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Where Are The Health Care Entrepreneurs? The Failure of Organizational Innovation in Health Care

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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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  • David M. Cutler, 2010. "Where Are The Health Care Entrepreneurs? The Failure of Organizational Innovation in Health Care," NBER Working Papers 16030, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:16030
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    Cited by:

    1. Saghafian, Soroush & Hopp, Wallace J., 2017. "Can Public Reporting Cure Healthcare? The Role of Quality Transparency in Improving Patient-Provider Alignment," Working Paper Series rwp17-044, Harvard University, John F. Kennedy School of Government.
    2. Foray, D. & Raffo, J., 2014. "The emergence of an educational tool industry: Opportunities and challenges for innovation in education," Research Policy, Elsevier, vol. 43(10), pages 1707-1715.
    3. Lakomaa, Erik & Sanandaji, Tino, 2017. "Integrating community driven care service in European welfare states – nonprofit institutional entrepreneurship as driver for expanding access," SSE Working Paper Series in Economic History 2017:5, Stockholm School of Economics.
    4. Amitabh Chandra & Jonathan S. Skinner, 2011. "Technology Growth and Expenditure Growth in Health Care," NBER Working Papers 16953, National Bureau of Economic Research, Inc.
    5. Ari Bronsoler & Joseph Doyle & John Van Reenen, 2021. "The impact of healthcare IT on clinical quality, productivity and workers," CEP Discussion Papers dp1801, Centre for Economic Performance, LSE.
    6. Gaynor, Martin & Town, Robert J., 2011. "Competition in Health Care Markets," Handbook of Health Economics, in: Mark V. Pauly & Thomas G. Mcguire & Pedro P. Barros (ed.), Handbook of Health Economics, volume 2, chapter 0, pages 499-637, Elsevier.
    7. Soroush Saghafian & Wallace J. Hopp, 2020. "Can Public Reporting Cure Healthcare? The Role of Quality Transparency in Improving Patient–Provider Alignment," Operations Research, INFORMS, vol. 68(1), pages 71-92, January.
    8. Lakomaa, Erik & Sanandaji, Tino, 2017. "Can Community Driven Care be integrated in the European Welfare System? Institutional Challenges and Historical Lessons," SSE Working Paper Series in Economic History 2017:3, Stockholm School of Economics.
    9. Ayoubi, Charles, 2020. "Machine learning in healthcare: Mirage or miracle for breaking the costs dead-lock?," Thesis Commons tc24d, Center for Open Science.
    10. Aaron K. Chatterji, 2017. "Innovation and American K-12 Education," NBER Chapters, in: Innovation Policy and the Economy, Volume 18, pages 27-51, National Bureau of Economic Research, Inc.
    11. Benjamin R. Handel & Jonathan T. Kolstad, 2021. "The Affordable Care Act After a Decade: Industrial Organization of the Insurance Exchanges," NBER Working Papers 29178, National Bureau of Economic Research, Inc.
    12. Michael L. Barnett & Andrew Olenski & Adam Sacarny, 2023. "Common Practice: Spillovers from Medicare on Private Health Care," American Economic Journal: Economic Policy, American Economic Association, vol. 15(3), pages 65-88, August.
    13. Aaron Chatterji, 2017. "Innovation and American K-12 Education," NBER Working Papers 23531, National Bureau of Economic Research, Inc.
    14. Amitabh Chandra & Jonathan Skinner, 2012. "Technology Growth and Expenditure Growth in Health Care," Journal of Economic Literature, American Economic Association, vol. 50(3), pages 645-680, September.
    15. 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.
    16. Agha, Leila, 2014. "The effects of health information technology on the costs and quality of medical care," Journal of Health Economics, Elsevier, vol. 34(C), pages 19-30.
    17. Atul Gupta & Sabrina T Howell & Constantine Yannelis & Abhinav Gupta, 2021. "Does Private Equity Investment in Healthcare Benefit Patients? Evidence from Nursing Homes," Working Papers 2021-20, Becker Friedman Institute for Research In Economics.
    18. Germán M. Izón & Chelsea A. Pardini, 2018. "Association Between Medicare’s Mandatory Hospital Value-Based Purchasing Program and Cost Inefficiency," Applied Health Economics and Health Policy, Springer, vol. 16(1), pages 79-90, February.
    19. Deepa Wani & Manoj Malhotra & Jonathan Clark, 2021. "Strategic Service Design Attributes, Customer Experience, and Co‐Created Service Choice: Evidence from Florida Hospitals," Production and Operations Management, Production and Operations Management Society, vol. 30(1), pages 210-234, January.

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    JEL classification:

    • I1 - Health, Education, and Welfare - - Health
    • L0 - Industrial Organization - - General

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