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NBER Working Paper No. 16030
Issued in May 2010
NBER Program(s): HC HE IO PR
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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.
Published: 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 (2010), University of Chicago Press
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