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

  • David M. Cutler

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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File URL: http://www.nber.org/papers/w16030.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16030.

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Date of creation: May 2010
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Publication status: published as Where are the Health Care Entrepreneurs? The Failure of Organizational Innovation in Health Care , David M. Cutler. in Innovation Policy and the Economy, Volume 11 , Lerner and Stern. 2010
Handle: RePEc:nbr:nberwo:16030
Note: HC HE IO PR
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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  1. 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.
  2. Randall D. Cebul & James B. Rebitzer & Lowell J. Taylor & Mark E. Votruba, 2008. "Unhealthy Insurance Markets: Search Frictions and the Cost and Quality of Health Insurance," NBER Working Papers 14455, National Bureau of Economic Research, Inc.
  3. 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.
  4. 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.
  5. repec:mpr:mprres:6492 is not listed on IDEAS
  6. 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.
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