There is debate on whether the adoption of new medical technologies has been a contributing factor to rising health expenditures. This literature is critically reviewed and another approach is advocated. This alternative approach rests on the distinction between product and process innovations. It is argued that the relationship between innovations and health expenditures can be illuminated, for process innovations, by determining if they are used as substitutes. The empirical results provide no indication that alternative technologies for diagnosing diseases/conditions of the upper gastrointestinal tract have been utilised by Australian medical practitioners, operating on a fee-for-service basis, as substitutes. The study provides new empirical support for the view that medical innovations contribute to rising health expenditures.