The Healthcare Marketplace

Carlson School of Management

Medical Industry Leadership Institute

University of Minnesota, Twin Cities

Spring 2015, 2 Credits

Lecture: M 5:45 – 9:05

 Location: Carlson School, Hansen Hall 1-102

Professor: Stephen T. Parente, Ph.D.

Catalog Description:


The healthcare market place constitutes nearly three trillion dollars in the United States and several trillion spent throughout the world.  With growing demand for medical technology and the aging of the population, the scale and complexity of the health care supply chain is expected to dramatically increase over the next two decades.  The healthcare sector is comprised of several markets for goods and services, including physician services, hospital services, insurance, pharmaceuticals and medical devices, and information technology.  This course aims to provide a survey of the health sector to understand the scale, market opportunities, as well as barriers to this expanding and global industry.     


Course Objectives:


   To identify the key actors in the healthcare sector and their market roles.

   To understand how the interactions of the actors influence particular markets.

   To understand the market opportunities offered by different sectors of the health economy.

   To understand the interrelationships between the markets.


Method of Evaluation: 


Midterm: 25%

Market sizing memo: 20%

Research paper:  45%

Participation:  10%


Exam:  There is only one exam in this class – a midterm.  The exam will be in-class, closed-book, and closed-note.  The exam will test on a mix of definitions, short answer and essay questions.


Market sizing memo:  The memo will be a 2 page long executive summary (with additional figures as appropriate) to identify the size of a specific market in the medical industry where an entrepreneurial venture could prove successful.  The memo should ideally address the following key questions:


1)      What is the potential venture?

2)      Who are the potential patients?

3)      What sub-sectors of the industry would be engaged (e.g., physician, pharmaceutical manufacturers)?

4)      What is the geographic scale of the venture (e.g., regional, national, global)

5)      Are there partnering agents necessary for success?  If so, who?

6)      Is return on investment possible within five year (a typical venture capital window)?

7)      What is the best case in five years?  What is the worse?  For each what would be the range of revenue (e.g., <$1M, $1-5M)


Examples from previous classes

·         Market sizing memo #1

·         Market sizing memo #2

·         Market sizing memo #3


An example market sizing memo (single space with figure) is available here for fictitious stroke technology UMN_Clot.  The memo addresses nearly all of the questions above.  Your goal is to keep the analysis effective, clear and concise.


All resources available to you are fair game.  Use the MILI resources page from the MILI web site: for industry connections.


The memo will be due on March 6, 2015 by 4pm.  For those taking New Product Development course or the Ventures Enterprise, you can use this memo as a ‘dual-use’ exercise. Email the market sizing memo to by 4pm with MILI6990 in the comment line of your email.



Market Research paper:  You will be expected to complete a market research paper for this course.   The intent of this requirement is to give you the opportunity to explore a specific health care market-oriented issue in which you are particularly interested. 


Deadlines: There will be two deadlines associated with the research paper. The first deadline occurs on 2/16/2015. On this day, you will need to turn in a one-page document that summarizes your proposed research paper topic of interest. It should include some background information as well as the specific question or issue that you would like to address. The second deadline is on 3/9/2015. On this day, you will need to turn in the final version of your paper, electronically by email to by 4pm with MILI6990 in the comment line of your email.



·         Market Research Paper #1


MILI Inventory of available Secondary Data Resources (student version) Note: MILI Affiliate Inventory – updated regularly - available after student completes MILI MBA specialization and leadership statement requirement.


Course Secondary Data Resources


     Diagnosis (ICD9) Code Spreadsheet

     Procedure Code Spreadsheet

Ehealthecon SQL Server link (Userid: MILI6589, password: puppydog)


MILI Lab Server for ICD9 procedure and diagnosis market sizing


Server Link


Userid: mili6690, password: puppydog


·         Wald_rx database description

·         Use SQL language example using Wald_rx

Topic:  Use syllabus topics, the newspaper, your own experiences, or other secondary sources to help you identify your topic.  A good place for ideas is the journal Health Affairs.  The website is  Helpful library indexes include Medline, Pubmed, and Econlit.  You can get to them by going to, and then click on Articles and Indexes. 


Note, the research paper should not be a position paper (e.g., pro vs. con).  Rather, it should be objective and present all relevant arguments (e.g., economic, political, scientific) related to the chosen issue.  I would also encourage you to consider a topic that may allow you to use scientific data to support your argument.  This is completely optional, but may be of interest to those who have had some statistics or economics coursework. 


Logistics: The paper should be double-spaced, 12-point font, with one-inch margins.  The length of the paper should be in the range of 7-8 pages of text.  You may also use footnotes where necessary.  


To avoid plagiarism, please be sure to give credit when you use another person’s idea or theory, other information that is not common knowledge, or statistics.  This includes both web-based and traditional sources. You should cite it in the text of the paper, as well as include a full citation on a reference page.  Refer to the MLA Handbook for formatting.  The instructor will enforce the policies issued by the University of Minnesota with respect to the Student Code of Conduct.




Readings including book chapters, journal articles and company annual reports will be made available electronically.


Course Content:


The course will be divided up into seven units:

1.      Historical Overview of the Healthcare Sector

2.      Physician Services Market

3.      Hospital Services Market

4.      Insurance Market

5.      Medical Devices and Pharmaceuticals Market

6.      Healthcare Information Technology Market

7.      International Healthcare Markets


Instructor Contact Information:


Stephen T. Parente, Ph.D., Professor

Associate Dean, MBA Programs, Carlson School of Management

Professor and Minnesota Insurance Industry Chair of Health Finance

Department of Finance, Carlson School of Management

Director, Medical Industry Leadership Institute

CSOM 3-279

612-624-1391 – voice, 612-435-4925 – fax


Office Hours:  By appointment by e-mail on Mondays


Course Web Site:





Historical Overview of the Healthcare Sector


January 26: Where does 3 Trillion go? Market and course overview

   Jonas & Kovner, Chapter 1

   National Health Expenditure Projections 2012-2023, CMS, 2014

   FTC Executive Summary, pp. 1-20.

   Starr, pp. 80-144

   Ginsburg, P. “Don’t Break Out The Champagne: Continued Slowing Of Health Care Spending Growth Unlikely To Last.” Health Affairs 27, no. 1 (2008): 30–32.

   Pear, R. “After Slow Growth, Experts Say, Health Spending Is Expected to Climb.” New York Times, September 3, 2014

   Parente, ST. “Health economics and policy: towards the undiscovered country of market based reform.” International Journal of Health Finance and Economics, September, 2012.


Physician Services Market


February 2: Market history and overview

   Starr, pp. 198-232

   Jonas & Kovner, Chapter 7.

   Blumenthal, David.  “New Steam from an Old Cauldron- The Physician-Supply Debate.”  New England Journal of Medicine, 350(17), April 22, 2004, pp. 1780-1787.

   Pham et al, “Financial Pressures Spur Physician Entrepreneurialism.”  Health Affairs,  March/April 2004.

   Evans, M. “How Patients Will Use Physician Payment Data.” The Morning Consult, October 5, 2014.


Hospital Services Market


February 9: Market overview and evolution

   Starr, Chapters 4 and 6.

   Jonas & Kovner, Chapter 6.

   Jessica H. May, Gloria J. Bazzoli, and Anneliese M. Gerland. Hospitals’ Responses To Nurse Staffing Shortages Health Affairs 25 (2006): w316-w323.

   Stuart H. Altman, David Shactman, and Efrat Eilat. Could U.S. Hospitals Go The Way Of U.S. Airlines?  Health Affairs 25, no. 1 (January/February 2006): 11-21.

   Garbutt J, Waterman AD, Kapp JM et al. Lost Opportunities: How Physicians Communicate About Medical Errors.  Health Affairs 27, no. 1 (2008): 246–255.

   Easley, J. “FTC Asserts Authority Amid Wave of Hospital Mergers.” The Morning Consult, June 28, 2014.







Insurance Market


February 16: Market overview and evolution

   Starr, pp. 236-289

   Jonas & Kovner, Chapter 3, 11

   Rowe JW, Brown-Stevenson T, Downey RL, and JP Newhouse. The Effect Of Consumer-Directed Health Plans On The Use Of Preventive And Chronic Illness Services. Health Affairs 27, no. 1 (2008).

   University of Minnesota Consumer Driven Health Plan Research, 2002-2008.

   Summary of the Affordable Care Act. Kaiser Family Foundation, 2013.

   Chen S, Feldman R and Parente, ST “A Five Year Study of Health Expenditures among Full Replacement CDHPs and Traditional Managed Care Plans.  Insurance Markets and Companies: Analyses and Actuarial Computations, Issue 1, Volume 5, 2014.


Information Technology


February 23: Midterm & Information Technology


   TOP TECH TRENDS, Healthcare Informatics, 2013-2014.

   Morrissey J, Just a click away. Modern Healthcare’s Millennium Issue, September 27, 1999, 6-8.

   Jaan Sidorov. It Ain’t Necessarily So: The Electronic Health Record And The Unlikely Prospect Of Reducing Health Care Costs. Health Affairs 25, no. 4 (July/August 2006): 1079-1085.

   Adler-Milstein J, McAfee AP, Bates DW, and AK Jha. The State Of Regional Health Information Organizations: Current Activities and Financing. Health Affairs 27, no. 1 (2008): w60–w69.

   Health IT News. “4 contentious topics in the ICD-10 debate.”

   Easley, J. “No Winner Takes All With Electronic Health Record Giants.” The Morning Consult, June 15, 2014.

   Parente, ST. “Harnessing Health Information in Real Time: Back to the Future for a More Practical and Effective Infrastructure”, American Enterprise Institute, December, 2011.


Medical Devices and Pharmaceuticals Market


March 2: Market history and overview


   Bitter pill. The Economist. Dec 7th 2006

   Biotechnology Needs to Grow Up.  The Economist, 2006.

   Bench to Bed.  The Economist, 2006.

   Goldman DP, Jena AB, Philipson T, and Sun E. Drug Licenses: A New Model for Pharmaceutical Pricing. Health Affairs 27, no. 1 (2008): 122–129.

   Danzon PM and Furukawa MF. International Prices and Availability of Pharmaceuticals in 2005. Health Affairs 27, no. 1 (2008): 221–233.

   Easley, J. “Health Firms Seek Shelter Abroad for Margins.” The Morning Consult, July 13, 2014.


March 9: International and Future HealthCare Market

   Reinhardt, Hussey, and Anderson, “U.S. Health Care Spending in an International Context.”  Health Affairs 23(3), May/June 2004, pp. 10-25.

   A Novel Prescription, The Economist. 2006.

   Yang B, Bae E, and J Kim. Economic Evaluation and Pharmaceutical Reimbursement Reform In South Korea’s National Health Insurance.  Health Affairs 27, no. 1 (2008): 179–187.

   Hussey et al. “How Does the Quality of Care Compare in Five Countries?”  Health Affairs 23(3), May/June 2004, pp. 89-99.

   Gerard F. Anderson, Bianca K. Frogner, Roger A. Johns, and Uwe E. Reinhardt Health Care Spending And Use Of Information Technology In OECD Countries Health Affairs 25, no. 3 (May/June 2006): 819-831.  

   Christine Borger, Sheila Smith, Christopher Truffer, Sean Keehan, Andrea Sisko, John Poisal, and M. Kent Clemens. Health Spending Projections through 2015: Changes On The Horizon. Health Affairs 25 (2006): w61-w73

   Frech, H.E., Parente, S.T., Frogner, B., Hoff, J. “Comparing the sensitivity of models predicting health status: a critical look at an OECD Report on the efficiency of health systems.”  Forthcoming in Insurance Markets and Companies: Analyses and Actuarial Computations, Issue 1, Volume 4, 2013.


Market Research Paper Due by 4pm on March 9th to

Market Sizing Memo Due by midnight on March 6th.

Comment line should lead with: MILI6990