salaried, technological growth is slow. When fee-for-service payments are offered there is a much greater incentive to adopt new technologies.
  • “Micro” technology regulation – Countries that require extensive reviews of individual treatment decisions put a strong limit on technological growth. Those needing little or no case-level review area associated with fewer barriers to technological change.

2.1  The New Zealand Experience

2.1.1  Policy settings provide a starting point for understanding health technology in New Zealand…

How we configure our health services in New Zealand is determined in part by our geography. With a population equivalent to the size of a major overseas city yet relatively dispersed over a large geographical area, we face a particular set of circumstances.

New pharmaceuticals are reviewed by PHARMAC and hence barriers to diffusion exist here. However, the process for approving and adopting other technologies involving large new pieces of equipment or service reconfigurations is still in its infancy. In May 2005, the National Health Committee put together a report to the Minister of Health setting out recommendations for a health intervention process (Decision Making about New Health Interventions, 2005). The Ministry of Health and DHBNZ have subsequently put into place the Service Planning and New Health Intervention Assessment (SPNHIA). The new procedures call for a more collaborative decision making process between DHBs, the Ministry of Health and other related bodies. Capital allocation is also considered and if the new technology requires it, then a separate set of guidelines exists for capital investment (Ministry of Health 2003 and 2005) once the technology has been approved by SPNHIA.

2.1.2  But the role of budgeting and funding arrangements must not be overlooked.

Related to the above section outlining current policy settings is the notion of budgeting and funding arrangements. The data used in this investigation spans a period which incorporates a number of different funding arrangements. Between 1991 and 1997 responsibility for purchasing health services shifted from local purchasing (with 14 area health boards) to regional purchasing (under 4 regional health authorities) to central purchasing with a single health funding authority. In 2001 District Health Boards came into existence each of which has a role in planning, funding, and providing health services for respective district populations. There are 21 in total and a large fraction of health funding is channelled through them.

This has implications for the adoption and dissemination of new technologies. Despite the lack of evidence on long term efficacy, the number of stents performed in New Zealand has increased dramatically since their introduction in 1995. In part, this may be explained by the manner with which they are funded e.g. if interventional cardiology services such as angioplasty and stents draw on different resources or silos from cardiac surgery (e.g. coronary artery bypass grafts, henceforth known as CABGs) then this may help to explain the rapid growth in one procedure.

Given that the 21 DHBs each have their own funding and provider roles, it is inevitable that there will be different views between DHBs on how best to fund similar services. Consequently, one would expect differences over time in how services are funded and purchased. However, this also has the potential to generate opportunities for some providers to leverage enhanced clinical capability particularly when the people using the new technology in their procedures are the same ones promoting it. Some commentators argue that this is the situation facing cardiology in New Zealand and that in this environment, clinicians and funders would appreciate information from technology assessment groups to advise on emerging technologies in the field.

2.1.3  Investing in new cardiac treatments carries a risk since it comes with high fixed or variable costs…

High Technology Treatments are those with high fixed costs or high variable costs per use. Many cardiac procedures fall into this category since they require substantial set up costs by hospitals in hiring specialised personnel (e.g. interventional cardiologists) and purchasing specialised equipment (e.g. catheterisation tables and fluoroscopes). Notably, it has been found that countries using fixed provider payments had relatively little growth in the use of these invasive procedures. (McClellan and Noguchi, 1998).

2.1.4  …but successful new innovations in cardiology are highly regarded by international clinicians.

In a recent survey, 225 leading general internists in the US were asked to rank the relative importance to patients of thirty medical innovations (Fuchs and Sox, 2001). The results put Balloon Angioplasty with Stents in 3rd place with Coronary Artery Bypass Grafts coming in 5th. This is not surprising given the high incidence of cardiovascular disease in the US and hence a significant “ability to benefit” in the population. Given that New Zealand faces similar pressures we might expect our rankings to be much the same as those in the US.

2.1.5  So with limited information on the spread of new technologies across New Zealand, there is a need to look further afield.

Despite the growing interest in technology diffusion, very little information exists that examines the spread of technology across regions within a country and no work to date has looked at health technology diffusion between the different DHBs of New Zealand. There is, however, considerable anecdotal evidence that can be tested against the data and a preliminary analysis provided by James Harris (2005) from a seminar entitled “Changing Priorities: Stents in Cardiovascular Care”.

While Harris’s work did not focus explicitly on the spread of a technology across New Zealand’s DHBs, it did reveal some problems encountered when a new technology is first introduced into an area, drawing comparisons with the Australian case.

His paper revealed that the process for adopting new technologies has differed between Australia and New Zealand. Australia did not fund the newer forms of stent devices until they were approved by the national Medical Services Advisory Committee (MSAC). The first drug eluting stents (DES) were added to the Australian Register of Therapeutic Goods (ARTG) as a non-current entry in 2000-01. This was conditional on the drug that coated the stent being approved for treating coronary heart disease. The approval was granted by the Therapeutics Goods Administration in June 2002. In 2005, MSAC carried out an assessment of DES for the Health Policy Advisory Committee. It was determined that the procedure was safe and more cost effective than bare metal stents mainly because it reduces rates of revascularisation at up to one year post procedure. However, it stressed that additional clinical practice data was needed since it was still early days with regard to the use of this device. In the same year, the Australian Productivity Commission Report outlined possible long term problems associated with these stents such as inflammatory responses and thrombotic reactions.

By contrast, New Zealand has not carried out national assessments, and has arguably weaker national controls over the details of hospital spending than Australia. Most health purchase choices are made locally at the DHB level with DHB funding and planning arms controlling provider arm spending within a budget set by ministers given district annual plans and district strategic plans. Until recently, New Zealand has effectively delegated decisions on devices and procedures to clinicians. After being introduced in New Zea land in 1995, stenting quickly became a popular procedure. However, when the newer drug eluting stents were introduced in 2002/03 their use became confined to particular hospitals and DHBs because of their cost and the lack of established clinical data supporting their use in New Zealand. This is relevant when we consider the following cost information.

Table 1– A Comparison of Individual Costs and Total Expenditure on Different Interventions
  Unit Cost Total Cost - 2002 (millions of dollars)
CABG $21 400 42.7
PTCA $6 300 2
Stent $6 900 20.4

Source: Harris (2005). Note that PTCA refers to percutaneous transluminal coronary angioplasty.

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