Technological Adoption in Health Care – The Role of Payment Systems

This paper examines the incentive to adopt a new technology resulting from common payment systems, namely mixed cost reimbursement and DRG reimbursement. Adoption is based on a cost–benefit criterion. We find that retrospective payment systems require a large enough patient benefit to yield adoption, while under DRG-linked payment, adoption may arise in the absence of patients benefits when the differential reimbursement for the old vs new...