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Where are the Health Care Entrepreneurs? The Failure of Organizational Innovation in Health Care

In: Innovation Policy and the Economy, Volume 11

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  • David M. Cutler

Abstract

Medical care is characterized by enormous inefficiency. Costs are higher and outcomes worse than almost all analyses of the industry suggest should occur. In other industries characterized by inefficiency, efficient firms expand to take over the market, or new firms enter to eliminate inefficiencies. This has not happened in medical care, however. This paper explores the reasons for this failure of innovation. I identify two factors as being particularly important in organizational stagnation: public insurance programs that are oriented to volume of care and not value, and inadequate information about quality of care. Recent reforms have aspects that bear on these problems.

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This chapter was published in:

  • Josh Lerner & Scott Stern, 2011. "Innovation Policy and the Economy, Volume 11," NBER Books, National Bureau of Economic Research, Inc, number lern10-1, octubre-d.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 12044.

    Handle: RePEc:nbr:nberch:12044

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    1. Brad M. Barber & Terrance Odean & Lu Zheng, 2005. "Out of Sight, Out of Mind: The Effects of Expenses on Mutual Fund Flows," The Journal of Business, University of Chicago Press, vol. 78(6), pages 2095-2120, November.
    2. Neeraj Sood & Arkadipta Ghosh & José J. Escarce, 2009. "Employer-Sponsored Insurance, Health Care Cost Growth, and the Economic Performance of U.S. Industries," Mathematica Policy Research Reports 6492, Mathematica Policy Research.
    3. Joseph P. Newhouse, 1992. "Medical Care Costs: How Much Welfare Loss?," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 3-21, Summer.
    4. Katherine Ho, 2009. "Barriers to Entry of a Vertically Integrated Health Insurer: An Analysis of Welfare and Entry Costs," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(2), pages 487-545, 06.
    5. David M. Cutler & Robert S. Ilckman & Mary Beth Landrum, 2004. "The Role of Information in Medical Markets: An Analysis of Publicly Reported Outcomes in Cardiac Surgery," American Economic Review, American Economic Association, vol. 94(2), pages 342-346, May.
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    Cited by:
    1. Martin Gaynor & Robert J Town, 2012. "Competition in Health Care Markets," The Centre for Market and Public Organisation 12/282, Department of Economics, University of Bristol, UK.
    2. Mas, Nuria & Cirera, Laia & Viñolas, Guillem, 2011. "Los sistemas de copago en Europa, Estados Unidos y Canadá: Implicaciones para el caso español," IESE Research Papers D/939, IESE Business School.

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