Medical technology, broadly construed, embraces innovations in medicine — new drugs, biologics, medical devices, and procedures — as well as existing therapeutic and diagnostic capabilities. The evaluation of the clinical effectiveness and cost-effectiveness of medical technology, therefore, is a matter of substantial interest to many parties. "Technology assessment" (TA) is the term most often applied to such evaluation. This study examines the development of technology assessment in the private health care sector. Although it briefly addresses the hospital, physician specialty, and medical-device sectors, the report emphasizes TA in managed care organizations because they constitute the most significant change in the financing, organization, and delivery of health care. The report seeks answers to five questions: What is the demand for TA? Who performs TA? What characterizes the conduct of TA? What use is made of the results of TA? What is the role of the government? The primary conclusion of the study is that a robust analytical TA capability now exists in the managed care sector, is strongly evidence-based, and is increasingly being integrated with clinical practice guidelines in a number of organizations. Operational TA programs are now taking steps to develop cost-effectiveness analysis, which is widening the scope of TA by including the evaluation of the cost implications and effectiveness of new drugs after Food and Drug Administration approval for marketing. Several issues relating to TA that have been settled are which organizational decisions should be supported by assessments, what evaluative criteria TA should use, what routines should be used for setting priorities on which technologies are to be assessed, and at what stage medical technologies should be assessed. TA-related issues that remain to be settled are what the relationship of TA to clinical trials should be and what medical information systems should be used to integrate TA with cost and other information. Looking at the closing of governmental attempts at centralized TA programs of the 1970s and 1980s, the failure of health care reform in 1994, and the growing and thriving private-sector TA industry, the report proposes not a centralized role but a supporting role for the federal government in TA. The study is based on site visits, extensive face-to-face and telephone interviews, and examination of TA-related documents. Individuals responsible for TA and associated activities were the primary source of data. The audiences for this report include not just those with responsibilities in technology assessment, but all those policymakers and managers who are actual or prospective users of TA, including members of Congress; officials in the Departments of Health and Human Services, Veterans Affairs, and Defense; state governments; Medicaid programs; and health insurance commissioners.