Healthcare Competition in the United States - Research Paper Example

?Healthcare Competition in the United s The United s displays one of the highest spending levels on healthcare when compared to other countries. It has been estimated that around 14% of the GDP or some 1.6 trillion dollars were being spent on healthcare in 2002. Out of this expense, the federal, state and local governments end up paying around 45% of the total incurred expense. Another 40% of this cost is paid by private insurance as well as other forms of private spending. The remaining 15% is paid by the consumer through pocket spending (Federal Trade Commission and Department of Justice, 2004). This signifies that the US healthcare system is intricate in terms of its organization as more than one kind of stakeholders is involved in terms of healthcare provision. In other countries around the world it is common practice for the healthcare sector to be regulated by the government with major players being few and backed up by the government. However, in the US the situation is altogether different. A number of different providers are available for healthcare that can be segregated as per their size, provided services, geographic access, quality of servicing as well as other measures. Typically it is sufficient to realize that the US healthcare system espouses private practitioners, hospitals, service providers, medical suppliers, insurance agencies and others. This would tend to make the system more competitive given the large number of players involved but the situation on ground is diametrically opposed. It has been argued that competition in healthcare in the US operates “at the level of health plans, networks, and hospital groups” (Porter & Teisberg, 2004). It must also be noted that health plans, hospital groups and physician groups have banded together in order to gain greater influence so that better deals could be made with suppliers as well as customers. However, this banding of the respective groups has failed to produce any improvements in the quality or efficiency of the provided services. Rather the opposite has taken place – quality of service and efficiency of operations has gone down in the healthcare sector. One of the primary means to drive competition in the healthcare sector is through health plans. The current configuration for health plans only makes money by denying patient’s certain services and by limiting the options available to subscribers as well as their physicians. A health plan can only be competitive when it can actually make a reasonable profit to justify its efficacy. In order to justify the economic value addition of health plans, it is common practice to limit the patient’s choices to previous methods of treatment that cost less than more recent innovations in healthcare. Similarly health plans typically pay hospitals a fixed amount to deal with a patient’s particular ailment. This approach stands in contrast to paying the hospital a variable amount for a complete patient treatment cycle. Since hospitals will be paid a typical fee no matter what the actual treatment cycle is so they tend to use cheaper methods of treatment as well as cheaper medicine (Porter & Teisberg, 2004). Given such treatment, the hospital will only be able to make more money if the patient is readmitted and ironically this approach is in use by hospitals to make more money. An essential other problem is the inclusion of legal choices in order to find acceptable solutions to medical disputes. Competitive practices in business tend to rely on the court system in order to settle disputes. The same is true for the healthcare sector in the US that is seen as a competitive industry. Theoretically the court system ought to simplify the reprisal of problems but this is not the practical case. The inclusion of courts to medical disputes between patients, physicians and suppliers tends to make the process more cumbersome as well as more expensive. The inclusion of legal fees has the unwanted consequence of inflating medical costs to newer higher levels. On the one hand the administrative expenses and legal fees tend to inflate costs while on the other hand the practice of defensive medicine by a number of doctors adds to unnecessary costs. These direct and indirect fees have to be borne by the patient who in turn finds lower quality out of competition. It has been estimated that only 30% of the billions of dollars paid for malpractice insurance end up in the patient’s or their families’ hands (Porter & Teisberg, 2004). However, this phenomenon may be attributed to a lack of competitive intelligence in the overall healthcare sector. Another issue to look into is the nature of competition that tends to subtract value for patients in the healthcare sector. The practice of competition to sign up new subscribers annually for health plans means that the patient’s focus is diverted to cost more than the tackling of disease and treatments. Moreover as the subscriber and the healthcare providers are engaged for a brief period of one year, there is little need for long term goal setting or thinking. Instead it is common practice to plan for the year and to change the marketing strategies in the year after to gain more clients (Rivers & Glover, 2008). This temporal relationship tends to create more problems than it solves and leaves the patient stranded with little choice as this is the only form of options that the market has to offer. Another brand of problems is introduced when healthcare providers compete to gain health plan networks with a lot of patients. In order to gain these networks large discounts are provided that reduce the overall cost for healthcare but the cost of patient care remains the same. Consequently the revenue side of the equation gets disturbed so that the larger employers tend to save up on these costs while the healthcare sector is left devoid of these revenues. This also tend so remove a large amount of people from the healthcare system because they cannot afford insurance on these scales such as self-employed people. The healthcare costs of these people are generally exacerbated and increased many fold such as through emergency procedures. These free services must also be paid for and so the overall health care bill tends to soar rather than decrease given these measures (Enthoven & Tollen, 2003). Given the current situation there is need to reform the system such that the competition facet improves and provides the patients with better quality medical care at lower costs. The inclusion of overheads such as legal fees and defensive medicine can only be ensured when the market has greater confidence in itself and when competition is healthier. The current state of cut throat competition exists because it tends to handle the health system through inappropriate levels. Instead of focusing on the conglomeration of resources, it would be better if healthcare providers would choose to concentrate on diseases and their treatments. This would ensure that patients are allowed more coverage against common and uncommon medical problems alike. The current Fordist model of operation being used to drive competition in the healthcare sector is also unsuitable because medicine is not a mass consumption industry (HYPATIA, 2009). Instead each patient has their own unique set of circumstances, problems and their required solutions. Essentially what healthcare in the US requires is a dose of personalization at all levels. Only this approach can ensure that the current blind competition is taken over by more quality based medical services at lower costs (as overhead costs are removed). Works Cited Enthoven, A. C., & Tollen, L. A. (2003). Competition In Health Care: It Takes Systems To Pursue Quality And Efficiency. Health Systems 3, 420-433. Federal Trade Commission and Department of Justice. (2004). Improving Health Care: A Dose of Competition. Washington D. C.: Federal Trade Commission and Department of Justice. HYPATIA. (2009). Business Intelligence in the Healthcare Industry: Assessment of Technologies, Solutions & Services. Hypatia Research, LLC. Porter, M. E., & Teisberg, E. O. (2004). Redefining Competition in Health Care. Harvard Business Review, 1-14. Rivers, P. A., & Glover, S. H. (2008). Health care competition, strategic mission, and patient satisfaction: research model and propositions. Journal of Health Organisation Management 22(6), 627–641. Read More