Performance Improvement 1997. Health Care in Transition: Technology Assessment in the Private Sector



Medical technology embraces innovations in medicine, such as new drugs, biologics, medical devices, and procedures, as well as existing therapeutic and diagnostic capabilities. Medical technology has been identified as a major factor driving the increase in national expenditures for health care services. Thus, the evaluation of the clinical and cost-effectiveness of medical technology is of substantial interest to many parties. Technology assessment is the term most often applied to such evaluations. A strong national system of technology assessment has not emerged in the wake of a series of failed efforts by the Federal Government. With rapid changes in health care, particularly the rise of managed care, the demand for technology assessment has increased in the private sector. It is not clear if technology assessment activities in the private sector are replacing the assessment functions once expected of Government.

This report briefly describes a number of private-sector health organizations that are engaged in technology assessment. Technology assessment is one of a family of evaluation activities occurring within these health care organizations. Private-sector technology assessment is highly evidence based. Rigorous evaluation of clinical effectiveness based on a systematic review of scientific and clinical evidence has become the norm among private organizations conducting technology assessment. Technology assessment in this sector has increasingly become "full service," encompassing drugs, medical devices, and clinical procedures.


This report considers the use of technology assessment by managed care organizations, which constitute the most significant change in the financing, organization, and delivery of health care. Managed care organizations have strong incentives to hold down the costs of care, and one way to do so is to avoid providing unnecessary, inappropriate, or inadequately tested medical technologies and procedures. This study aims to answer the following questions: What is the demand for technology assessment? Who are the performers of technology assessment? What characterizes the conduct of technology assessment? How are the results of technology assessment used? What unmet needs for technology assessment might be met by cooperation between the public and private sectors of health care?


Much attention has been given in the past two decades to a strong governmental role in technology assessment, a term used to describe the evaluation of the clinical and cost-effectiveness of medical technology. Yet the Government bodies established to conduct such evaluations have not survived the budget cuts and political environment of the 1990's. At the same time, large corporate purchasers of health care have become more active in seeking to rein in the growth of health care expenditures. Managed care organizations have responded to market opportunities by enrolling an increasing proportion of patients, reducing excess hospital capacity, and shifting care away from physician specialists to primary caregivers. In this context, the evaluation of clinical practice for cost-effectiveness has assumed greater market value, and the demand for technology assessment has increased. There are two main sources of increased demand for technology assessment: the press for cost containment and performance evaluation and the need to be responsive to a changing health care marketplace.

With the failure of health care reform efforts in the early 1990's, and with the emergence of managed care, new questions have emerged about the extent of technology assessment activity in the private sector and whether these activities fulfill the functions that were once expected of the Federal Government. This study briefly describes a number of private-sector health organizations engaged in technology assessment.


The scope of this study was narrowed to focus on managed care. Data collection was accomplished through site visits, interviews, attendance at meetings, document review, and follow-up interviews. Since the Blue Cross/Blue Shield Association and The Emergency Care Research Institute had long been involved in technology assessment, they were the primary contacts for data collection. In total, 46 interviews were conducted with 56 individuals in 29 different organizations, including performers of technology assessment, third-party insurers, managed care organizations, professional organizations, and other settings. This report is not a comprehensive enumeration of all the organizations engaged in technology assessment, but is a selective picture of the major players; thus, the extent to which these practices are diffused is unknown.


In the past decade, a strong, decentralized technology assessment capability has developed in the private health care sector of the United States, consisting of a small number of national organizations and a growing number of larger health plans. Private organizations are conducting technology assessment in response to private-sector demands. These assessments are often designed to serve special clientele and require a significant number of internal staff resources.

Some national insurers and managed care organizations conduct centralized technology assessment efforts that serve member plans. Several membership organizations have constituency-oriented technology assessment programs, and some individual managed care organizations have significant technology assessment capabilities. In short, the private-sector technology assessment system is a mix of distributed centralized (national subscription, plan, and constituency efforts) and decentralized (regional and local health plans) efforts. Managed care has strong incentives to support and conduct technology assessment.

Several issues in technology assessment appear to have been settled in the past decade, including the organizational decisions supported by such assessments, the evaluative criteria for assessing a technology, the means of setting priorities for conducting assessments, and the stage of technology that is the object of the assessment. However, issues of how technology assessment applies to clinical trials and the development and maintenance of data bases are yet to be resolved.

In general, the evaluative context within which technology assessment is conducted has changed, focusing more on effectiveness, outcomes, appropriateness, and clinical practice guidelines. There has also been a shift toward evidence-based assessment, that is, a deemphasis on intuition and more emphasis on systematic clinical experience as sufficient grounds for clinical decision making. Although consensus processes are used to interpret and apply the results of technology assessments, the evidence-based movement discounts very heavily the use of consensus to assess the scientific bases of clinical practice.

Driven by cost-containment and quality-assurance objectives, health plans are increasingly examining the clinical effectiveness of interventions in relation to their financial implications. The use of technology assessment in the managed care sector is primarily to support coverage decision making. However, a number of innovative developments go beyond this narrow range of issues. These include benchmarking for member organizations of evaluative activities believed to be needed for survival in the current marketplace and providing a forum for reviewing the evidence related to competing technologies. They also include educational efforts in some plans, directed at changing physician behavior toward evidence-based medicine. Finally, the working limits of technology assessment have been broadened to include the evaluation of drugs after Food and Drug Administration approval for marketing.

Use of Results

An examination of private-sector technology assessment leads back to questions about the appropriate role of the Federal Government in technology assessment and the appropriate division of labor between the public and private sectors. One strong implication is that the Federal Government, as purchaser of health care services, should be no less competent and effective than the private sector in supporting and conducting technology assessment. However, this does not necessarily imply a centralized Federal Government leadership role, which does not appear feasible at present. Although the Federal Government has not shown a leadership role in technology assessment, it can play a significant role as sponsor of technology assessment-related research.

Agency sponsor:

Office of the Assistant Secretary for Planning and Evaluation

Federal contact:

Cheryl Austein-Casnoff
PIC ID: 6180

Performer organization:

RAND Corporation, Santa Monica, CA