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The Medical Professionalism Blog

The Dark Side of Competition

The participants at the Madison meeting told us that the biggest barrier to collaboration was competition. One is hard-pressed to find a community where competition doesn’t rule the day.

For the last 30 years, competition has been part of this country’s health care policy strategy to reduce costs and enhance quality. The theory is that consumers and patients, armed with cost and quality information, would select high-performing institutions. Poor performers would be forced to improve or go out of business. The “best” would capture more of the market share and thus market forces would improve health care.

Even if competition drove hospitals to improve quality and lower costs of producing units of service, does that reduce costs for the community?

The reality you see in Madison and most communities in the U.S. shows us a different side of competition:

1. Cost of care is largely driven by supply – the number of beds and physicians in a region.

If all the hospitals and physicians in an area were providing the optimal level of care for a community, they could compete for who was going to provide that care. However, a health care institution provides a service and hopes to operate that service at full capacity, independent of community need: “A built bed is a filled bed.” Communities and countries that have been able to control the supply of hospital beds (thus avoiding any potential surplus) appear to be better off in terms of overall health care costs and quality.

2. In competitive markets, health care institutions survive by producing more volume, particularly in the form of tests and procedures with higher profit margins.

Hospitals and other facilities tend to invest in services that have high operating margins.  If heart procedures have a higher margin, you tend to see more investment in that area.

3. Collaboration within this competitive model is difficult.

If you wanted to rationalize the numbers of the delivery of a specific service (e.g., heart surgeries), there would be losers and winners. No one wants to be a loser.  Since the focus of an organization is on survival, health outcomes for the community take back seat.

4. Current Federal health care reform legislation.

Participants at the Madison meeting felt that Accountable Health Organizations would not be a force for collaboration but would fuel competition in their region.  It has produced a “put your head down” approach to survive. In other parts of the country, consolidation has replaced collaboration.

In 30 years, competition has not proven to decrease costs in the long-term. Let’s give collaboration a chance and see what the results will be.

3 Comments to The Dark Side of Competition

  • Marc S. Frager MD's Gravatar Marc S. Frager MD
    June 7, 2011 at 11:57 am | Permalink

    There should be competition in certifying agencies. Likely that would lead to lower cost certification and less intrusive but more relevant processes. Furthermore it is really no surprise that the conflict of interest inherent in the same agency testing and (re)certifying physicians has not been discussed openly by ABIM

    • admin's Gravatar admin
      June 8, 2011 at 9:24 am | Permalink

      Dr. Frager,

      We received the following from ABIM in response to your comment:

      Certification and Maintenance of Certification are critically important self-regulatory programs that give the public vital information about their physicians. While other organizations do offer certification in medicine, we are pleased that so many physicians choose to certify and recertify with the American Board of Internal Medicine (ABIM). Our Certification and Maintenance of Certification exams are developed by physicians in practice and academia, and are psychometrically validated. A complete list of our physician experts can be found on the ABIM website.

  • June 6, 2011 at 3:43 pm | Permalink

    But doesn’t it take competition in an ideal free market setting to lower costs and improve quality? Health care does not, however, appear to approach an ideal free market, and maybe it isn’t possible to have anything resembling a free market in health care. See:
    http://hcrenewal.blogspot.com/2010/08/how-fallacy-of-perfect-health-care.html
    So maybe what we really need is ways to compensate for the failure of the free market in health care. One such way may be cooperation (in particular circumstances.)

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