Competition in Health Care Essay
Competition in Health Care
For this assignment the class was instructed to 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. Health care as in all industries, competition among businesses has long been encouraged as a mechanism to increase value for patients. In the overwhelming majority of industries, firms compete with each other to sell more products or services to customers, their purpose being to capture more of the customer’s dollar (Spath & Abraham, 2014). Many companies are free at any time to offer whatever products they think people need at any price they believe people are willing to pay. If customers will buy their product they will succeed; if not, they fail. This considered the nature of competition. Competition creates winners and losers inspires firms to constantly improve.
Competition in many sectors of the healthcare industry functions differently. The usual free market principles of supply and demand are distorted by an extensive regulatory framework at both the federal and state levels of government. State regulators may not allow all HSOs in one geographical market area to offer particular services. Price caps may prevent HSOs from charging whatever price people are willing to pay for healthcare services. Pharmaceutical companies are free to develop any new medication they want but must get approval from the Food and Drug Administration before it can be sold in the United States. Insurance plans may direct people to receive services from certain HSOs and not others. Hospital emergency departments must provide healthcare services to people even if they cannot pay for those services (Spath & Abraham, 2014). In the health care industry, competition has an impact on many relational perspectives. There have been several studies examining the relationships between competition and quality of health care, competition and health care system costs, and competition and patient satisfaction. Some elements of competition in health care are price, quality, convenience, and superior products and services.
One type of competition that takes place in health care amongst the various types of health care organizations is the business’s existing competitors. The existing competitors are the ones that the business has been dealing with for many years. There are also potential competitors, which are companies that are currently operating in another industry or market, but show interest in entering the business’s industry or market. Some examples are; firms operating in other geographic regions seeking to expand their markets, firms offering similar and related, but not directly competing, products that wish to expand their product lines, customer firms that decide to integrate backward in the industrial value chain, suppliers attracted by margins may choose to integrate forward in the chain, a small, strategically weak firm becomes a serious threat of entry when it is acquired by a company that can reduce or eliminate the weaknesses, firms that feel threatened by a move into their markets might retaliate by moving in the opposite direction, and firms that have a possible fit or synergy with the critical success factors in the industry (Moseley, 2009).
Attention must also be paid to indirect competition, those entities offering products or services that may serve as substitutes to the business’s products or services in the eyes of its customers (Moseley, 2009). Hospitals also compete for physicians by offering more highly trained supportive staff and/or better equipment. Hospitals are more likely to compete for patients by providing more services, better amenities, or discounted prices. There is a strong competition for cutting edge technology and medical talent locally and globally. Hospitals also have to compete for inclusion in insurer’s provider networks. Insurance plans compete for cost to payers, quality of provider networks, credentialing screening, and quality assessment procedures. Competition has played a vital role in shaping the delivery of healthcare in the United States. Competition drives innovation and ultimately leads to the delivery of better healthcare.
Competition results in lower prices and broader access to health care and health insurance. Competition among and between hospitals and physicians intensified with the development of managed care organizations. In addition to putting pressure on costs, managed care plans have pressured providers to use shorter hospital stays and to offer alternative outpatient treatments (Macfarlane, 2014). This led to lower costs and an increase in choice without sacrificing quality. Lower costs and improved efficiency has made health insurance more affordable and available. Another benefit of competition in health care is the innovation in healthcare technology (endoscopic surgery, anesthetic agents available in ambulatory surgery centers). There are many competitive success stories in healthcare in the area of pharmaceuticals, urgent care centers, and elective surgeries. Competition has some pitfalls in healthcare that includes the time and costs that it takes for healthcare organizations to compete against others.
Other common pitfalls are unexpected difficulties when expanding into new geographies, over-optimistic projections in patient numbers, revenues, and profitability, misjudging local income levels and ability to pay, and underestimating local competition. Another pitfall may be over investing in equipment. Competition has severely restricted collaboration among service providers. An alternative to competition would be collaboration between providers or fixed prices. Success is not achieved by ignoring your competition but rather by anticipating competitive issues and influences so you can always have a proactive plan and strategy for staying ahead of your competition.
As in all industries including health care the competition among businesses has long been encouraged as a mechanism to increase value for patients. There are many forms of competition that have an influence on services offered by health care organizations. The competition comes from not only other practices, but can include anyone or anything that may influence a prospective patient to not become a patient of an organization. Organizations that fail to deliver products that satisfy customers’ needs will soon go out of business. Strategic thinking and planning enables organization to stay ahead of the competition.
Macfarlane, M. (2014). Sustainable Competitive Advantage for Accountable Care Organizations. Journal of Healthcare Management, 59(4), 263-271. Retrieval from EBSCOhost, www.ashford.edu/libraryMoseley, G (2009). Health Care Competition, Strategic Mission, and Patient Satisfaction: Research Model
and Propositions. Retrieved from www.ncbi.nln.nhi.gov/. Spath, P., Abraham, S. (2014). Strategic Management for Healthcare Organizations, Bridgepoint Education, Inc. www.ashford.edu/books.