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1. Testimony before the U.S. Congress House Committee on Ways and Means, Subcommittee on Health, Washington, D.C., July 18, 2006.
2. Ibid.
3. Lucette Lagnado, "Anatomy of a Hospital Bill," Wall Street Journal, September 21, 2004, p. B1.
4. Galen Institute, Congressional Staff Briefing, "Weighing the Benefits of Specialty Hospitals, " Washington, D.C., July 20, 2005. Statementof Kelby Krabbenhoft, CEO, Sioux Valley.
5. Institute of Medicine (IOM), To Err Is Human: Building a Safer Health System (Washington, D.C.: National Academies Press, 2000), p. 1.
6. Avera Heart Hospital of South Dakota, "About Us" (www.SouthDakotaHeart.com, accessed January 14, 2007).
7. Galen Institute Congressional Staff Briefing, July 20, 2005.
8. 2004 and 2005 Internal Revenue Service (IRS) Form 990s, SiouxValley Hospitals & Health System (Sanford Health as of February 2007), Sioux Falls, S. Dak.
9. Bradford C. Johnson, "Retail: The Wal-Mart Effect" and "What's Right with the U.S. Economy," McKinsey Quarterly, no. 1 (2002), pp. 40–43.
1. Alain C. Enthoven and Victor R. Fuchs, "Employment-Based Health Insurance: Past, Present, and Future," Health Affairs, vol. 25, no. 6 (November/December 2006), pp. 1538–1547.
2. Medicare Payment Advisory Commission, A Data Book: Healthcare Spending and the Medicare Program (Washington, D.C.: Medicare Payment Advisory Commission, June 2006), p. 3.
3. Laura B. Benko, "McGuire's Billion-Dollar Exit: Investors Are Sad to See Unit-edHealth Chief Go," Modern Healthcare, October 23, 2006, p. 8.
4. George Anders, "Health-Care Gold Mines: Middlemen Strike It Rich, " "Rewarding Career: As Patients, Doctors Feel Pinch, Insurer's CEO Makes a Billion, " "UnitedHealth Directors Strive to Please 'Brilliant' Chief, " and "New Questions on Options—Selling Trout for 40 Cents a Pound," Wall Street Journal, April 18, 2006; and James Bandler, Charles Forelle, and Vanessa Fuhrmans, "CEO Aims to Halt Stock-Based Pay at UnitedHealth—Move Comes Amid Scrutiny of Options Timing, Gains," Wall Street Journal, April 19, 2006.
5. Agatha Christie, Murder on the Orient Express (New York: Dodd, Mead, 1985, first published in 1933).
6. Kaiser Family Foundation and Health Research and Educational Trust, Employer Health Benefits, 2005 Annual Survey (Menlo Park, Calif.: Henry J. Kaiser Family Foundation, 2005), p. 16.
7. "Controversy, Salaries Rise," Modern Healthcare, July 31, 2006; UnitedHealth-care, 2006 Proxy, p. 13.
8. Institute of Medicine (IOM), "Crossing the Quality Chasm: The IOM Health Care Initiative" (Washington, D.C.: The National Academies, iom.edu, accessed January 10, 2007).
9. Rachel M. Werner et al., "The 'Hassle Factor': What Motivates Physicians to Manipulate Reimbursement Rules?" Archives of Internal Medicine, vol. 162, no. 10 (May 27, 2002), pp. 1134–1139.
10. Peter J. Cunningham and Jessica H. May, A Growing Hole in the Safety Net: Physician Charity Care Declines Again, Tracking Report No. 13 (Washington, D.C.: Center for Studying Health System Change (CSHSC), March 2006).
11. Revenue Reconciliation Act of 1989: Law and Explanation, as passed by Congress on November 22, 1989 (Chicago: Commerce Clearing House, 1989); Omnibus Budget Reconciliation Act of 1993 (Washington, D.C.: Government Printing Office, 1993); Balanced Budget Reconciliation Act of 1995: S.1357 to provide for reconciliation pursuant to Section 105 of the concurrent resolution on the budget for fiscal year 1996 (Washington, D.C.: Government Printing Office, 1995); and C. I. Scofield, ed., The New Scofield Reference Bible, Authorized King James Version (New York: Oxford University Press, 1967).
12. Allan Nevins with the collaboration of Frank Ernes Hill, Ford: The Times, The Man, The Company (New York: Scribner's, 1954), pp. 646–647; Price/Per Capital Income column: Robert F. Martin, National Income in the United States, 1799–1938 (New York: National Industrial Conference Board, 1939).
13. Ha T. Tu and Paul B. Ginsburg, Losing Ground: Physician Income, 1995–2003, Tracking Report No. 15 (Washington, D.C.: Center for Studying Health System Change, June 2006).
14. Association of American Medical Colleges (AAMC), "Medical School Applications May Be on the Rise, " December 2002, and "Medical School Enrollment Rises, " November 2006 (aamc.org, accessed January 1, 2007).
15. Organ Procurement and Transplantation Network (OPTN), "Donors Recovered in the U.S. by Donor Type" and "Overall by Organ" (www.optn.org, accessed May 15, 2006).
16. Organ Procurement and Transplantation Network, "PARA Waiting Times, 1997–2000, " "Donors Recovered in the U.S. by Donor Type, " and "Overall by Organ" (www.optn.org, accessed May 15, 2006).
1. Charles Ornstein and Tracy Weber, "Kaiser Put Kidney Patients at Risk," Los Angeles Times, May 3, 2006, Part A, p. 1.
2. Ibid; and U.S. Department of Health and Human Services (DHHS), Centers for Medicine & Medical Services (CMS), Statement of Deficiencies, Kaiser Foundation Hospital Renal Transplantation Center, May 12, 2006. Obtained by the author under the Freedom of Information Act.
3. Sabin Russell, "Scathing Report on Kaiser Kidney Program; Transplant Delays Assailed—Medicare Threatens to End Coverage," San Francisco Chronicle, June 24, 2006; and Ornstein and Weber, "The State; Kaiser Put Kidney Patients at Risk."
4. Tracy Weber and Charles Ornstein, "Kaiser Transplant Patients Express Their Fear and Fury; With Reports of Disarray Added to Their Existing Frustration, Some Don't Want the HMO Performing Their Surgeries," Los AngelesTimes, May 6, 2006, Part A, p. 1.
5. Ornstein and Weber, "Kaiser Put Kidney Patients at Risk."
6. DHHS, Statement of Deficiencies, ID tag V114; and Russell, "Scathing Report on Kaiser Kidney Program."
7. Ibid.
8. Ibid.
9. Ibid.
10. DHHS, Statement of Deficiencies, ID tag V112, V114, and V116; and Russell.
11. DHHS, Statement of Deficiencies, ID tag V141; Ibid.; "Kaiser Permanente San Francisco Facing Transplant Troubles, " Transcript, May 2 and May 8, 2006; "State Launches Probe of Kaiser Transplant Program, " Transcript, May 3, 2006; "Kaiser Conducts Internal Probe into Kidney Program, " Transcript, May 4, 2006; "Patient Left in Limbo by Kaiser Transplant Woes, " Transcript, May 5, 2006; CBS 5 Investigates.
12. DHHS, Statement of Deficiencies, ID tag V110; Charles Ornstein and Tracy Weber, "U.S. Berates Kaiser Over Kidney Effort," Los AngelesTimes, June 24, 2006, Part B, p. 1.
13. Ornstein and Weber, "Kaiser Put Kidney Patients at Risk." p. 1.
14. DHHS, Statement of Deficiencies, ID tag V114; and Ornstein and Weber, "Kaiser Put Kidney Patients at Risk."
15. Ibid.
16. Chris Rauber, "Kaiser Whistleblower Settles Lawsuit Over Abrupt Firing," San Francisco Business Times, January 12, 2007.
17. Chris Rauber, "Kaiser Whistleblower Files Lawsuit, Raises Concerns," Sacramento Business Journal, July 21, 2006, http://sacramento.bizjournals.com/sacra mento/stories/2006/07/17/daily51.html?t=printable, accessed January 8, 2007; Charles Ornstein and Tracy Weber, "3 Sue Kaiser in Transplant Case: Lawyers Say the Action May Be the First of Many; The HMO's Arbitration Rule Could Thwart Them," Los Angeles Times, May 12, 2006, Part B, p. 1.
18. Ibid.
19. Talia Kennedy, "Kidney Transplant Patients Transferredto UC-Davis Medical Center," The California Aggie, October 4, 2006.
20. "California's Kaiser to Pay Record $2 Million Fine Over Kidney Transplant Program," BestWire, August 15, 2006.
21. This section is partially based on Regina E. Herzlinger, "Culture Is the Key, " in Leading Beyond the Walls, ed. F. Hesselbein, M. Goldsmith, and I. Somerville (San Francisco: Jossey-Bass, 1999), pp. 105–121.
22. Matthew K. Wynia et al., "Do Physicians Not Offer Useful Services Because of Coverage Restrictions?" Health Affairs, vol. 22, no.4 (July–August 2003), pp. 190–197.
23. Reed Abelson, "Doctors Press Oxford Health on Payments," New York Times, February 3, 1998, sec. D, p. 1; Lindy Washburn, "Oxford Fined a Record $275, 000; State Says HMO Denied Claims," The Record, April 1, 2000, p. A1; Carol Eisenberg and Susan Harrigan, "Oxford's FailingHealth/There's No Shortage of Diagnoses for System Decline," Newsday, December 9, 1997, p. A4; and Ron Winslow and Scot J. Paltrow, "Sick Business—The Resurgent Turmoil in Health Care—Ill-Managed Care: At Oxford Health, Financial 'Controls' Were Out of Control—HMO UnderestimatedCosts and Overstated Revenue; Then Reality Descended—A Regulator's Ultimatum," Wall Street Journal, April 29, 1998, p. A1.
24. Diane Levick, "Oxford Options Pay Off: Retired Chairman Gets $73 Million," Hartford Courant, April 3, 2003, p. E2.
25. Stephen Brook, God's Army: The Story of the Salvation Army (Philadelphia: TransAtlantic Publications, 1999; based on the Channel 4, U.K., television series God's Army).
26. Werner Keller, The Bible as History (New York: Morrow, 1981, first published 1965).
27. Kaiser Foundation Health Plan, Inc., www.Kaiserpermanente.org and globalbb.onesource.com/brow_at_Health_Plan_Inc.
28. See, for example, "America's Best HMOs," Newsweek, June 24, 1996.
29. Martha Groves, "Ailing Health Care System May Get Kaiser-Style Care," Los Angeles Times, May 10, 1993.
30. John G. Smillie, Can Physicians Manage the Quality and Costs of Health Care? The Story of the Permanente Medical Group (New York: McGraw-Hill,1991).
31. Carl T. Hall, "Huge Loss for Kaiser—Rates to Rise; $270 Million Shortfall Also Means Cost Cuts," San Francisco Chronicle, February 14, 1998, p. A1.
32. Robert Pear, "The Health Care Debate: Managed Care; Once in Front, H.M.O.s Lose Their Luster in Health Debate," New York Times, August 23, 1994.
33. Louise Kertesz, "Which Is the Real Kaiser? Is the Nation's Largest HMO a Model of Cost-Effective, Quality Care or a Greedy Medical Factory That Endangers Its Patients?" Modern Healthcare, August 25, 1997.
34. Chris Rauber, "Kaiser's Losses Hit $288 Million in '98," Modern Healthcare, February 22, 1999; Tom Abate, "Kaiser Reports It Narrowed Loss in '99," San Francisco Chronicle, February 29, 2000; and Laura B. Benko, "Kaiser on Track to Recovery: After Posting Losses for Two Consecutive Years, Kaiser Almost Broke Even in 1999," Modern Healthcare, March 6, 2000.
35. "Sierra Health Subsidiary Completes Purchase, " PR Newswire, November 2, 1998.
36. Milt Freudenheim, "Kaiser H.M.O., Erring on Costs, Posts $270 Million Loss for '97," New York Times, February 14, 1998.
37. Kertesz, "Which Is the Real Kaiser?"
38. Ibid.
39. Smillie, Can Physicians Manage the Quality and Costs of Health Care?
40. Center for Studying Health Systems Change, "Physicians Are MoreLikely to Face Quality Incentives than Incentives That May Restrain Care, " Issue Brief No. 48 (Washington, D.C.: HSC, January 2002).
41. Carl T. Hall, "$1 Billion HMO Pay Unifies Critics," San Francisco Chronicle, June 20, 1996, p. B1.
42. But the chorus was not universal. As early as 1986, Roger Feldman and his colleagues at the University of Minnesota warned that HMOs did not lower hospital costs or diminish hospital profits. They presciently concluded that "public policy created to induce competition must go beyond the simple stimulus of HMO growth." See R. Feldman et al., "The Competitive Impact of Health Maintenance Organizations on Hospital Finances: An Exploratory Study," Journal of Health Politics, Policy, and Law, vol. 10, no. 4 (winter 1986), pp. 675–697. And a 1994 report bythe U.S. Office of Technology Assessment questioned the wisdom of a national model based on the Twin Cities experience. The report concluded: "It is difficult to accurately assess whether expenditures for health care in the Twin Cities are higher or lower than in other metropolitan areas." See "A Model in Dispute," Minneapolis Star Tribune, July 27, 1994, p. 1A.
43. James. C. Robinson, "At the Helm of an Insurance Giant: Aetna's Richard L. Huber," Health Affairs, vol. 18, no.6 (November–December 1999), pp. 89–99.
44. B. Martinez, "Aetna Tries to Improve Bedside Manner inBid to Help Bottom Line," Wall Street Journal, February 23, 2001, pp. A1, A9.
45. Milt Freudenheim, "Aetna's Chief Steps Down Under Pressure from Shareholders," New York Times, February 26, 2000, p. C1.
46. Robin Toner, "Health Care in Minnesota: Model for U.S.or Novelty?" New York Times, October 9, 1993, p. A1.
47. Robert H. Miller and Harold S. Luft, "HMO Plan Performance Update: An Analysis of the Literature, 1997–2001," Health Affairs, vol. 21, no. 4 (July–August 2002), pp. 80–81.
48. SatireWire.com, http://www.satirewire.com/news/022800/satire-hmo.shtml.
49. Paul Fronstin, "The Role of Managed Care," Benefits Quarterly, Second Quarter, 2001, p. 12.
50. U.S. Census Bureau, Statistical Abstract of the United States, 1999 (Washington, D.C.: Government Printing Office, 2000), Table No. 776, p. 495.
51. Medicare Payment Advisory Commission, "Assessing Payment Adequacy and Updating Payments for Home Health Services," Report to the Congress: Medicare Payment Policy (Washington, D.C.: Medicare Payment Advisory Commission, March 2003), pp. 101–117.
52. Ibid.
53. Underwriting profits are earned solely from the insurance business. Many insurers also earn additional returns from investing their free cash.
54. Kristen Hallam, "Blues Report Big 1997 Operating Loss," Business Insurance, June 1, 1998, p. 14.
55. Congressional Budget Office (CBO), "An Analysis of the Literature on Disease Management Programs, " Washington, D.C.: CBO, October 13, 2004.
56. Catherine Hoffman, Dorothy Licey, and Hai-Yen Sung, "Persons with Chronic Conditions: Their Prevalence and Costs," Journal of the American Medical Association, vol. 276, no. 18 (1996), pp. 1473–1479.
57. Joanne Wojcik, "HMOs Still Using Gatekeeper Model," Business Insurance, vol. 34 (December 11, 2000), pp. 3, 13.
58. Paul B. Ginsburg et al., "Tracking Health Care Costs: Continued Stability but at High Rates in 2005," Health Affairs, vol. 25, no. 6 (November–December 2006), pp. 486–495 (e-published, October 3, 2006).
59. Regina E. Herzlinger and Jeff Grahling, "Note on Financing of the U.S. Health Care Sector, " HBS Case No. 304-309, Rev. August 29, 2006 (Boston: Harvard Business School Publishing, 2003).
60. Atlanta Information Services, AHIP, Kaiser Family Foundation, and eHealth-Insurance, taken from Goldman Sachs Group, "Healthcare Investment Strategy, " September 20, 2006, p. 13, Exhibit 10.
61. "Three-Year Study Shows Consumer-Driven Health Plans Continue to Stimulate Positive Changes in Consumer Health Behavior," Business Wire, Unit-edHealth Group, July 12, 2006.
62. McKinsey & Company, North American Payer Provider Practice, "Consumer-Directed Health Plan Report—Early Evidence Is Promising, " June 2005.
63. American Enterprise Institute for Public Policy Research, "What Is Behind the Rapid Growth of Health Spending, " Presentation, July 17, 2006, www.aei.org, accessed February 20, 2007.
64. Amy Finkelstein, "The Aggregate Effects of Health Insurance, " and Amy Finkelstein and Robin McKnight, What Did Medicare Do? (And Was It Worth It?), National Bureau of Economic Research (NBER) Working Papers No. 11609 and 11619, May and September 2005.
65. Finkelstein and McKnight, What Did Medicare Do?
1. C. Guth, "Klarer Befund, " pp. 16–19; and McK Wissen 19 "Krankenhaus" (December 2006), brand eins Wissen GmbH und Co. KG, Hamburg. OECD, Health Division, "Expenditures on In-Patient Care/Capita, " October 10, 2006, ecosante.pr.ezpl., accessed March 7, 2007.
2. Arnold Milstein, "American Surgical Travel Is a Treatable Symptom, " Testimony, U.S. Senate Special Committee on Aging, June 27, 2006; anddata from the Indian Healthcare Federation, e-mail from Rajit Kamal to Professor Regina E. Herzlinger, October 27, 2006.
3. P. Ginsburg et al., "Tracking Health Care Costs, " Health Affairs, October 3, 2006, W489; also Issue Brief 91 (Washington, D.C.: Center for Studying Health System Changes, December 2004).
4. Ibid.
5. Medicare Payment Advisory Commission, Report to the Congress: Medicare Payment Policy, (Washington, D.C.: Medicare Payment Advisory Commission, March 2006), p. 54.
6. Carlos Angrisano et al., "Accounting for the Cost of Health Care in the United States" (McKinsey & Company: McKinsey Global Institute, January 2007), p. 12.
7. Organization for Economic Co-operation & Development, OECD Health Data 2006, available through the SourceOECD database, www.oecd.org, accessed February 6, 2007.
8. Organization for Economic Co-operation & Development, Health at a Glance: OECD Indicators 2005 (Paris: OECD Publishing, 2005), pp. 45 and 139.
9. Survey of Current Business (bea.gov); Centers for Disease Control, "Cost of Chronic Diseases, " accessed March 21, 2007; American Diabetes Association, "Economic Control of Diabetes in the U. S. in 2002," Diabetes Care, March 2003, vol. 26 (3), pp. 917-932.
10. Robert Town et al., "The Welfare Consequences of Hospital Mergers, " National Bureau of Economic Research (NBER) Working Paper 12244 (Social Science Research Network: ssrn.com).
11. www.opensecrets.org, accessed February 2, 2007.
12. "Audited Consolidated Financial Statements, " University of Pittsburgh Medical Center, years ended June 30, 2006; Consejo de Latinos Unidos, hospitalpricing.com, accessed January 14, 2007.
13. McKesson Corporation, OneSource database, accessed February 8, 2007.
14. Medicare Payment Advisory Commission, Report to the Congress: Medicare Payment Policy. For an opposing perspective, see Charles Kahn, III, Statement of the Federation of American Hospitals, www.ftc.gov/ogc/healthcarehearing/docs/030227kahniii.pdf.
15. Christopher Rowland, "Hospital CEOs join the $1m Club," Boston Globe, August 31, 2006, boston.com, accessed January 15, 2007.
16. David Hyman, Improving Healthcare: A Dose of Competition:A Report by the Federal Trade Commission and the Department of Justice (July 2004) (Dordrecht: Springer, 2005).
17. Martin S. Gaynor, What Do We Know About Competition and Quality in Health Care Markets?, NBER Working Paper No. 12301, issued June 2006, available at www.nber.org.
18. American Hospital Association (AHA), AHA Hospital Statistics 2006 (Washington, D.C.: AHA, 2006), p. 10.
19. David Hyman, Improving Healthcare,Chapter 4.
20. William B. Vogt and Robert Town, "How Has Hospital Consolidation Affected the Price and Quality of Hospital Cases?" The Synthesis Project, Robert Wood Johnson Foundation policysynthesis.org, pp. 6, 8. Ranjan Krishnan, "Market Restructuring and Pricing in the Hospital Industry," Journal of Health Economics, 20, 2001.
21. Town et al., "The Welfare Consequences of Hospital Mergers."
22. Lawton R. Burns and Mark V. Pauly, "Integrated Delivery Networks—A Detour on the Road to Integrated Health Care?" Health Affairs, vol. 21, no. 4, July–August 2002, pp. 128–143.
23. Paul B. Ginsburg and Cara S. Lesser, A Decade of TrackingHealth Systems Change, Commentary No. 2 (Washington, D.C.: Center For Studying HealthSystem Change, March 2006), p. 4; and Cara S. Lesser and Paul B. Ginsburg, "Update on the Nation's Health Care System: 1997–1999," Health Affairs, November–December 2000, pp. 206–216.
24. Vogt and Town, "How Has Hospital… "
25. David Hyman, Improving Healthcare,Chapter 4.
26. See, for example, Joseph P. Newhouse, "Toward a Theoryof Nonprofit Institutions: An Economic Model of a Hospital," American Economic Review, vol. 60, no. 1, March 1970, pp. 64–74.
27. Daniel P. Kessler and Jeffrey J. Geppert, "The Effectsof Competition on Variation in the Quality and Cost of Medical Care," Journal of Economics & Management Strategy, vol. 14. no. 3, September 2005, pp. 575–589.
28. Gaynor, What Do We Know.: Gary J. Young et al, "Community Control and Pricing Patterns of Nonprofit Hospitals," Journal of Health Politics, Economics, and Law, 1051, 1073 (2000).
29. Vogt and Town, "How Has Hospital…"
30. Regina E. Herzlinger and William Krasker, "Who Profitsfrom Nonprofits," Harvard Business Review, vol. 65, no. 1, January–February, 1987, pp. 93–106.
31. Chapin White, Robert Nguyen, and Alshadye Yemanne, Nonprofit Hospitals and the Provision of Community Benefits, CBO Report (Washington, D.C.:Congressional Budget Office, December 2006), p. 3.
32. U.S. Senate Finance Committee, "Taking the Pulse of Charitable Care and Community Benefits at Nonprofit Hospitals, " Statement of Sen. Chuck Grass-ley, September 13, 2006, www.finance.senate.gov.
33. White, Nguyen, Nonprofit Hospitals and the Provision of Community Benefits, p. 3
34. Lucette Lagnado, "Anatomy of a Hospital Bill," Wall Street Journal, September 21, 2004, p. 1.
35. Revenue Ruling 56-185, 1956-1 C.B. 202, 1956 IRB LEXIS 422 (1956).
36. Revenue Ruling 69-545, 1969-2 C.B. 117, 1969 IRB LEXIS 176 (1969). For a discussion of subsequent rulings, see Jack E. Karns, "Justifying the Nonprofit Hospital Tax Exemption in a Competitive Market Environment," Widener Law Journal, vol. 13 (2004), pp. 383–561; and a class of indigent patients denied medical treatment at various nonprofit hospitals unsuccessfully challenged the legality of the "community benefit" standard in East Kentucky Welfare Rights Organization v. Simon, 506 F.2d 1278 (D.C. Cir. 1974).
37. In re Evanston Northwestern Healthcare Corp., 2005 FTC LEXIS146 (October 20, 2005).
38. Ibid., quoting Hospital Corp. of America, 807 F.2d at 1381 (7th Cir., 1986).
39. Kaiser Family Foundation, Trends and Indicators in the Changing Health Care Marketplace, 2002, May 2002, Exhibit 5.9, p. 56, at http:www.kff.org/insurance/3161-index..cfm, updated with 2001 data from the American Medical Association, Patient Care Physician Survey, 2001.
40. "Faltering Family M.D. Gets Technology Lifeline," Wall Street Journal, February 23, 2000, p. A1.
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43. Sucharita Mulpuru (with Carrie A. Johnson and Brian Tesch), "2005 US eCommerce: The Year in Review, An Overview of Annual and Q-1 US Online Retail Sales" (Cambridge, Mass.: Forrester, January 20, 2006).
44. Peggy Edersheim Kalb, "Tricks of the Trade: Calling Customer Service," Wall Street Journal, December 20, 2006, p. D2.
45. U.S. Census Bureau, 2002 Economic Census, Selected Industry Statistics for the U.S. and States: 2002 (http://factfinder, census.gov, accessed February 21, 2007).
46. Claudia Kalb et al., "Health for Life," Newsweek, vol. 148, no. 14 October 16, 2006, pp. 46–73.
47. Heart hospitals had lower length-of-stay and readmission rates (R. E. Herzlinger and P. Stavros, "Medcath Corp.: A, " Boston: Harvard Business School Publications, 2004). A MedPac study claiming heart hospitals had costs equalto those of a general community hospital is questionable because (1) it did not adjust costs for higher depreciation and lease expenses for heart hospitals, which are newer, and (2) it failed to use activity-based costing to measure the general hospital costs (MedPac, "Physician-Owned Specialty Hospitals Revisited, " August 2006).
48. Markian Hawryluk, "Congress Eyes Boutique Hospital Backers," American Medical News, vol. 46, no. 18, May 12, 2003, p. 6.
49. Regina E. Herzlinger and Peter Stavros, "MedCath Corporation (A), " HBS Case No. 303-041, rev. August 2006 (Boston: Harvard Business School Publishing, 2004), p. 10.
50. Michelle Terwilleger, "Winning Patients' Hearts," Californian, July 16, 2001, taken from Herzlinger and Stavros, "MedCath Corporation (A)."
51. Ron Winslow, "Fed-Up Cardiologists Invest in Hospital for Heart Disease," Wall Street Journal, June 22, 1999, taken from Herzlinger and Stavros, "MedCath Corporation (A)."
52. Kevin Dobbs, "A Philosophical Shift Between Doctors and Administrators Transforms Cardiac Care," Argus Leader, March 11, 2001, taken from Herzlinger and Stavros, "MedCath Corporation (A)."
53. Ibid.; Winslow, "Fed-Up Cardiologists Invest in Hospital."
54. Kristine Henry, "Nucor Sets Pace for Steelmakers," Hamilton Spectator, May 13, 2002, p. D10.
55. Form 10Q, Nucor and Bethlehem Steel, U.S. Securities and Exchange Commission, Washington, D.C.: September 2003.
56. FACCT—The Foundation for Accountability and the RobertWood Johnson Foundation, A Portrait of the Chronically Ill in America (Portland, Ore. and Princeton, N.J.: Robert Wood Johnson Foundation); and Steven B. Cohen and WilliamYu, "The Persistence in the Level of Health Expenditures Over Time: Estimates for the U.S. Population, 2002–2003, " Statistical Brief 124, Agency for HealthcareResearch and Quality (AHRQ), Medical Expenditure Panel Survey, May 2006.
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58. Regina E. Herzlinger and Bruce Wilson, "MedCath Corporation (C), " HBS Case No. 305-097, Rev. May 2006 (Boston: Harvard Business School Publishing, 2005).
59. MedPac, "Physician-Owned Specialty Hospitals Revisited" Herzlinger and Stavros, "MedCath Corp.: A."
60. MedPac, "Physician-Owned…, " p. vii.
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63. Adam Bryant, "Who's Afraid of Dickie Scruggs?" Newsweek, December 6, 1999.
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65. "Who's Afraid of Dickie Scruggs?"
66. U.S. Committee on Ways and Means, Subcommittee on Health, 109-78, "Hearing on Price Transparency, " July 18, 2006, http://waysandmeans.house.gov/hearings.asp?formmode=detail&hearing=494&comm=1, accessed February 21, 2007.
67. Milstein, "American Surgical Travel Is a Treatable Symptom."
68. Cinda Becker, "The Best Care Money Can Buy?" Modern Healthcare, vol. 34, no. 32 (August 9, 2004), p. 26. Also Dr. Pushwaz Virk to Prof. Regina E. Herzlinger, Fall 2006.
69. For example, Bumrungrad International Hospital, www.bumrungrad.com, and Bangkok International Hospital, www.bangkokhospital.com, accessed February 2, 2007.
70. Correspondence from Dr. Pushwaz Virk to Professor Regina E. Herzlinger, October 17, 2006.
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4. Tarren Bragdon, e-mail to Regina E. Herzlinger, December 10, 2006, tbragdon @empirecenter.org.
5. Ibid.
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33. Ibid., Figs. 5.12 and 5.14.
34. Ibid., Section Ten, Researcher's Guide, Slides 5.10 and 5.11.
35. Ibid., Fig. 10.29.
36. Ibid., Fig. 5.52, Fig. 1.23.
37. Ibid., Fig. 5.28.
38. Ibid., Section Ten, Researcher's Guide.
39. Thomas Maeder, "The Orphan Drug Backlash," Scientific American, vol. 288, no. 5 (May 2003), p. 80; and Merrill Goozner, "The Making and Selling of a Star Drug, a Prescription for Profit," Chicago Tribune, May 24, 1999.
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41. MedPAC, "Report to Congress: Issues in a Modernized Medicare Program, " p. 96.
42. U.S. Renal Data System, Table K.3; and MedPAC, "Reportto Congress: Issues in a Modernized Medicare Program, " Table 4-3, p. 96.
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47. The FDA posted a Public Health Advisory on epoetin alfa and darbepoetin alfa on its Web site. For additional information about the advisory, please use the following link: http://www.fda.gov/cder/drug/infopage/RHE/default.htm.
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56. Micah L. Sifry and Nancy Watzman, "Corporate Conventions: How Millions of Dollars Will Buy Influence in New York and Boston," LA Weekly, July 23–29, 2006, www.commondreams.org; also opensecrets.org.
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58. MedPAC, "Report to Congress: Issues in a Modernized Medicare Program, " p. 88.
59. Ibid.
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1. "Putting America on Wheels," Economist, December 23, 1999, p. 82.
2. Allan Nevins with the collaboration of Frank Ernest Hill, Ford: The Times, the Man, the Company (New York: Scribner's, 1954), pp. 646–647; Price per capita income: Robert F. Martin, National Income in the United States, 1799– 1938 (New York: National Foundation Conference Board, 1939).
3. Harold Katz, The Decline of Competition in the Automobile Industry, 1920– 1940 (New York: Arno, 1977), p. 41.
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6. Robert Lilienfeld, The Rise of Systems Theory: An Idealogical Analysis (New York: Wiley, 1978), pp. 103– 104.
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8. Ibid.
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11. Charles J. Hitch and Roland N. McKean, The Economics of Defense in the Nuclear Age (New York: Atheneum, 1966), p. v.
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14. Ibid.
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19. Medicare Payment Advisory Commission (MedPac), "Report to the Congress: Issues in a Modernized Medicare Program" (Washington, D.C.: MedPac, 2005).
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21. Regina E. Herzlinger and William S. Krasker, "Who Profits from Nonprofits," Harvard Business Review, January–February 1987, pp. 93–106. For critiques of their accounting in another field, see David Dranove and Michael Millenson, "Medical Bankruptcy: Myth Versus Fact, " Health Affairs Web Exclusive, January–June 2006, pp. W74̵183.
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30. James Frogue, "A High Price for Patients, " Heritage Foundation, Backgrounder no. 1398, September 26, 2000, p. 14.
31. Fraser Institute, Waiting Your Turn (Vancouver: Fraser Institute, 2005).
32. James Brooke, "Full Hospitals Make Canadians Wait and Look South," New York Times, January 16, 2000, p. A3.
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34. Fraser Institute, Waiting Your Turn: Hospital Waiting Lists in Canada, 16th Ed., (Vancouver: The Fraser Institute, October 2006).
35. Ibid., p. 5.
36. MRI units number per million population, 2002—Japan (highest): 35.3; OECD:7.3; Canada: 4.3; and Mexico (lowest): 0.2. CT scanners, number per million population, 2002—Japan (highest): 92.6; OECD: 17.6; Canada: 10.3; and Mexico (lowest): 1.5. Organization for Economic Co-Operation and Development (OECD), Health at a Glance: OECD Indicators 2005 (Paris: OECD, 2005), pp. 46–47.
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50. See, for example, J. H. Hibbard and J. Jewett, "Will Quality Report Cards Help Consumers?" Health Affairs, vol. 16, no. 3 (May–June 1997), pp. 218–228.
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52. B. E. Landon et al., "Health Plan Characteristics and Consumers' Assessments of Quality," Health Affairs, vol. 20, no. 2 (March–April 2001), p. 274.
53. D. W. Bates and A. W. Gawande, "The Impact of the Internet on Quality Measurement," Health Affairs, vol. 19, no. 6 (November–December 2000), p. 106. For an expanded discussion of this topic, see also Regina E. Herzlinger and S. Bokser, "Note on Health Care Accountability and Information in the U.S. Health Care System, " HBS Case No. 302-007, rev. August 2006 (Boston: Harvard Business School Publishing, 2001).
54. Bates and Gawande, "The Impact of the Internet on Quality Measurement."
55. Kaiser Family Foundation, "Trends and Implications in the Changing Health Care Marketplace, 2002, " May 2002, Exhibit 5.9, p. 56, updated with 2001data from the American Medical Association, 2001 Patient Care Physician Survey.
56. K. I. Shine, "Health Care Quality and How to Achieve It," Academic Medicine Journal of the Association of American Medical Colleges, vol. 77, no. 1 (January 2002), pp. 91–99.
57. Paul Heiney, The Nuts and Bolts of Life: Willem Kolff and the Invention of the Kidney Machine (Stroud: Sutton, 2002).
58. "A Father of Invention," Wall Street Journal, September 28, 2002, p. 5.
59. Cynthia M. Piccolo, MedHunter.com, transplant timeline, accessed August 15, 2006.
60. Francis L. Delmonico, "Interview with Dr. Joseph Murray," American Journal of Transplantation, vol. 2, no. 9 (October 2002), pp. 803–808.
61. Scott Allen, "The Power of Perseverance: Dr. Joseph Murray Virtually Created a New Field of Medicine; Scientists of Today Could Learn from His Example," Boston Globe, December 14, 2004, p. B13.
62. Joseph Murray, "The First Successful Organ Transplants in Man, " Nobel Prize acceptance speech, 1990.
63. Ibid.
64. Ibid.
1. Likely, Jack Morgan would receive the amount of money men his age typically spend on health insurance. The public or private payer would risk-adjust his insurer for Jack's health status. Risk adjustment, the process of adjusting the transfer for the person's level of illness, is also discussed in Chapter 11.
2. Rebecca Voelker, "Cost of Transplant vs. Dialysis," Journal of the American Medical Association, vol. 281, no. 24 (June 23, 1999), p. 2277.
3. Alternatively, Jack's insurers or providers could have received more than $40, 000 if Jack were sicker than the average or less if he were healthier. The pros and cons of prices that adjust for the levels of illness when given to Jack or his insurer or his provider are discussed further in this chapter and in Chapter 11.
4. Marlene Busko, "Survival Better with Short, Daily Dialysis Than with Conventional HD," Medscape Medical News, December 13, 2006.
5. Peter Zweifel et al., eds., Regulation of Health: Case Studies of Sweden and Switzerland (Boston: Kluwer Academic, 1998), Developments in Health Economics and Public Policy, No. 7; Peter Zweifel and Willard G. Manning, "Moral Hazard and Consumer Incentives in Health Care, " in Handbook of Health Economics 2000, eds., A. J. Culyer and J. P. Newhouse (Amsterdam: North Holland Press, 2000), chap. 8; Gregory C. Pope et al., "Risk Adjustment of Medicare Capitation Payments Using the CMS–HCC Model," Health Care Financing Review, vol. 25, no. 4 (summer 2004), pp. 119–141; Wynand P. M. M. van de Ven et al., "Health-Adjusted Premium Subsidies in the Netherlands," Health Affairs, vol. 23, no. 3 (2004); Peter Zweifel and Michael Breuer, "The Case for Risk-Based Premiums in Public Health Insurance," Health Economics, Policy and Law, vol. 1, no. 2 (April 2006), pp. 171–188; Peter Zweifel, personal correspondence to Regina E. Herzlinger, May 24, 2006; for information on risk adjustment in Holland, www.cvz.nl, Jeroen van der Wolk, personal correspondence to Regina E. Herzlinger, May 24, 2006, and Wynand P. M. M. van de Ven, personal correspondence to Regina E. Herzlinger, May 27, 2006.
6. Greg Scandlen, "Insurance Mandates Aren't the Answer to Uninsured," Health Care News, March 2007, p. 12.
7. Robert Pear, "Experts See Peril in Bush Health Plan," New York Times, January 23, 2007.
8. "Aetna Releases Broadest Study to Date of Consumer-Directed Plans, " http://www.aetna.com/news/2006/pr_20061001.htm.
9. JoAnn M. Laing, President, Information Strategies, Inc., and Don Mazzella, Publisher and Editor, Healthcare & You, and COO, HSAfinder.com; "CIGNA Choice Fund Study Provides New Insights on Consumer Decision-Making in Consumer-Driven Health Plans," PRNewswire, FirstCall, February 2, 2006; "Three-Year Study Shows Consumer-Driven Health Plans Continue to Stimulate Positive Changes in Consumer Health Behavior," Business Wire, United-Health Group, July 12, 2006; "Aetna Releases Broadest Study to Date of Consumer-Directed Plans, " http://www.aetna.com/news/2006/pr_20061001.htm; and McKinsey & Company, North American Payer Provider Practice, "Consumer-Directed Health Plan Report—Early Evidence Is Promising, " June 2005.
10. U.S. Census Bureau, Statistical Abstract of the United States, 2001 (Washington, D.C.: Government Printing Office, 2002), Table No. 664, p. 435; also "New Health Plan Fares Poorly at 'U': Workers Pick Old Favorites over Newcomers, " Minneapolis, Minn. Star Tribune, December 15, 2001, p. 1D.
11. See American Diabetes Association's Web site at diabetes.org.
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13. Marcia A. Testa and Donald C. Simonson, "Health Economic Benefits and Quality of Life During Improved Glycemic Control in Patients with Type 2 Diabetes Mellitus: A Randomized, Controlled, Double-Blind Trial," Journal of the American Medical Association, vol. 280, no. 17 (November 4, 1998), pp. 1490–1496.
14. American Diabetes Association (ADA), "Economic Costs of Diabetes in the U.S. in 2002," Diabetes Care, vol. 26, no. 3 (March 2003), pp. 917–931.
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16. Regina E. Herzlinger, Market-Driven Health Care: Who Wins, Who Loses in the Transformation of America's Largest Service Industry (New York: Perseus, 2001); and Robert Wood Johnson Foundation, A Portrait of the Chronically Ill in America, 2001 (Princeton, N.J.: Robert Wood Johnson Foundation, 2002), p. 39.
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19. For more on how Dr. Cooley scaled up the Texas Heart Institute, see Denton A. Cooley and John W. Adams, Jr., "Package Pricing at the Texas Heart Institute, " in Regina E. Herzlinger, ed., Consumer-Driven Health Care: Implications for Providers, Payers, and Policymakers (San Francisco: Jossey-Bass, 2004), Chap. 56, pp. 612–618.
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23. See, for example, Peter P. Budetti et al., "Physician and Health System Integration," Health Affairs, vol. 21, no. 1 (January–February 2002), pp. 203–210.
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25. Kerry A. Dolan and Robyn Meredith, "Ghost Cars, Ghost Brands," Forbes, April 30, 2001, p. 109.
26. Ibid.; and Fred Andrews, "Dell, It Turns Out, Has a Better Idea," New York Times, January 26, 2000, p. C12.
27. Herzlinger, Market-Driven Health Care. 28. Ibid.
28. Ibid.
29. Ibid.
30. Ibid.
31. Vince Galloro and Jeff Tieman, "Hitting the Brakes: Hospital Merger-and-Acquisition Activity Declines for Third Consecutive Year," Modern Healthcare, January 14, 2002, p. 22.
32. Arista Marketing Associates, 2000 Survey of Integrated Delivery Systems (North-brook, Ill.: Arista Marketing Associates, July 15, 2000).
33. Endnote intentionally deleted.
34. Regina E. Herzlinger "Specialization and Its Discontents," Circulation, 109 (May 25, 2004), pp. 2376–2378.
35. Regina E. Herzlinger, "Can We Control Health Care Costs?" Harvard Business Review, vol. 56, no. 2 (March–April 1978), pp. 102–110.
36. Institute of Medicine (IOM), Crossing the Quality Chasm: A New Health System for the 21st Century (Washington, D.C.: National Academies Press, 2001), p. 174.
37. Scott Cook, chairman, Intuit, various e-mails to Regina Herzlinger, 2006 and 2007.
38. Gary McWilliams, "Big Employers Plan Electronic Health Records," Wall Street Journal, November 29, 2006, p. B1.
39. Personalized Medicine Coalition (PMC), The Case for Personalized Medicine (Washington, D.C.: PMC, November 2006), p. 3.
40. Regina E. Herzlinger, "Diagnostic Genomics, " HBS Case No. 302-004, rev. December 2006 (Boston: Harvard Business School Publishing, 2001).
41. Regina E. Herzlinger and Mark P. Allyn, "Medtronic: Patient Management Initiative, " HBS Case No. 302-005, rev. August 2006 (Boston: Harvard Business School Publishing, 2001).
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43. David M. Cutler and Mark McClellan, "Is Technological Change in Medicine Worth It?" Health Affairs, vol. 20, no. 5 (September–October 2001), pp. 11–29.
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46. Kaiser Family Foundation, Menlo Park, Calif., and Health Research and Educational Trust, Chicago, Ill., "Employer Health Benefits 2006, " p. 4.
47. Thomas Rice et al., "Workers and Their Health Plans: Free to Choose?" Health Affairs, vol. 21, no. 1 (January–February 2002), pp. 182–187.
48. With deep thanks to Ray Herschman and Mark Tierney for their review of this section.
49. Gail Dutton, "The Shrinking Pool of Plans," Business & Health, Supp: The State of Health Care in America, 2001, vol. 6 (July 31, 2001), p. 14.
50. Mark Penn, "Health Care Is Back," Blueprint, April 1, 2000, p. 70.
51. American Customer Satisfaction Index, University of Michigan, February 15, 2005; Retail Trade; Finance & Insurance; Health Care; Food Service.
52. Dr. Leo Henikoff, personal communication to Regina E. Herzlinger, 2002.
53. Professor James Fries, personal correspondence to Regina E. Herzlinger.
54. With deep thanks to Ray Herschman and Mark Tierney for their review of this section.
55. Mark Merlis et al., Rising Out-of-Pocket Spending for Medical Care: A Growing Strain on Family Budgets (New York: Commonwealth Fund, February 2006).
56. Gail Shearer, "Hidden from View: The Burden of Health Care Costs" (Washington, D.C.: Consumers Union, January 22, 1998), unnumbered, Table 5a; Wenke Hwang et al., "Out-of-Pocket Medical Spending for Care of Chronic Conditions," Health Affairs, vol. 20, no. 6 (November–December 2001), pp. 267–278; and Druss et al., "Comparing the National Economic Burden of Five Chronic Conditions."
57. Aparna Mathur, Medical Bills and Bankruptcy Filings, Working Paper (Washington, D.C.: American Enterprise Institute, July 19, 2006).
58. Jane Gross, "Elder-Care Costs Deplete Savings of a Generation," New York Times, December 30, 2006, p. 1.
59. Ron Z. Goetzel et al., "Health, Absence, Disability, and Presenteeism Cost Estimates of Certain Physical and Mental Health Conditions Affecting U.S. Employers," Journal of Occupational and Environmental Medicin e, vol. 46, no. 4 (April 2004), pp. 398–412.
60. John L. Sinclair, "Total System Costs and the Case of the Executive's Hernia," Benefits Quarterly, vol. 14, no. 1 (first quarter, 1998), pp. 1, 14, 45–54.
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68. Endnote intentionally deleted.
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77. Stephen Barr, "Looking for Ways to Soften the Blow of Rising Health Insurance Costs," Washington Post, December 12, 2002, p. B2.
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1. Regina E. Herzlinger and Ramin Parsa-Parsi, "Consumer-Driven Health Care: Lessons from Switzerland," Journal of the American Medical Association, vol. 292, no. 10 (September 8, 2004).
2. Peter Zweifel, "Switzerland," Journal of Health Politics, Policy, and Law, vol. 25, no. 5 (2000), pp. 937–944.
3. Robert E. Moffit et al., "Perspectives on the European Health Care Systems: Some Lessons for America," Heritage Foundation Lectures, no. 711 (July 9, 2001), pp. 15–16.
4. Statistik über die Krankenversicherung 2001 ( Bern, Switzerland: Bundesamt für Sozialversicherung, 2002), pp. 147, 148.
5. Schweizerische Sozialversicherungsstatistik 2003 ( Bern, Switzerland: Bundesamt für Sozialversicherung, 2003). pp. 145, 157.
6. VISANA, Leistungsübersicht Ausgabe 2002 (Muri/Bern, Switzerland: Schweiz, Visana Versicherungen AG, 2002).
7. Statistik der obligatorischen Krankenversicherung 2002 (Bern, Switzerland: Bundesamt für Gesundheit, 2002). p. 94.
8. Kommunikation, ( Gümligen, Switzerland: Innova Versicherungen, June 2003). Available at www.innova.ch/privat/angebote/index.html. Accessed August 11, 2004.
9. Statistik der Wahlbaren Frachisen in der Krankenverischerun, ( Bern, Switzerland: Bundesamt für Sozialversicherung; 2000), Tabelle A 4.2. p. 65.
10. Konstantin Beck et al., "Risk Adjustment in Switzerland," Health Policy, vol. 65, no. 1 (July 2003), pp. 63–74; and Urs Wunderlin, personal correspondence to Regina E. Herzlinger, April 18, 2006. For various approaches to risk adjustment, see Regina E. Herzlinger, Consumer-Driven Health Care (San Francisco: Jossey-Bass, 2004).
11. John K. Iglehart, "Revisiting the Canadian Health Care System," New England Journal of Medicine, vol. 342, no. 26 (June 29, 2000), pp. 2007–2012; C. D. Naylor, "Health Care in Canada: Incrementalism under Fiscal Duress," Health Affair s, vol. 18, no. 3 (May–June 1999); Sarah Lyall, "In Britain's Health Service, Sick Itself, Cancer Cure Is Dismal," New York Times, February 10, 2000, p. A1; Michael Marmot, "Acting on the Evidence to Reduce Inequalities in Health," Health Affairs, vol. 18, no. 3 (May–June 1999), p. 42; and R. M. Martin, "NHS Waiting Lists and Evidence of National or Local Failure: Analysis of Health Service Data," British Medical Journal, vol. 326, no. 7382 (January 25, 2003), p. 188.
12. Beth E. Quill and Mary Desvignes-Kendrick, "Reconsidering Health Disparities," Public Health Reports, vol. 116, no. 6 (November–December 2001), pp. 505–514; and Dana P. Goldman and James P. Smith. "Can Patient Self-Management Help Explain the SES Health Gradient?" Proceedings of the National Academy of Sciences, vol. 99, no. 16 (August 6, 2002), pp. 10929–10934.
13. Mitchell D. Wong et al., "Contribution of Major Diseases to Disparities in Mortality," New England Journal of Medicine, vol. 347, no. 20 (November 14, 2002), pp. 1585–1592.
14. Gerard F. Andeson et al., "It's the Prices, Stupid: Why the United States Is So Different from Other Countries," Health Affairs, vol. 22, no. 3 (May–June 2003), pp. 89–105.
15. Statistik über die Krankenversicherung 2001, p. 62.
16. "Blues," PULSE (Gwynedd, Pa.: Sherlock Company, June 2003), p. v.
17. Statistik der obligatorischen Krankenversicherung 2004 (Bern, Switzerland: Bundesamt für Gesundheit (BAG), 2006), Table 1.01, p. 58.
18. Robert Cunningham and Douglas B. Sherlock, "Bounceback: Blues Thrive as Markets Cool toward HMOs," Health Affairs, vol. 21, no. 1 (January–February 2002), pp. 24–38; and Diana V. Shaw, "Mergers and Health Care Organizations," Journal of Health Care Finance, vol. 29, no. 3 (April 1, 2003), pp. 28–37.
19. Statistik der obligatorischen Krankenversicherung 2004 (Bern, Switzerland: Bundesamt für Gesundheit (BAG), 2006) Table 5.01, pp. 140–141.
20. Ibid.
21. Peter Zweifel and Chantal Grandchamp, "Measuring the Effect of Cartelization in Medicine: An International Study, " in Measuring Market Power, ed. Daniel J. Slottje (Oxford, U.K.: Elsevier Science B.V., 2002).
22. Lukas Steinmann and Peter Zweifel, "On the (In)efficiency of Swiss Hospitals," Applied Economics, vol. 35, no. 3 (January 1, 2003), pp. 361–370.
23. "Health Savings Accounts Are Not Likely to Stem Rising Health Care Spending, " The Commonwealth Foundation, www.cmwf.org see, for example, Karen Davis, "Will Consumer Directed Care Improve System Performance?" Health Services Research, 39 (4), pt. 2, pp. 1219-1233.
24. G. Domenighetti and L. Crivelli, Versorgungssicherheit in der Ambulanten Medizin im Rahmen der Aufhebung des Vertragszwangs, Kurzfassung von Santésuisse. Solothurn, Santésuisse; 2001.
25. Endnote intentionally deleted.
26. The New York Stock Exchange's 2000 average charges were 38 percent of 42 countries. (Justin Schuck, "Double Whammy," Institutional Investor, November 2001, p. 98. Computed as the ratio of fees and commissions to the average price of stock for the NYSE and in 42 countries, table on p. 98.)
27. Lori Lucas, "Under the Microscope: A Closer Look at the Diversification and Risk Taking Behavior of 401(k) Participants and How Plan Sponsors Can Address Key Investing Issues," Benefits Quarterly, vol. 16, no. 4 (Fourth Quarter 2000), pp. 24–30.
28. Jeanne Cummings, "Small Investors Now a Big Bloc," Wall Street Journal, September 27, 2002, p. A4; and Edward Wyatt, "Pension Change Puts the Burden on the Worker," New York Times, April 5, 2002, p. C2.
29. Employee Benefit Research Institute (EBRI) and Investment Company Institute, "401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 1999, " EBRI Issue Brief No. 230 (Washington, D.C.: Employee Benefit Research Institute, February 2001), www.ebri.org.
30. Karen Damato, "Index Funds: 25 Years in Pursuit of the Average," Wall Street Journal, April 9, 2001, pp. R4, R9.
31. Andrew A. Samwick and Jonathan Skinner, "How Will Defined Contribution Pension Plans Affect Retirement Income?" (National Bureau of Economic Research: Working Paper No. 6645, July 1998); Arleen Jacobius, "Nice Numbers: Amateurs Do Better Than DB Professionals in Bull Market, Study Shows," Pensions & Investments, January 21, 2002, pp. 3 and 77; and Andrew Samwick, private correspondence to Regina E. Herzlinger, April 7, 2002.
32. Employee Benefit Research Institute (EBRI) and Investment Company Institute, "401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2005, " EBRI Issue Brief No. 296 (Washington, D.C.: Employee Benefit Research Institute, August 2006), www.ebri.org.
33. Christopher Palmeri, "Politicians Should Butt Out of Pension Funds, " Commentary, BusinessWeek, June 11, 2001, p. 150.
34. Florian Zettelmeyer, Fiona M. Scott Morton, and Jorge Silva-Risso, Cowboys or Cowards: Why Are Internet Car Prices Lower? Yale School of Management Working Paper, E5-16, October 2001; and "Hotels vs. Brokers: Comparing Rates," Consumer Reports, July 2001, p. 13.
35. www.fidelity.com, accessed February 2, 2007.
36. Fidelity Investments, Building Futures (Boston: Fidelity Investments, 1999), p. 12.
37. Ibid., p. 17.
38. Ibid., p. 21.
39. Ibid., p. 27.
40. Ibid., pp. 56–57.
41. Employee Benefit Research Institute (EBRI), "401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2005, " pp. 4, 14.
42. Fidelity Investments, Building Futures, p. 44.
43. Ibid., pp. 45 and 47.
44. Ibid., pp. 58, 60, and 63.
45. Employee Benefit Research Institute (EBRI), "401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 1999."
46. "Too Much of a Good Thing?" Institutional Investor, February 2000, p. 121.
47. Employee Benefit Research Institute (EBRI), "401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2005, " p. 11.
48. Robert Slater, John Bogle and the Vanguard Experiment (Chicago: Irwin, 1997), pp. 142, 146.
49. Ibid., pp. 143, 144.
50. Ibid., p. 146.
51. "What Banks Can Learn from Mutual Funds," U.S. Banker, March 1998, pp. 45–55.
52. Richard A. Oppel Jr., "Fund Expenses: They're Going Down, Down, Down: Conventionl Wisdom Is Belied by The Numbers," New York Times, Money and Business, Mutual Funds Report, July 4, 1999, pp. 11, 28; and John Bogle, personal communication to author, April 4, 2002.
53. Robert Pozen with editorial assistance by Sandra D. Crane, The Mutual Fund Business (Cambridge, Mass.: MIT Press, 1998), p. 416.
54. "Small Employers Adopt 401(k) Plans," Employee Benefit Plan Review, vol. 52, no. 9 (March 1998), pp. 40–44.
55. "A Newfangled 401(k)," Institutional Investor, vol. 33, no. 8 (August 1999), p. 163.
56. Employee Benefit Research Institute (EBRI), "401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2005, " p. 9.
57. Regina E. Herzlinger et al., "Consumer-Driven Health Care: Medtronic's Health Insurance Options, " HBS Case No. 302-006, Rev. June 2006 (Boston: Harvard Business School Publishing, 2001).
58. Atlanta Information Services, AHIP, Kaiser Family Foundation, and eHealth-Insurance, taken from Goldman Sachs Group, "Healthcare Investment Strategy, " September 20, 2006, p. 13, exhibit 10.
59. Linda J. Blumberg and Len M. Nichols, "The Health Status of Workers Who Decline Employer-Sponsored Insurance," Health Affairs, vol. 20, no. 6 (November–December 2001), p. 185.
60. Kenneth Linde, CEO, Destiny Health , personal communication to Regina E. Herzlinger.
61. Ibid.
62. Herzlinger et al., "Consumer-Driven Health Care: Medtronic's Health Insurance Options."
63. Jon B. Christianson and Roger Feldman, "Evolution in the Buyers Health Care Action Group Purchasing Initiative," Health Affairs, vol. 21, no. 1 (January–February 2002), pp. 76–88.
64. Herzlinger et al., "Consumer-Driven Health Care: Medtronic's Health Insurance Options."
65. Alan Lyles et al., "Cost and Quality Trends in Direct Contracting Arrangements," Health Affairs, vol. 21, no. 1 (January–February 2002), pp. 89–102.
66. Herzlinger et al., "Consumer-Driven Health Care: Medtronic's Health Insurance Options."
67. Ann Robinow, former executive, Buyers Health Care Action Group (BHCAG), personal correspondence to Regina E. Herzlinger, 2002.
68. Steven Wetzell, personal communication with the author, February 2007.
69. Cummings, "Small Investors Now a Big Bloc."
70. "Fund Expenses: They're Going Down, Down, Down," New York Times.
71. Morningstar Mutual Funds 5000 (Chicago: Morningstar, 2000), p. 5.
1. Endnote intentionally deleted.
2. George W. Wilson and Joseph M. Jadlow, "Competition, Profit Incentives, and Technical Efficiency in the Provision of Nuclear Medicine Services," Bell Journal of Economics, vol. 13, no. 2 (Autumn 1982), pp. 472–482; Regina E. Herzlinger and William S. Krasker, "Who Profits from Nonprofits?" Harvard Business Review, vol. 65, no. 2 (1987), pp. 93–106; David M. Cutler and Jill R. Horwitz, "Converting Hospitals from Not-for-Profit to For-Profit Status: Why and What Effects?" in The Changing Hospital Industry: Comparing Not-for-Profit and For-Profit Institutions, ed. David M. Cutler (Chicago: University of Chicago Press, 2000). Note, however, that at least one study has found that nonprofit hospitals are more efficient than for-profit hospitals: Stephen Zuckerman, Jack Hadley, and Lisa Iezzoni, "Measuring Hospital Efficiency with Frontier Cost Functions," Journal of Health Economics, vol. 13, no. 3 (October 1994), pp. 255–280.
3. Kevin J. Haley and Daniel M. T. Fessler, "Nobody's Watching? Subtle Cues Affect Generosity in an Anonymous Economic Game," Evolution and Human Behavior, vol. 26, no. 3 (2005), pp. 245–256; Melissa Bateson et al., "Cues of Being Watched Enhance Cooperation in a Real-World Setting," Biology Letters, vol. 2, no. 3 (September 22, 2006), pp. 412–414; and Ernst Fehr, "Human Behaviour: Don't Lose Your Reputation," Nature, vol. 432, no. 7016 (November 25, 2004), pp. 449–450.
4. Bettina Rockenbach and Manfred Milinski, "The Efficient Interaction of Indirect Reciprocity and Costly Punishment," Nature, vol. 444, no. 7120 (December 7, 2006), pp. 718–723.
5. Peter Applebome et al., "A Delicate Balance Is Undone in a Flash, and a Battered City Waits," New York Times, September 4, 2005, p. 25; and Evan Thomas et al., "The Lost City," Newsweek, September 12, 2005, p. 42.
6. K. McCauley, "Katrina Relief Lifts Wal-Mart's Image," O'Dwyer's PR Services Report (New York: odwyerpr.com), October 2005, p. 1.
7. Applebome et al., "A Delicate Balance Is Undone in a Flash" and Thomas et al., "The Lost City."
8. Nicholas Confessore, "Woman Claiming to Be a Victim of Katrina Is Charged with Fraud," New York Times, March 23, 2006, p. B1.
9. Sandy Davis, "Charity Revamps Disaster Operation—Red Cross Takes Criticism 'to Heart,'" Baton Rouge Advocate, January 7, 2007.
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11. Anup Malani and Eric A. Posner, "The Case for For-Profit Charities, " John M. Olin Program in Law and Economics Working Paper No. 304 (2d series), The Law School, The University of Chicago, September 2006.
12. Joseph P. Newhouse, "Toward a Theory of Nonprofit Institutions: An Economic Model of a Hospital," American Economic Review, vol. 60, no. 1 (1970), p. 64; and Darius Lakdawalla and Tomas Philipson, "Nonprofit Production and Competition" (Cambridge, Mass.: National Bureau of Economic Research, Working Paper No. 6377, January 1998).
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14. "Definity Health Acquired by UnitedHealth Group for $300m," Health & Medicine Week, December 27, 2004, p. 919.
15. eHealthInsurance Services, Inc. (Mountain View, Calif.: www.ehealthinsurance.com, May 2, 2006).
16. "Health Savings Accounts, January 2005–December 2005, " eHealthInsurance. com, 2006, p. 5.
17. "Fast Company Magazine's 10th Anniversary Issue Puts MinuteClinic in the 'Fast 50,'" PR Newswire, February 28, 2006.
18. Ibid.
19. Jonathan Birchall, "CVS Buys Walk-in Medical Clinic Network," Financial Times, July 14, 2006, p. 24.
20. U.S. Census Bureau, Statistical Abstract of the United States, 2005 (Washington, D.C.: Government Printing Office, 2005), p. 440, Table 661.
21. Dr. Garrison Bliss, personal communication to Regina E. Herzlinger, May 2006.
22. Tarun Khanna et al., "Narayana Hrudayalaya Heart Hospital: Cardiac Care for the Poor, " HBS Case No. 505-078 (Boston: Harvard Business School Publishing, June 22, 2005).
23. V. Kasturi Rangan, "The Aravind Eye Hospital, Madurai, India: In Service for Sight, " HBS Case No. 593-098 (Boston: Harvard Business School Publishing, April 1, 1993), p. 6.
24. Centers for Medicare and Medicaid Services (CMS), "Study of Physician-Owned Specialty Hospitals, " U.S. Department of Health and Human Services, 2005; and Peter Cram et al., "Cardiac Revascularization in Specialty and General Hospitals," New England Journal of Medicine, vol. 352, no. 14 (April 7, 2005), pp. 1454–1462.
25. John E. Schneider et al., "The Effects of Specialty Hospitals on General Hospital Financial Performance, 1997–2004, " Working Paper, University of Iowa, 2005.
26. McKinsey & Company, "Healthcare in India: The Road Ahead." (New Delhi: Confederation of Indian Industry and McKinsey & Company, 2002); and Dr.P. Virk, interviews with senior management of Fortis Healthcare, India, spring 2006.
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35. Ibid.
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41. Ibid.
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