Innovation diffusion under budget constraints : Microeconometric evidence on heart attack in France

This paper studies the relationship between the diffusion of innovative procedures for the treatment of heart attack and distributions of the cost and length of hospital stays. Using a sample of 5,681 stays observed in French public hospitals, we use microsimulation techniques to highlight various effects on the shifts in the overall distribution of the costs and length of stays : (i) the effect of the adoption of new techniques by hospitals (between hospital diffusion) ; (ii) the effect of the diffusion of technological progress within hospitals ; (iii) the effect of changes in patients' characteristics (age, comorbidities). This decomposition approach is used in the studies on the relationship between education and income distribution where observed distributions are compared to counterfactual distributions built by replacing some estimated parameters with their counterparts estimated from another country or time period. Our work shows that between 1994 and 1997 hospitals faced two main causes of rises in costs : firstly, diffusion of technological progress, with increasing use of costly innovative procedures such as angioplasty ; secondly, patients'epidemiological state worsened, since they became older and had more secondary diagnoses. These two factors induced sizeable shocks in cost distribution. Over this period, French public hospitals were financed by a global budget, and their budgets increased very slowly. However, international comparison shows that diffusion of technological progress for AMI treatment was similar in France and in comparable countries. How did French hospitals deal with their financial constraints ? Our study shows that they greatly reduced the length of stays for patients at the bottom of the distribution. This reduction in the length of stays appears to have enabled hospitals to finance the diffusion of angioplasty. Obviously, such a strategy cannot be sustained in the long run without jeopardizing the quality of care.