IDEAS home Printed from https://ideas.repec.org/h/nbr/nberch/12044.html
   My bibliography  Save this book chapter

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

In: Innovation Policy and the Economy, Volume 11

Author

Listed:
  • 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.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • David M. Cutler, 2011. "Where Are the Health Care Entrepreneurs? The Failure of Organizational Innovation in Health Care," NBER Chapters, in: Innovation Policy and the Economy, Volume 11, pages 1-28, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:12044
    as

    Download full text from publisher

    File URL: http://www.nber.org/chapters/c12044.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Deborah Peikes & Arnold Chen & Jennifer Schore & Randall Brown, 2009. "Effects of Care Coordination on Hospitalization, Quality of Care, and Health Care Expenditures Among Medicare Beneficiaries: 15 Randomized Trials," Mathematica Policy Research Reports ce70f11be1b44e2c8590b9cf5, Mathematica Policy Research.
    2. David M. Cutler & Robert S. Huckman & 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.
    3. repec:mpr:mprres:6184 is not listed on IDEAS
    4. 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.
    5. Deborah Peikes & Arnold Chen & Jennifer Schore & Randall Brown, "undated". "Paper of the Year: Effects of Care Coordination on Hospitalization Quality of Care and Health Care Expenditures Among Medicare Beneficiaries: 15 Randomized Trials (JAMA 2009)," Mathematica Policy Research Reports 05bbbc49ae314e1494a855ccb, Mathematica Policy Research.
    6. repec:mpr:mprres:6492 is not listed on IDEAS
    7. 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.
    8. David M. Cutler, 2002. "Equality, Efficiency, and Market Fundamentals: The Dynamics of International Medical-Care Reform," Journal of Economic Literature, American Economic Association, vol. 40(3), pages 881-906, September.
    9. David Dranove & Daniel Kessler & Mark McClellan & Mark Satterthwaite, 2003. "Is More Information Better? The Effects of "Report Cards" on Health Care Providers," Journal of Political Economy, University of Chicago Press, vol. 111(3), pages 555-588, June.
    10. 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.
    11. 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.
    12. Cutler, David, 2002. "Equality, Efficiency, and Market Fundamentals: The Dynamics of International Medical Care Reform," Scholarly Articles 2640584, Harvard University Department of Economics.
    13. Daniella Perlroth & Dana Goldman & Alan Garber, 2010. "The potential impact of comparative effectiveness research on U.S. Health Care expenditures," Demography, Springer;Population Association of America (PAA), vol. 47(1), pages 173-190, March.
    14. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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.
    2. Ayoubi, Charles, 2020. "Machine learning in healthcare: Mirage or miracle for breaking the costs dead-lock?," Thesis Commons tc24d, Center for Open Science.
    3. 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.
    4. 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.
    5. 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.
    6. 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.
    7. 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.
    8. 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.
    9. 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.
    10. 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.
    11. 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.
    12. Hoang, Ha & Perkmann, Markus, 2023. "Physician entrepreneurship: A study of early career physicians’ founding motivations and actions," Social Science & Medicine, Elsevier, vol. 339(C).
    13. 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.
    14. Amitabh Chandra & Jonathan S. Skinner, 2011. "Technology Growth and Expenditure Growth in Health Care," NBER Working Papers 16953, National Bureau of Economic Research, Inc.
    15. 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.
    16. 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.
    17. 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.
    18. Aaron Chatterji, 2017. "Innovation and American K-12 Education," NBER Working Papers 23531, National Bureau of Economic Research, Inc.
    19. 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.
    20. 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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. David M. Cutler, 2011. "Where Are the Health Care Entrepreneurs? The Failure of Organizational Innovation in Health Care," Innovation Policy and the Economy, University of Chicago Press, vol. 11(1), pages 1-28.
    2. 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.
    3. Hyejin Lee & Dong-Yop Oh & Ming Meng, 2019. "Stationarity and cointegration of health care expenditure and GDP: evidence from tests with smooth structural shifts," Empirical Economics, Springer, vol. 57(2), pages 631-652, August.
    4. Daron Acemoglu & Amy Finkelstein & Matthew J. Notowidigdo, 2013. "Income and Health Spending: Evidence from Oil Price Shocks," The Review of Economics and Statistics, MIT Press, vol. 95(4), pages 1079-1095, October.
    5. Peter Martinsson & Emil Persson, 2019. "Physician behavior and conditional altruism: the effects of payment system and uncertain health benefit," Theory and Decision, Springer, vol. 87(3), pages 365-387, October.
    6. van der Star, Sanne M. & van den Berg, Bernard, 2011. "Individual responsibility and health-risk behaviour: A contingent valuation study from the ex ante societal perspective," Health Policy, Elsevier, vol. 101(3), pages 300-311, August.
    7. Sherry Glied, 2003. "Health Care Costs: On the Rise Again," Journal of Economic Perspectives, American Economic Association, vol. 17(2), pages 125-148, Spring.
    8. Taylor J. Christensen, 2016. "A framework for guiding efforts to reward value instead of volume," International Journal of Health Economics and Management, Springer, vol. 16(2), pages 175-187, June.
    9. Amy Finkelstein, 2005. "The Aggregate Effects of Health Insurance: Evidence from the Introduction of Medicare," NBER Working Papers 11619, National Bureau of Economic Research, Inc.
    10. Mads Leth Felsager Jakobsen & Thomas Pallesen, 2017. "Performance Budgeting in Practice: the Case of Danish Hospital Management," Public Organization Review, Springer, vol. 17(2), pages 255-273, June.
    11. Parida Wubulihasimu & Werner Brouwer & Pieter van Baal, 2016. "The Impact of Hospital Payment Schemes on Healthcare and Mortality: Evidence from Hospital Payment Reforms in OECD Countries," Health Economics, John Wiley & Sons, Ltd., vol. 25(8), pages 1005-1019, August.
    12. Mikkers, Misja, 2016. "The Dutch Healthcare System in International Perspective," Other publications TiSEM 800704a0-24ee-4830-8659-2, Tilburg University, School of Economics and Management.
    13. R. Halbersma & M. Mikkers & E. Motchenkova & I. Seinen, 2011. "Market structure and hospital–insurer bargaining in the Netherlands," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 12(6), pages 589-603, December.
    14. Domenico Lisi & Giacomo Pignataro, 2021. "A note on the trade‐off between waiting times and quality in a constrained hospital market," Health Economics, John Wiley & Sons, Ltd., vol. 30(1), pages 180-185, January.
    15. Powdthavee, Nattavudh & van den Berg, Bernard, 2011. "Putting different price tags on the same health condition: Re-evaluating the well-being valuation approach," Journal of Health Economics, Elsevier, vol. 30(5), pages 1032-1043.
    16. Gary E. Bolton & Axel Ockenfels, 2004. "The Behavioral Tradeoff between Efficiency and Equity when a Majority Rules," Papers on Strategic Interaction 2003-12, Max Planck Institute of Economics, Strategic Interaction Group.
    17. Cooper, Zack & Gibbons, Stephen & Skellern, Matthew, 2018. "Does competition from private surgical centres improve public hospitals' performance? Evidence from the English National Health Service," Journal of Public Economics, Elsevier, vol. 166(C), pages 63-80.
    18. Christine André & Philippe Batifoulier & Mariana Jansen-Ferreira, 2016. "Privatisation de la santé en Europe. Un outil de classification des réformes," Working Papers hal-01256505, HAL.
    19. Clive R Belfield & Milagros Nores & Steve Barnett & Lawrence Schweinhart, 2006. "The High/Scope Perry Preschool Program: Cost–Benefit Analysis Using Data from the Age-40 Followup," Journal of Human Resources, University of Wisconsin Press, vol. 41(1).
    20. Lawrence Brown, 2006. "Political Challenges for Healthcare Reform," PharmacoEconomics, Springer, vol. 24(2), pages 95-99, December.

    More about this item

    JEL classification:

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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberch:12044. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.