The Health Care Industry in the United States - Coursework Example

Health Care - USA 04 November Introduction The health care industry in the United s is a really big industry to the tune of $2.5 trillion annually. It is also very complex with a tangled web of relationships between patients, health care providers like doctors and nurses, primary provider organizations, non-profits and for-profits hospitals, clinics, specialized care facilities and major private corporations like the insurance and pharmaceutical companies. No matter at what level of technology development, a key factor in the health care industry is that it is also very labor-intensive in all aspects. The field of medicine is very wide indeed and continuing changes brought about by knowledge, an inevitable need to adopt new medical technologies and new ways of delivering health services has kept this large industry in a constant state of flux. Among the major industrialized Western countries, it is only the United States that has no national health plan or what is euphemistically termed as socialized medicine. The recent passage of the Patient Protection and Affordable Care Act in early 2010 is a right first step in the direction of providing affordable but high-quality universal health care. The United States health care industry is characterized by three factors, namely: limited consumer access (with an estimated 47 million without any health coverage at all), inconsistent quality that is based more on cost containment rather than creating value and uncontrolled costs for everybody. A situation like this gave rise to maintenance health organizations (HMO) because they provide a good business model anchored on four principles which are pre-paid medical services, the group medical practice, preventive or defensive medicine and the delivery of the whole set of medical services under one roof only (Boyer 1), sort of a one-stop shop concept. Discussion In addition, the US health care industry has not adequately addressed the duplication and wasteful use of resources in certain areas of medical services while not providing for the essential services in some basic areas. In other words, there are gross distortions within a very system that is competing on the wrong grounds. US health care is largely a private enterprise and as such the competitive market in which it operates has not resulted into either lower cost or higher quality. The intense competition for buyers and consumers of health care services is becoming unhealthy with an emphasis on cost containment rather than delivering true value to its stakeholders (Porter & Teisberg 1). More importantly, Prof. Porter is of the view that health care can be improved if hospitals, clinics and preferred primary providers (PPO) will focus on just a few competencies on key specialized areas. This approach is expected to result in great improvements overall such as higher efficiency, economy and effectiveness. In other words, the current business paradigm of offering all types of medical services is not the best way to deliver health care and is even counter-productive in the longer term. It is advocated that health care providers adopt specialization so they will acquire the expertise and experience that will lower the cost and improve the quality. It is called as distinctiveness. In ordinary marketing parlance, this is called as a differentiation strategy in health care. Because the US health care industry is largely a private endeavor, it is experiencing a radical change in terms of reforms that are essentially market-driven and not what many have perceived as policy-driven due to the governments intervention (Sultz & Young xviii). There are many variants to the traditional health plans and one example are consumer-driven health plans (CDHP) which is a combination of a flexible savings account, an IRA and a 401K types of health savings account (HSA) or health reimbursement account (HRA). However, an issue here is affordability as these plans have high deductibles or upfront costs (Glabman 8). The primary reason for a hospital merger within a certain area is complementarity of their services. Additionally, a merger allows for efficiency of scale and helps effectiveness in the rendition of medical care services. Hospitals are facing a variety of challenges such as the increasing costs of health care, difficulties in obtaining financing, ensuring health care access to all, the shift in demographics towards more elderly patients and shortages in doctors and nurses and other allied health personnel (Snyder 1). Other reasons may include “power to the buyer” in which enlarged market share allows for greater bargaining leverage when it comes to negotiating with the sellers of health insurance (Schlossberg 216) and as a simple matter of survival during the current economic downturn (Kastor 1). It can be said the main reason for hospital mergers is economics and a driving force is due to the burgeoning share of managed care today. Hospitals had gone a long way from their early beginnings as halfway houses for the sick, destitute, mentally-ill people and the orphans. Today, billions of dollars flow into the hospitals from health insurance companies which was started by Blue Cross during the Great Depression in the 1930s and followed by other firms (Sultz & Young 73). In other words, there is big money in hospitalization admissions because a big constraint had been removed with regards to hospital costs. The presence and ability of health insurers to pay for rising hospital costs made it easy for unrestrained reimbursements. The rendition of medical care services today is no longer patterned after that of the old days of independent physician private practice but now more as a corporate model in which a primary aim is to minimize overall health costs. Managed care performed under a corporation such as HMO and PPO eroded a doctor’s traditional independence and fee-for-service model. This loss of professional control also resulted into the loss of control for health care dollars but by merging their hospitals, health care practitioners hope to counteract the growing power of health insurance firms. They can demand for higher reimbursement rates for some surgical or medical procedures; health insurers would be more reluctant to reduce payments too. Hospital systems like the one in Albany, New York hoped to combine their operations and in the process deal with the changes in the health care industry particularly the continuous state funding cuts due to budgetary constraints and shortfalls (Pinckney 1). The three hospitals are St. Peter’s Health Care Services, Northeast Health and Seton Health. The increasing costs in hospitalization and medical care now require a new paradigm and this has resulted in the shift towards consumer-driven health plans in which patients use medical care services more appropriately as they now shoulder the upfront costs (Goldberg 1). Furthermore, the approval of the new Affordable Care Act will require the establishment of health plan exchanges within each state where health insurers will post their plans and compete for consumers. This will in effect result to lower-cost health plans and hospitals must be prepared to offer their services by correspondingly lowering their costs to match these plans but still improve their quality (Alonso-Zaldivar 1) because the new law is expected to cut into hospital profits. Conclusion The frenzy in hospital mergers, acquisitions, closures and downsizing could have an adverse impact on access to health care as some public health advocates warned (NYCLU 1). In particular, the groups are concerned about the merger of Catholic and secular hospitals in which women can no longer avail of the full range of reproductive health services because the Catholic hospitals prohibit contraception, abortion, tubal ligation, vasectomy and condom use. A hospital merger entails the marriage of two equal institutions under a shared license and these hospitals are usually located in close proximity to each other. A hospital acquisition, on the other hand, means the combining hospitals retain their licenses but are owned by the same group and managed by a common governing body (Cuellar & Gertler 77). As long as all hospitals give consumers value for their money, the health care reforms will have a beneficial effect on everybody although some experts caution it is too early to tell because a hospital’s strategy can vary to different levels of efficiency and how market power affects health plans. Works Cited Alonso-Zaldivar, Ricardo (2010, October 24). “Employers Looking at Health Insurance Options.” The Associated Press 24 Oct 2010. Web. 04 Nov. 2010 from: http://news.yahoo.com/s/ap/20101024/ap_on_bi_ge/us_employer_health_plans Boyer, Paul S. Health Maintenance Organizations. 2001. Web. 04 Nov. 2010 from Cuellar, Alison Evans and Paul J. Gertler. “Trends in Hospital Consolidation: The Formation of Local Systems.” Health Affairs 22.6 (2003): 77-87. Print. Glabman, M. “Taking the Pulse of Consumer-Driven Health Plans.” The Physician Executive Sept-Oct 1996:6-10. Print. Goldberg, S. E. “Demand Management: Implementing your Own Program.” American Academy of Family Physicians 1998. Web. 04 Nov. 2010 from: Kastor, John A. Mergers of Teaching Hospitals in Boston, New York and Northern California. Ann Arbor, MI: The University of Michigan Press, 2003. Print. New York Civil Liberties Union. “Proposed New York State Hospital Closures, Mergers and Downsizings Could Endanger Women’s Health, Groups Warn.” NYCLU 28 Nov. 2006. Web. 04 Nov. 2010 from: Pinckney, Barbara. “Three Health Care Systems Sign, Flesh Merger Agreement.” The Business Review 22 June 2010:1-2. Web. 04 Nov. 2010 from Porter, Michael E. and Elizabeth O. Teisberg. “Redefining Competition in Health Care.” Harvard Business Review June 2004:1-14. Print. Schlossberg, Robert S. Mergers and Acquisitions: Understanding the Antitrust Issues. Chicago, IL: American Bar Association, 2008. Print. Snyder, Alison. “Nassau-Suffolk Hospital Council’s New Board of Directors Chair.” Long Island Business News 1 Aug. 2008:1. Web. 04 Nov. 2010 from Sultz, Harry A. and Kristina M. Young. Health Care USA: Understanding its Organization and Delivery. Sudbury, MA: Jones & Bartlett, 2010. Print. Read More