CASE: SM-136 DATE: 10/24/04

BETTER MEDICINE THROUGH INFORMATION TECHNOLOGY
INTRODUCTION The health care industry in the United States was troubled. Most of the world’s state-of-the-art health care research occurred in U.S. university and corporate laboratories. Similarly, most of the best centers in the world for delivery of health care were located in the U.S. However, the costs of health care in the United States were exploding and overall quality, along many dimensions, was not increasing. For U.S. consumers it was the best of times and the worst of times—health care services were often terrific if judged by the ability of individual physicians to do more for patients and yet, as judged on almost any broad parameter such as life expectancy or infant mortality, the United States was at best average compared to other developed countries. In most developed countries, spending on health care grew dramatically over the past several years. This increase in spending, combined with lower overall economic growth, pushed up the share of health care expenditure as a percentage of gross domestic product (GDP) of OECD countries from an average 7.8 percent in 1997 to 8.5 percent in 2002. By comparison, the share of GDP spent on health care remained almost unchanged from 1992 to 1997 (Exhibit 1). In the United States, health care expenditure grew 2.3 times faster than GDP, rising from 13 percent in 1997 to 14.6 percent in 2002. Spending was $5,267 per capita in 2002, almost 140 percent above the OECD average of $2,144.1 The cost of health care in the United States was becoming an ever more onerous burden on companies, governments and individual consumers.

1

“Health Spending in Most OECD Countries Rises, with the U.S. Far Outstripping all Others,” OECD Press Release, March 6, 2004, http://www.oecd.org/document/12/0,2340,en_2649_37407_31938380_1_1_1_37407,00.html.