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

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  • Cutler, David M.

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.

Suggested Citation

  • Cutler, David M., 2010. "Where Are the Health Care Entrepreneurs? The Failure of Organizational Innovation in Health Care," Scholarly Articles 5345877, Harvard University Department of Economics.
  • Handle: RePEc:hrv:faseco:5345877
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    References listed on IDEAS

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    1. Randall D. Cebul & James B. Rebitzer & Lowell J. Taylor & Mark E. Votruba, 2011. "Unhealthy Insurance Markets: Search Frictions and the Cost and Quality of Health Insurance," American Economic Review, American Economic Association, vol. 101(5), pages 1842-1871, August.
    2. repec:mpr:mprres:6492 is not listed on IDEAS
    3. Neeraj Sood & Arkadipta Ghosh & José J. Escarce, 2009. "EmployerSponsored Insurance Health Care Cost Growth and the Economic Performance of US Industries," Mathematica Policy Research Reports 88ac266a27d2497c84f0a2db7, Mathematica Policy Research.
    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, June.
    5. Deborah Peikes & Randall Brown & Greg Peterson & Jennifer Schore, 2009. "The Promise of Care Coordination: Models that Decrease Hospitalizations and Improve Outcomes for Medicare Beneficiaries with Chronic Illnesses," Mathematica Policy Research Reports 2de6fbb7f31a459cace4e08ce, Mathematica Policy Research.
    6. Chernew, Michael & Cutler, David & Keenan, Patricia S., 2005. "Increasing Health Insurance Costs and the Decline in Health Insurance Coverage," Scholarly Articles 2660660, Harvard University Department of Economics.
    7. 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.
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    Cited by:

    1. Gaynor, Martin & Town, Robert J., 2011. "Competition in Health Care Markets," Handbook of Health Economics, Elsevier.

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