Forward Looking Adoption Under Policy Uncertainty: Evidence From Healthcare
Abstract
This project explores innovation diffusion in regulated markets. In healthcare, delays in public reimbursement for socially valuable but financially unprofitable technologies are common. While these delays may appear to slow innovation, the issue is more complex when considering limited public budgets and hospital competition. We examine Transcatheter Aortic Valve Replacement (TAVR), a minimally invasive alternative to open-heart surgery, during a shift in Medicare reimbursement policies. Using hospital-level data, we find that 20% of TAVR adoption occurred before profitable reimbursement was introduced. Hospitals leveraged TAVR as a consumer steering mechanism, with patients willing to travel to adopting hospitals, regardless of whether they would ultimately undergo the innovative procedure. This raises the question of whether delayed public policy interventions, coupled with subsidies for rural hospitals, could result in higher adoption rates than immediate reimbursement policies.