The Impact of Relative Performance on Physician Technology Disadoption

This paper examines how physicians’ relative performance affects their disadoption of technology in response to information shocks. We draw on an exogenous announcement of negative news about laparoscopic hysterectomy by the Food and Drug Administration and use this information shock to gauge the impact of physician relative performance on their treatment choices between two types of hysterectomies: open hysterectomies and laparoscopic hysterectomies. Using a 100% sample of procedures in Florida from 2012 to 2015, we find that physicians do respond to negative news by choosing laparoscopic hysterectomies less often. However, we find that the physicians’ relative performance prior to the release of negative news significantly alter their responses: physicians whose laparoscopic performances are better than their open performances are less likely to disadopt laparoscopic hysterectomies. In specific, we find that one standard deviation increase in relative performance (i.e., laparoscopic relative to open) decreases the probability of disadoption by 4 percentage points. We do not find a significant impact of absolute laparoscopic performance on the likelihood of disadoption. These results indicate that physicians account for their performance on alternative treatments when disadopting certain technologies. Relative performance across alternative treatments is an important determinant of physician response to negative news.