Market competition forces in the healthcare and Medicare system has affected various stakeholder industry such as patients, economy, insurance, physicians, politics and provider organizations. These forces have been a wake-up call to all especially policymakers on the need to develop best policies and frameworks that establish health care as a primary driver of people’s lives. Additionally, these competitive forces enhance the quality of products and services in the attempt to outdo each other. This brief identifies the performance of the competitive market. It also explores the theories applicable in the health care system, objective methods for prediction of future market behavior and assessment of economic policy recommendations for healthcare stakeholders.
The United States depends on competition forces to balance costs and quality in the healthcare and Medicare system (Drummond et al. 2015). Recently, concentration is rising throughout the insurer, physician and hospital markets. Medium sized community hospitals face reducing demand and soaring competition from both freestanding diagnostic and surgical centers and larger hospitals leaving the midsized hospitals vulnerable to mergers with other facilities or closure. The development of hospital systems that extend the negotiation power of hospitals providing the best care for complex and less common conditions has limited competition among insurers across local health care markets (Drummond et al. 2015). Government anti-trust enforcement could play a crucial role in maintaining competition in both the insurer and hospital markets. However, the impact of the implementation has been restricted.
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Competition indicates that higher productivity producers in the in manufacturing industries are allocated greater market share at a point in time and over prolonged periods (Chandra, Finkelstein, Sacarny, & Syverson, 2016). The unusual features of the healthcare sector and its institutions eliminate these reallocation forces. As a result, the victims include consumers who lack time or knowledge to respond to the quality and price differences across providers, health insurance which protects consumers from the direct financial repercussions of their health care consumption choices, and public sector reimbursement which offers little incentive for providers to achieve productive effectiveness. These factors are believed to weaken the disciplining force of demand-side competition existing in most other sectors (Chandra, Finkelstein, Sacarny, & Syverson, 2016).
This theory of healthcare exceptionalism concurs with the contention that hospitals with superior outcomes are not rewarded in the form of getting more patients which thwarts innovation and quality improvement endeavors. Dismally performing hospitals do not feel the pressure from patients to enhance quality because conventional market force does not apply to healthcare. However, this assessment has been found deficient since there has been little research to prove it (Chandra, Finkelstein, Sacarny, & Syverson, 2016). The conventional wisdom associating greater market share to big producers is right, but there are reasons to believe that it is deficient. Markets are good at providing information to consumers who use it sensibly by choosing hospitals with high-quality services. A hospital’s standard of service delivery may reflect worthy details about its performance which may spread widely without prodding or quality reporting. This idea advances the notion that consumers are rational beings who process information and not get deceived.
The increase in the high-volume digital flood of information at high velocity and variety is adding complexity to the healthcare system. The repercussions are unprecedented increases in medical costs and time for patients and healthcare providers. The providers are seeking useful information technology tools to consolidate organizational resources to offer high-quality patient experience, improve performance and probably create new, more effective data-oriented business models (Wang, Kung, & Byrd, 2018). The future presents uncertainty to the assumptions of the health care exceptionalism theory. Companies will not be guaranteed a bigger market share due to higher productivity. As healthcare providers incorporate IT systems to improve efficiency and quality of health care services, the notion of exceptionalism will decrease in practice. Customers will prefer providers offering high-quality services despite their size.
The United States health care system is moving from a fee-for-service (FFS) reimbursement model to a value-based-care (VBC) model to enhance patient outcomes and control spending (Hansen, Anell, Gerdtham, & Lyttkens, 2015). Despite most stakeholders welcoming the new move, it is not apparent how providers will respond. The change by U.S healthcare organizations to a VBC model resulted from criticism of the current FFS reimbursement model that was blamed for the increasing cost of healthcare treatment. The VBC model intends to reduce health care costs through a proactive approach that dwells on preventative maintenance and support of population health.
The model puts patients at the center of care. Hansen et al. (2015) indicate that the Affordable Care Act (ACA) included an option for hospitals and doctors to be part of an accountable care organization (ACO). An ACO consists of a network of care providers who can share financial and medical responsibility for patients through a synchronized care approach that limits extraneous spending. The departure from a fee-based model to a value-based model will also disapprove the healthcare exceptionalism theory since superior outcomes will not be premised on size but value.
The health care system and Medicare care competition forces face change due to the change in operations of providers, new policies and changing consumer perceptions. The practicability of the exceptionalism theory will reduce as policy recommendations such as VBC are fully operationalized. Providers will develop new value-driven systems and frameworks that match the requirements of VBC. Small sized providers have the chance to improve if they effectively apply the VBC model. More quality will be guaranteed since high productivity manufacturers will ensure they deliver high-quality products. These future changes also provide researchers in the health sector with new research opportunities since the recommended policies present an uncertain environment for manufacturers, consumers, and providers.
References
Chandra A., Finkelstein, A., Sacarny A., & Syverson C. (2016). Health Care Exceptionalism? Performance and Allocation in the US Health Care Sector. American Economic Review , 106(8): 2110-2144 DOI: http://dx.doi.org/10.1257/aer.20151080
Drummond, M. F., Sculpher, M. J., Claxton, K., Stoddart, G. L., & Torrance, G. W. (2015). Methods for the economic evaluation of health care programmes . Oxford university press.
Hansen, F., Anell, A., Gerdtham, U. G., & Lyttkens, C. H. (2015). The future of health economics: the potential of behavioral and experimental economics. Nordic Journal of Health Economics , 3 (1), pp-68.
Wang Y., Kung L., & Byrd T. A. (2018). Big Data Analytics: Understanding its Capabilities and Potential Benefits for Healthcare Organizations: Technological Forecasting & Social Change , 126(1): 3-13.
