Fixing the cost and quality of healthcare by addressing lack of competition

Fixing the cost and quality of healthcare by addressing lack of competition April 20, 2017

It’s no surprise that the US healthcare system “does not work as well as it could,” as researchers Martin Gaynor, PhD, Paul Ginsburg, PhD, and Farzad Mostashari, MD point out in a new report. Costs are high and inconsistent, care quality is similarly variable, and the market lacks “the innovation and dynamism” that enables other sectors to thrive in the US.

Evidence supports the claim that highly consolidated markets and a lack of competition among health systems and physician organizations are to blame. Patients, employers, and private insurers pay more for healthcare when only a handful of options exist in dysfunctional markets.

This level of inefficiency can even leak into public programs like Medicare, where poor competitiveness among providers is also associated with lower quality care.

The effect of competition is that organizations are constantly pressured to do better and make improvements — if they don’t, another group can and will take their place. Small and solo practices, which are known for their high-quality, less expensive care, understand this framework better than anyone else.

In concentrated markets where few independent medical practices exist, prices can increase by up to 40 percent, because when markets are dominated by a small number of health systems, that firm doesn’t have the incentive to lower prices. Evidently, creating a healthier and less consolidated market hinges on the survival of small practices.

So how can we reshape the healthcare landscape to make it less anticompetitive? The authors of the report formulated ideas that make up a new “competition policy” to address our increasing consolidated healthcare system:

1. Maintain and enhance the competitiveness of healthcare markets: The researchers call for reforming Medicare policies like the 340B drug pricing program that favor consolidation. The report also recommended greater transparency on quality and cost for providers and consumers.

2. Promote entry by new competitors/remove barriers to entry: This involves eliminating or refocusing state regulations that unnecessarily limit the entry of providers to markets. In addition, state licensing laws should facilitate innovative entrants and new practice developments.

3. Prevent anticompetitive practices: The authors discussed how mergers and acquisitions of healthcare entities cause healthcare prices to go up and quality of care to suffer. To combat this, they called on federal antitrust agencies and state governments to actively examine and review these tactics to promote fair competition.

According to the researchers, pursuing this policy proposal can lead to lower costs, higher quality, and more access to care. But addressing this issue will require broader consideration and action beyond policy change.

We at Elation believe that supporting independent physicians is an example of an immediate way to reinforce the aims of this report. Ensuring that small practices continue to exist and flourish will foster competition and put the US on a path toward less consolidation.

In an increasingly competitive landscape with independent physicians well-positioned to provide high-quality care at a lower cost than their large system counterparts, focusing on small and solo practices has never been more important.

Learn more about how Elation supports small and solo practices.