We have over the years seen a rapid rise in the healthcare cost. Many have been made to believe that the industry needs to be given the freedom to compete. We have been told that the free market will drive the quality up and cost down.
Not True! The number of deaths and injuries in the hospital remain very high to the level of 100,000 and 1,000,000 respectively. Patient safety is quite often at stake. And the cost is so high that many are becoming bankrupt while over 40,000,000 without insurance.
Whatever is being said, a closer look will indicate that healthcare is not about free market. It is heavily legislated to the extent that number of doctors country creates is pretty much in the hands of congress and you guesses it!, in the hands of lobbyist.
The Wall Street Journal reports that a nonprofit medical center, Carillion Health Systems in Virginia’s Roanoke Valley had profits of more than $100,000,000 last year.
According to the report, “Critics say big medical centers like Carilion use near-monopoly power to charge high prices; Carilion says it needs to charge more for some procedures to subsidize other parts of its business, such as care for the uninsured.”
Carilion has used its power to buy small local medical practices under the name of synergy and improvement of care. The irony is that hundreds of local doctors, who did not sell their practices have decline in number of patient.
If nonprofit hospitals can make so much profit, then I would wonder how for-profits are doing!
The monopolistic nature of the healthcare industry has protected executives from investing in real improvement opportunities since they are able to raise the prices as they desire.
About the Author: Dr. R.K. “ravi” Pandey has years of experience in business and business process transformation, strategy, and Lean Six Sigma. Ravi currently serves as the President of BIPRO Inc., a leading provider of services for improvement in healthcare business.
11 users commented in " Healthcare Crisis! Is It Due to Monopolistic Nature of the Industry? "
Follow-up comment rss or Leave a Trackback[...] Original post by Dr. Healthcare [...]
[...] Original post by Dr. Healthcare [...]
[...] Original post by Dr. Healthcare [...]
Hi R.K.,
No. Some of the solutions include considering a single payor like Medicare.
JC Brandon
Links:
[ http://www.JCBCapital.com|leo://plh/http%3A*3*3www%2EJCBCapital%2Ecom/XBa_]
>
No, but it is also not functionally competitive in ways that push prices down. It is IMO over regulated, taking risk aversion to the point of creating failures and risks,
Regulated healthcare is, in this country. However the market power of Hospitals in one health system towns, theunchecked power of Insurers, DME suppliers, Big Pharma, Biological device makers etc is the real cost drivers. Until and unless we address this no meaningful savings will accrue. We need to enlist PCPs in this task, not alienate them as we currently do in this system. PCPs are the ones with the best vantage point to make a real difference, if we enable them.
yes, or at the very least, oligopolistic. many areas have few and sometimes only a single healthcare provider. pharmaceuticals are expensive when there is just a single or two providers of a particular drug. many of the latest drugs are monopolies protected by patents.
even if there are plenty of health care providers in a particular market, comparison shopping is difficult or impossible. the prices doctors, clinics, and hospitals charge for healthcare aren’t published and aren’t freely available. nor are the performance statistics or records of quality of care.
finally, for many conditions you don’t have an opportunity to comparison shop. when someone enters an emergency room with angina and finds that he needs coronary bypass surgery, he’s not then going to shop around for a surgeon. the heart surgeon on duty that day has a monopoly on all emergency patients.
its easy to say that healthcare is over-regulated. but if the healthcare market is going to be a true free market, it’s going to require a whole new set of regulations – instead of regulations requiring a minimum level of across the board quality, we’d need regulations regarding price transparency, information about the quality of heath care providers, etc. there’s no such thing as complete health care deregulation.
Hi
Yes, To an extend we are seeing consolidation in this sector.
In the Global scenerio where we are finding aquisition and mergers of regional/country specific players who are not able to compete in terms of pricing , quality and delivery.
Healthcare sector is not left behind.
Also consumers, Doctors have started supporting MNC due to brand recognistion.
Regards
Sanjay
Dear RK,
Company vs another company, no. Brand vs brand, no. On both the criteria it is very competitive. As an industry it is lethally monopolistic. It knows how to ‘buy’ credentials for a brand, and ‘dump’ products through the practitioners network. It also has enormous power to ride past claims of having sold products that were not just injurious to health but even fatal. The practitioners use far more drugs, tests and technological intervention than required because in many countries the expense that a patient incurs is covered by insurance. The analytical skills of a practitioner has been snubbed by the industry in favour of induced (seduced?) usage of costlier remedies. I believe, there are two most dangerous and unethical industries in the world – one is arms and the other healthcare – because they play on hapless citizen.
Cheers.
Prabhat
Monopoly is defind by there only being one supplier of the goods or servives. Because the Healthcare industry has more than one supplier, but these suppliers are not very transparent in their priceing and there is no direct purchasing between the supplier (hospital, doctors and pharmas) and the buyers (the patients) there is no room for market compition. Instead we have a third party payor system (health insurance companies) that negotiate and pay the cost of the care provided. Health insurance as it currently exists is not true insurance. True insurance is the transfer of risk of a financial risk. What would make the health care industry more of a “normal” capitalistic type of market would be to limit the amount of third party payor activity and bring the suppliers and buyers closer together. This can be achieved by the buyers burening the cost of lower priced services, but having a true catestrophic insurance that would be paid by the health insurance company.
this would achieve two things, one the cost of health care would decrease as more choice would be in the hands of the buyers and more competition would be created by the suppliers to attract buyers. The cost of health insurance would also be driven down as the amount of risk of having claims would be limited to the insurance company to only catestrophic incedents. Because the law of large numbers would say that it is very unlikely that every single policyholder would make a claim at once, or even a quarter of the policyholders would do such, this lessons the likelyhood that a large amount of money would be needed to sit on the side in reserves.
This type of insurance is currently available, and the power of the buyer is starting grow already with the introduction of HSAs. The problem is that people are not getting the information that is needed for them to make educated decisions on the subject. Yes these are high deductable plans, but most of the reasons we go to the doctor are already covered without having to use the deductable. And if you have this type of plan long enough and contribute to it, by the time you need to go to the doctor for a deductable reason, the plan will pay the deductable without taking any money from your monthly cash flow.
Your writing style is quite a good role model for me – I have recently started my own blog and I am really struggling to write articles!
Leave A Reply