Competition in Healthcare - Essay Example

? COMPETITION IN HEALTHCARE By Abuthamer [Sur Presented to [Your Presentation] Contents Contents 2 Introduction 2 Competition 3 How Competition Works 4 Benefits of Competition 5 Key Elements of Competition in Healthcare 6 Strengths and Weaknesses of Competition in the Healthcare Industry 6 Advantages and Disadvantages of Competition in Healthcare 7 Strategies to Succeed in a Competitive Healthcare Marketplace 8 Impact of Competition on Quality, Safety, and Cost 8 Discussion 9 Conclusion 10 References 11 Introduction Competition characterises the current global environment in various sectors of the economy. In line with this, competition helps organisations deliver quality services to their clients with these organisations striving to package products that were more appealing to their customers than the products and services offered by their competitors. In effect, the need to provide the best services and offer the most appropriate products created a competitive environment between various organisations. On the other hand, it is evident that the contemporary world continues to experience various advancements in technology each day. Hence, the rise in technology has enhanced the competitive nature of organisations with various organisations investing heavily in current technology in order to deliver services that were foolproof and benefitted customers. The healthcare system is not different in terms of the creation of a competitive environment. In this case, the healthcare system experiences competition in various aspects that are beneficial to clients. In line with this, healthcare services providers strive to offer the best services to clients in order for them to retain customers and maintain a competitive edge over their competitors. While analysing the issue of competition in the healthcare system, this expose will incorporate all elements of the healthcare system. In this case, the expose observes that healthcare system is not limited to healthcare facilities and physicians, but it encompasses health insurances providers that might be privately owned or public. In addition, the expose highlights the strengths, weaknesses, advantages, and disadvantages of competition while also highlighting the strategies to employ in a competitive system and investigating the effects of competition on costs, quality, and safety. Competition According to Rivers and Glover (2008), competition in the healthcare sector involves different players contending for clients while working on improving the elements of cost, quality, superior products and services that they offered, and convenience of the services and products on offer. In effect, organisations will always outdo each other by ensuring that the quality of services and products they offered were convenient and of higher quality and affordable cost than what other players in the industry offered. Increasingly, advancements in technology and increased innovations are becoming the major elements that define competition among different players (Rivers and Glover, 2008). In this case, it is evident that different players in the healthcare sector are increasingly offering services and products that are more superior to what used to be offered previously, which is possible due to the advancements in technology. In effect, innovative products and services that result from advancements in technology underline competition in the contemporary healthcare system. How Competition Works Competition in the healthcare sector works in various components with Rivers and Glover (2008) defining three fundamental components. First, competition works among individuals who provide healthcare services to their clients (Greenberg, 1991). In line with this, it is essential to point out that the individuals who provide healthcare consist of physicians and other providers. In this case, competition is for patients who can pay for services without owning any health insurance or competing for patients whose expenses are paid for by third-party insurers. In addition, physicians can compete in the healthcare industry with other professionals in the industry who were non-physicians, but offered healthcare services such as psychologists (Rivers and Glover, 2008). The second component through which competition in the healthcare industry works regards competition between different organisations that provide healthcare services. These organisations include hospitals, different health services organizations, and other hospital systems. According to Harris and McDaniel (1993), these organisations compete against each other to attract patients or payers who are third parties, or concurrently compete for physicians to work in their organisations. In line with this, it is evident that the need to attract talent is both on a local and global level with various organisations competing to obtain the best talent to work for them and ensure that the organisation achieved a competitive edge and maintained it in the competitive world. In addition, it is important for organisations that provide healthcare services to realise the important role played by migration of workers and the shortage of workers (Porter and Kaplan, 2011). Finally, the third component where competition works in the healthcare system regards organizations and institutions that offer healthcare insurance and financing such as health management organisations and other related organisations (Rivers and Glover, 2008). In this case, these organisations compete in terms of access, quality, cost in terms of premiums, and the benefits that users will accrue from the services that these providers offered. Benefits of Competition Busse (2009) identified different benefits accrued by competition in the healthcare industry. First, competition in the healthcare industry was important for production of more needs-based equity. In this regard, it is essential to point out that competitors in the industry will style their services to the needs of the customers in order to remain competitive. On the other hand, Busse (2009) emphasised the important role of competition in enhancing the quality of healthcare provided by healthcare providers in the industry. In this case, it is important to point out that competitors engaged in innovations and used new technology to develop superior products and services that were of high quality. Competition in the healthcare industry enhanced efficiency and promoted less bureaucracy in the healthcare industry. While Busse (2009) cited one of the benefits of competition in healthcare as reduced cost, Porter and Teisberg (2004) noted that competition does not reduce the cost of healthcare services and products in the healthcare industry. Key Elements of Competition in Healthcare Strengths and Weaknesses of Competition in the Healthcare Industry Every element has its strengths and weaknesses. In line with this, it is evident that competition in the healthcare sector has its strengths as well as its weaknesses. The fundamental strength of competition in the healthcare industry is that stakeholders can design competition and mould it in a way that encouraged innovation, which can be crucial in delivering high quality services at an affordable cost to clients (Dash and Meredith, 2010). In this regard, it is evident that competition in any industry leads to improved quality of services and increase in productivity among corporations (Nickell, 1996). On the other hand, the main weakness in competition in the healthcare industry is its ability to encourage excess capacity and allow for duplication of services among various players in the industry (Dash and Meredith, 2010). In addition, another weakness revolves around the nature of some markets in the healthcare system being predominantly monopolies, which affects the quality of care after the introduction of competition in the industry (Dash and Meredith, 2010). Nonetheless, competition in the healthcare system can be used in the markets that were not monopolistic in nature to improve and innovate services and products that were superior and do not compromise the quality of care. Advantages and Disadvantages of Competition in Healthcare Primarily, the main advantage drawn from competition in this industry regards its ability to improve the quality of services and products offered. In this regard, there is evidence that English hospitals used competition to drive up the quality of their healthcare management practices, which improved outcomes in finance, clinical setting, and operational outcomes in hospitals (Bloom, et al., 2010). Conversely, studies in US hospitals indicate that competition is crucial since it improves the quality of care provided while also controlling costs in the healthcare sector (Gaynor, 2006; Kessler and McClellan, 1999). Another advantage of competition in the healthcare industry is its ability to shorten waiting time, which is a result of less bureaucracy (Burgess, Gossage and Propper, 2003). On the other hand, there is evidence that competition in the healthcare industry affected the quality of care in a negative approach although the measure was only in terms of a selected outcome (Burgess, Gossage and Propper, 2003). In this case, the measure of quality in the study focused on death from acute myocardial infarction. However, an earlier study by Burgess, Green and Propper (2000) noted that increased competition of English hospitals might have had an adverse effect on the quality of healthcare in the UK’s National Healthcare Service system although by a small degree. In addition, competition in the healthcare industry may contribute to poor outcomes in the industry; duplication of costs, products, and services; and inefficiency in the approach of allocating resources to various elements in an organisation (Dash and Meredith, 2010). Strategies to Succeed in a Competitive Healthcare Marketplace Porter and Teisberg (2004) identified uniqueness as the most important strategy to succeed in the competitive healthcare marketplace. In this case, it is important to highlight the important role played by creating unique products and services that added unique values to clients. Peterson (1988) supported this strategy by indicating that various healthcare organisations competed in an approach that led to duplicity of products and services without any unique services and products on offer. On the other hand, transparent pricing and elimination of bureaucracy in the healthcare system is crucial strategy to survive in the competitive marketplace (Morrissey, 2001). In this case, organisations should make their systems easy to use and price them in a clear way that eliminated ‘hidden charges’ in order to attract more clients and maintain the clients. Impact of Competition on Quality, Safety, and Cost Competition in the healthcare system affected the quality, safety, and cost in different perspectives as advocated by various researchers. On one hand, various researchers posit that competition does not have an effect on the cost of healthcare. Porter and Tiesberg (2004) observed that the costs in healthcare kept on rising despite competition and the strategies that aim at reducing the costs. In support of this argument, an earlier study by Enthoven (1993) identified competition in the healthcare system as an approach that had failed to lower the cost in the healthcare system. Hence, increased competition in this sector ensured costs remained high due to investment in high technology that was expensive with clients tending to favour high technology instead of lower costs (Rivers and Glover, 2008). On the other hand, increased competition had an effect on the quality of services provided by organisations. In most cases, the quality of services offered was high due to the increased cost resulting from the investment in new technology and innovations (Fleming, 1992; Flood, Shortell and Scott, 1994). Significantly, competition compels providers to increase value to customers as they provide healthcare facilities (Teisberg, Porter and Brown, 1994). Importantly, it is crucial to point out that the safety of patients has improved overtime and competition has been one of the factors that have necessitated the increase in safety. Discussion Overall, despite the notion that competition reduced the cost in healthcare, it is evident that this is not the case since the cost of healthcare has been on the rise. However, it is evident that competition has allowed organisations in the healthcare to be unique and integrate advanced technology in their systems in order to offer innovative products and services. Importantly, clients in the healthcare industry are not attracted to the cheaper cost, but to innovative services and technologies in various organisations. Hence, an organisations in the healthcare industry can use competition to integrate modern technology in their operations and consequently promote quality of care, which is important than the cost of care given. Porter and Teisberg (2004) argued about the important role of accessibility to information as crucial strategy for succeeding in the competitive healthcare industry. In this regard, providers should provide customers with the information that they required in order to make informed decisions regarding the choice of the healthcare system they wanted (Chassin, 1997). In effect, healthcare organisations can maintain a competitive edge in the healthcare industry in this effective way. For example, insurance providers should provide updated information about the services that they offered in the industry to enhance the decision making of a potential customer to embrace the products. Conversely, another fundamental strategy that aims at improving the competitiveness of an organisation in the competitive healthcare marketplace regards the ability to ensure that customers had a wide range of choices to select the best alternative (Porter and Teisberg, 2004). Conclusion Based on the foregoing, it is evident that organisations in the healthcare system compete in the aspects of quality, cost, technology, and innovation. However, it is palpable that increased competition does not have a bearing on the costs of services and products since organisations invest in expensive technology and innovations that do not reduce the cost of care. Conversely, it is crucial to point out that healthcare clients tend to favour organisations that used advanced technology instead of those that offered cheap services and products. With regard to the strategies, uniqueness of the services and products that an organisation offered is crucial in determining whether the organisation attains and maintains a competitive edge. Conversely, accessibility to information and providing a variety of choices to customers ensures that an organisation remained competitive. Despite the ability of healthcare providers to duplicate prices, products, and services, it is important to point out that competition is crucial since it allows for innovations in the healthcare industry and the consequent provision of quality products and services. References Bloom, N., Propper, C., Seiler, S. and Reenen, J. V., 2010. The impact of competition on management practices in public hospitals. National Bureau of Economic Research, working paper number 16032. 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The relationship between quality and cost: pure and simple? Inquiry, 28, 29–38. Flood, A. B., Shortell, S. M. and Scott, W. R., 1994. Organizational performance: managing for efficiency and effectiveness. In: S. M. Shortell, A. D. Kaluzny, eds. Health Management. 1994. Albany: Delmar Publishers. Gaynor, M., 2006. What do we know about competition and quality in health care markets? Centre for Market and Public Organisation (CMPO), working paper number 06/151. Greenberg W.,1991. Competition, Regulation and Rationing in Health Care. Ann Arbor: Health Administration Press. Harris, I. C. and McDaniel, R. R., 1993. Untangling healthcare competition, health care managers must recognize the three-dimensional nature of competition. Health Progress, 30, 20–23. Kessler, D. P. and McClellan, M. B., 1999. Is hospital competition socially wasteful? National Bureau of Economic Research, working paper number 7266. Morrisey, M. A. 2001. Competition in hospital and health insurance markets: a review and research agenda. Health Services Research, 36(1), 121–191. Peterson, K., 1988. The Strategic Approach to Quality Service in Health Care. Rockville: Aspen Publishers. Porter, M. E. and Kaplan, R. S., 2011. The Big Idea: How to Solve the Cost Crisis in Health Care. [online] Available at: [Accessed 5 January 2013]. Porter, M. E. and Teisberg, E. O., 2004. Redefining competition in health care. Harvard Business Review, 82(6), 65–72. Nickell, S. J., 1996. Competition and corporate performance. Journal of Political Economy, 104(4), 724–46. Rivers, P. A. and Glover, S. H., 2008. Health care competition, strategic mission, and patient satisfaction: research model and propositions. Journal of Health Organisation Management, 22(6), 627–641. Teisberg, E. O., Porter, M. E. and Brown, G. B., 1994. Making competition in health care work, incentives throughout the health care system are so skewed that the normal rules of competition do not apply. Harvard Business Review. 131–141. Read More