The purpose of this study is to demonstrate that within the United States health care system, a number of institutions have evolved which have given rise to a perverse set of incentives that direct technological change. As a result of these incentives, the diffusion and utilization of new and existing technologies is carried out in a random and indiscrete fashion, subsequently placing upward pressure on the costs of health care. This analysis relies on the empirical work, observations, and writings of a large number of physicians, social scientists, hospital administrators, and federal bureaucrats.