Concepts of Healthcare Market - Coursework Example

Healthcare Market Healthcare Market The incentives presented by the competitive associations of health care providers are an integral power that dictates their operation and it also affects the price, quantity as well as the quantity of health care services. This is especially true in Maryland where like in other U.S. states, 56% of the total healthcare services are financed privately and therefore the prices, qualities as well as the quantities of those services are shaped by the interactions between the buyers as well as the sellers. Even in instances where the prices are set administratively, as is currently the case for majority of the publicly financed care, the deliberate interactions between providers has a great effect on the main facets of healthcare (American Medical Association, 2010). This paper analyzes the current health care delivery structures within the state MD-Maryland and how they affect healthcare market power. Hospital and physician services constitute a large section of the Gross Domestic Product (GDP). In 2010, hospital care by itself constituted 5.4% of the U.S. GDP something that is over two times that generated by the automobile, agriculture or mining and bigger that that of the food manufacturing industry. In Maryland, doctors services account for almost 4% of the total state’s GDP. the size of the physician and hospital sectors has continued to grow in the last 30 years and this makes understanding their structure, conduct, and performance critical not only for the performance of the health care sector but its also critical for the understanding of the economy in its totality (Kessler, & Geppert, 2012). In the last few years, there have been across-the-board transformations in the Maryland physician markets. Over the last ten years, the percentage of doctors in single or 2 person practices went down from 45% to 35% in 2010-2012. In addition to this, the amount of practices where 3-5 doctors team together went down significantly over the same period. The amount of doctors working in groups of more than 6 grew significantly within the same period. Within the same period, the number of doctors who were employed by others also grew from an average of 32% to 37%. Given that the number of doctors per every 1,000 persons has not been altered since 1997, this shows that there has been a rise in concentration (Kessler, & Geppert, 2012). Apart from the changing market structure, there have also been changes in prices and the input of the heath care prices to the general health care cost growth. According to the results of one study, there was a 100% rise in hospital prices in Maryland from 2000-2008. This increase was not in any way related to market concentration. This growth has been linked to growth owing to prices versus the growth arising from nonprice factors such as population and the intensity of care. Although this growth has been varied over time, it is also clear it has been holding steady in the last one decade. According to a report from the Maryland Attorney General’s office, price increases accounted for most of the rise in health care spending in the state in the recent past. This increase has however not been related in any way to the quality of health care (Ciliberto, & Dranove, 2013). In general, the trend within Maryland and in other states depict the scenario of a health care and health insurance markets that are concentrated and gaining this nature with the passage of time. There is also sufficient evidence to show that prices are growing at a faster rate than the quantities and that this price variation has no relationship whatsoever to quality but it is as a result of market power. Competitive Forces in Health Care Delivery System Various healthcare policies, either through intentional or unintended effects usually affect the motivation of health care providers to enter or leave the market. This means that various health policies may influence the provider market structure and therefore change the outcomes affected by market structure such as price, quantity, or quality, that were not within the scope of the policy. These incentives may vary by ownership status and therefore the policies may transform the mix of for-profit and not-for-profit public organizations. In the state of Maryland, there are programs that offer not for profit organizations and public hospitals subsidies during construction and expansion (Berenson, Ginsburg, & Kemper, 2012). This policy has had a great effect of the amount of hospitals, their productive capacity, and ownership mix and as a result this has an effect on market outcomes of price, quantity, and quality. Most hospitals and doctors get a big portion of their income from offering care to insurance patients under the public scheme and such reimbursements are determined at the administration level. Any alteration in those payments mostly impacts the ability of the providers to enter or leave the market (Ciliberto, & Dranove, 2013). The most significant transformation in the Maryland health care policy in the last century was bringing into the scene Medicare and Medicaid in the middle of the 1960’s. Large sections of poor people both in Maryland and other states got medical insurance under this program. What this means is that the inception of Medicare and Medicaid formed a big, positive shock to the requirement for hospital and physician services which, in turn, had the capability to affect the entry, exit and investment decisions that providers made. Experts agree that the Medicare program largely raises the size of hospitals as admissions go up and also encourages the adoption of new technology (Barro, Huckman, & Kessler, 2012). One thing that has been established beyond control is that an availability of insurance influences hospital inducements but the character of the insurance market may influence the reimbursement rates and therefore affect the inducements of organizations to invest in technology. Essentially, managed care organizations are able to bargain for reduced payments and control utilization and therefore influence the adoption of technology. In a one study conducted in Maryland, it was established that a high level of HMO market share has a direct relationship with low levels of MRI accessibility and consumption. What this insinuates is that managed care has the capability of reducing health care prices by influencing the acquirement and utilization of new medical equipment and technologies. There is enough evidence to suggest that an increase in HMO activity is linked with a reduction in the amount of mammography providers as well as a rise in the number of services that are offered by the other providers. It has also be identified that a rise in HMO market share has a direct relationship with deductions in costs for hospital services and with rises in the required period for appointments but not with appalling health outcomes (Atherly, Dowd, & Feldman, 2011). Following this explanation, it is therefore right to conclude that managed care is capable of slowing down the adoption of intensive care units instead of the advanced high-level units. In addition to that, contrary to the frequent hypothesis that reducing technology growth is detrimental to patients, in this particular scenario reduced approval of mid level units could have been an advantage to patients because the outcomes for critically ill patients are superior in high level intensive care units and the lowering of the middle level units have the likelihood of mounting the likelihood of acquiring care in a high-level center (Barro, Huckman, & Kessler, 2012). The foundational structure and duties and segmentation of health care providers in Maryland have remained constant for the better part of the last and this century. Most hospitals offer an array of inpatient and outpatient services and depending on what they specialize on, doctors offer care mostly in their offices or in hospitals. This trend is caused mostly by the absence of entrepreneurial fervency in dealing with the inefficiencies that come up in the provision of healthcare. One of the reasons why these inefficiencies come up is because the fee-for-service reimbursement systems present providers with very little incentive to lower the cost of the care that they offer. In addition to this, the information on the pricing and quality of care that is available on the market is largely not transparent. For this reason, the returns to creating new care modalities that give rise to enhanced quality or ones that are capable of bringing down the prices are most likely to be modest (Berenson, Ginsburg, & Kemper, 2012). As mentioned earlier, the hospital industry is one of the most promising in the U.S. economy. This is because the hospital industry is not only huge, but it functions in a very special organizational setting. In Maryland, privately insured patients basically acquire hospital care using their health insurance. This means that most hospitals rely on the health plan of the insurance provider’s network structure. In most cases, health insurers enter into contracts with a division of hospitals in a certain locality. The hospital choice set for any given patient when they need to access treatment therefore depends on the health insurance plan that they hold. In addition to this, most patients do not make direct payments when they need to be admitted in hospitals. This is because majority of the cost for inpatient experience is enveloped under the patient’s insurance cover and for that reason any price difference between hospitals is not usually mirrored in the cost that the patient makes out of pocket (Berenson, Ginsburg, & Kemper, 2012). Another thing to note about the financial risk of a capitation payment system is that hospitals function as an option demand market where they make the choices for health insurance before a patient can be admitted. In most cases, hospitals confer with private insurers over addition in their provider network and the reimbursement that the hospital will acquire from offering treatment to the patient holding the insurance. These negotiations are the ones that also determine how hospital operation is supervised and regulated as well as particulars of the payment arrangements. Given the above breakdown, it is apparent that insurers are the ones who are mostly responsible for meeting the cost of healthcare provision to clients. However, regardless of whether the insurer is private or the public health care plan, the insurance provider is solely responsible for deciding on the health plans that they offer to those in their plan founded on projected prices, the benefit structure as well as the networks that the provider has (Berenson, Ginsburg, & Kemper, 2012). References American Medical Association (2010). Competition in health insurance: A comprehensive study of U.S. markets. Technical Report, American Medical Association. Chicago, IL. Atherly, A., Dowd, B., & Feldman, R. (2011). The effects of benefits, premiums, and health risk on health plan choice in the Medicare program. Health Services Research, 39 (4): 847-864. Barro, J., Huckman, R., & Kessler, D. (2012). The effects of cardiac specialty hospitals on the cost and quality of medical care. Journal of Health Economics, 25 (4): 702-725. Berenson, R., Ginsburg, P., & Kemper, N. (2012). Unchecked provider clout in Maryland foreshadows challenges to health reform. Health Affairs, 29 (4): 699-703. Ciliberto, F., & Dranove, D. (2013). The effect of physician-hospital affiliations on hospital prices in Maryland. Journal of Health Economies, 25 (1): 29-38. Kessler, D. & Geppert, J. (2012). The effects of competition on variation in the quality and cost of medical care. Journal of Economics and Management Strategy, 14 (3):575-589. Read More