Describe the different forms of competition that take place among various types of health care organizations.
Competition in Health Care
Competition in Health Care
One of the trends marking the continuing transformation of the U.S. health care industry is the dramatic increase in the pace of competition. The heightened competition is taking place among hospitals health plans physician groups and drug companies and between physicians and hospitals and hospitals and health plans. Listen to the Looking Ahead: The Future of Health Care Policy podcast from National Public Radio (NPR). Then prepare a three- to five-page paper in which you:
Describe the different forms of competition that take place among various types of health care organizations.
Evaluate the benefits and pitfalls of competition in health care and suggest alternatives if competition was not the primary driver of operations in the U.S. health care system.
Explain the elements of successful competition and the use of competitive intelligence.
Describe the influence competition has on the services offered by health care organizations and the choices patients have.
Your paper must be three to five double-spaced pages (excluding title and reference pages) and formatted according to APA style. Utilize a minimum of two scholarly sources that were published within the last five years. One source must be focus on competition health care. All sources must be in Apa format
The wrong kinds of competition have made a mess of the American healthcare system. The right kinds of competition can straighten it out
THE U.S. HEALTHCARE SYSTEM has registered unsatisfactory performance in both costs and quality over many years. While this might be expected in a state-controlled sector it is nearly unimaginable in a competitive market and in the United States healthcare is largely private and subject to more competition than virtually anyplace else in the world.
In healthy competition relentless improvements in processes and methods drive down costs. Product and service quality rise steadily. Innovation leads to new and better approaches which diffuse widely and rapidly. Uncompetitive providers are restructured or go out of business. Value-adjusted prices fall and the market expands. This is the trajectory common to all well-functioning industries computers mobile communications banking and many others.
Healthcare could not be more different. Costs are high and rising despite efforts to reduce them and these rising costs cannot be explained by improvements in quality. Quite the opposite: Medical services are restricted or rationed many patients receive care that lags currently accepted procedures or standards and high rates of preventable medical error persist. There are wide and inexplicable differences in costs and quality among providers and across geographic areas. Moreover the differences in quality of care last for long periods because the diffusion of best practices is extraordinarily slow. It takes on average 17 years for the results of clinical trials to become standard clinical practice. Important constituencies in healthcare view innovation as a problem rather than a crucial driver of success. Taken together these outcomes are inconceivable in a well-functioning market. They are intolerable in healthcare with life and quality of life at stake.
We believe that competition is the root of the problem with U.S. healthcare performance. But this does not mean we advocate a state-controlled system or a single-payer system; those approaches would only make matters worse. On the contrary competition is also the solution but the nature of competition in healthcare must change. Our research shows that competition in the healthcare system occurs at the wrong level over the wrong things in the wrong geographic markets and at the wrong time. Competition has actually been all but eliminated just where and when it is most important.
There is no villain here. Poor public-policy choices have contributed to the problem but so have the bad choices made by health plans hospitals and the employers who buy their services. Decades of reform have failed and attempts to reform will continue to fail until we finally get the right kind of competition working.
The healthcare system can achieve stunning gains in quality and efficiency. And employers the major purchasers of healthcare services could lead the transformation.
Zero-Sum Competition
In any industry competition should drive up value for customers over time as quality improves and costs fall. It is often argued that healthcare is different because it is complex; because consumers have limited information; and because services are highly customized. Healthcare undoubtedly has these characteristics but so do other industries where competition works well. For example the business of providing customized software and technical services to corporations is highly complex yet when adjusted for quality the cost of enterprise computing has fallen dramatically over the last decade.
Healthcarecompetition by contrast has become zero sum: The system participants divide value instead of increasing it. In some cases they may even erode value by creating unnecessary costs. Zero-sum competition in healthcare is manifested in several ways: First it takes the form of cost shifting rather than fundamental cost reduction. Costs are shifted from the payer to the patient from the health plan to the hospital from the hospital to the physician from the insured to the uninsured and so on. Passing costs from one player to another like a hot potato creates no net value. Instead gains for one participant come at the expense of others and frequently with added administrative costs.
Second zero-sum competition involves the pursuit of greater bargaining power rather than efforts to provide better care. Health plans hospital groups and physician groups have consolidated primarily to gain more clout and to cut better deals with suppliers or customers. But the quality and efficiency gains from consolidation are quite modest.
Third zero-sum competition restricts choice and access to services instead of making care better and more efficient. As the system is currently structured health plans make money by refusing to pay for services and by limiting subscribers and physicians choices. Health plans and care providers restrict patients access to medical innovations or limit the services that are covered. Many health plans pay hospitals a set amount per admission for a given ailment rather than for a full treatment cycle. This creates an incentive for hospitals to use cheaper treatments rather than more effective innovative ones and if patients consequently must be readmitted the hospitals are paid again.
Fourth zero-sum competition relies on the court system to settle disputes. Yet lawsuits compound the problem. They actually raise costs directly (through legal fees and administrative expenses) and indirectly (through the practice of unnecessary defensive medicine) none of which creates value for patients. Moreover of the billions of dollars that doctors and hospitals pay annually for malpractice insurance less than 30% goes to injured patients or their families.
What Happened?
Zero-sum competition in healthcare is the consequence of a series of unfortunate strategic choices made by nearly all the actors in the system encouraged and in some cases reinforced by bad incentives introduced through government regulation. These include:
The Wrong Level of Competition.The most fundamental and unrecognized problem in U.S. healthcare today is that competition operates at the wrong level. It takes places at the level of health plans networks and hospital groups. It should occur in the prevention diagnosis and treatment of individual health conditions or co-occurring conditions. It is at this level that true value is created or destroyed disease by disease and patient by patient. It is here where huge differences in cost and quality persist. And it is here where competition would drive improvements in efficiency and effectiveness reduce errors and spark innovation. Yet competition at the level of individual health conditions is all but absent.
The fundamental economics of healthcare are driven at the level of diseases or conditions. Numerous studies show that when physicians or teams treat a high volume of patients who have a particular disease or condition they create better outcomes and lower costs. (For more on this concept see the exhibit Experience Matters.) The renowned Texas Heart Institute (THI) for example prides itself on having surgical costs that are one-third to one-half lower than those of other academic medical centers despite taking on the most difficult cases and using the newest technologies. Because of its specialization THI attracts the most complex and demanding patients whose needs produce even more rapid learning. In healthcare as in most industries cost and quality can improve simultaneously as providers prevent errors boost efficiency and develop expertise. As we have learned in many businesses doing it right the first time not only improves outcomes but can dramatically cut costs. The trade-off between cost and quality in healthcare then is significantly reduced by competition at the right level.
Competition at the level of individual diseases and conditions is getting even more important as medical research reveals that diagnoses and treatments should be increasingly specialized. Prostate cancer for example is now understood to be six different diseases that respond to different treatments. Providers should compete to be the best at addressing a particular set of problems and patients should be flee to seek out the providers with the best track records given their unique circumstances. In the current environment where patients treatments are determined by the networks they are in network providers are all but guaranteed the business.
The Wrong Objective. Competition at the wrong level has been exacerbated by pursuit of the wrong objective: reducing cost….
