Is vigorous competition between providers of healthcare likely to be an effective part of our collective efforts to lower the cost of medical care? It would seem likely because there is nothing more fundamental to our American culture than our belief in the benefits of competition. Competition enters many of our lives in our early childhood games and almost everybody has had a taste of organized competition by the elementary grades, even as parents try to soften the downside with “participation awards” that give everybody a chance to feel good about their efforts. The jury is still out about how best to teach our children the benefit of competition or how to manage the pain of loss. Most of us believe that early competitive activities do seem to help us improve the focus and strategies necessary to achieve business and professional goals.
Competition is fun. My parents were not interested in sports. My mother wanted me to learn how to play the piano or the violin, but competition never was a part of her mentoring process although she was a “ruthless” Scrabble player. She did try to bribe me to practice piano and violin by offering little rewards like ice cream cones. She never had a chance because I was always preferred being outside competing with the other boys in the neighborhood, playing endless games of sandlot baseball, and cutthroat games of “tackle the man with the ball” on the school yard, or just wrestling in the grass to try to establish dominance. These days I am a sports spectator and get my “hands on” competitive fixes playing Scrabble, Words With Friends, and Mexican Train Dominoes!
Shamefully we have never passed the Equal Rights Amendment of the Constitution but we did pass Title IX which has enabled girls like my granddaughter to have an equal opportunity to have the advantages that sports may offer young women in preparation for a competitive future. Competition is as much a part of our culture as is capitalism. The two go hand in hand. It is easy to understand why we expect competition to be a major part of our effort to lower the cost of care. Competition has improved the quality of most consumer products and has lowered the cost of the many electronic gadgets that we use every day. It is easy to understand why we expected competition to be a major part of our effort to lower the cost of care. Why were we wrong?
The president’s flash of wisdom, “Nobody knew healthcare was so complicated,” may shed some light on why “competition” has not been an effective tool so far in the effort to lower the cost of care. The recent book, An American Sickness: How Healthcare Became Big Business and How You Can Take It Back, by Elisabeth Rosenthal, MD provides us several angles on the problem. Ironically the political process, regulatory agencies, the work of lobbyists, the influence of the AMA, and the unwillingness of the public to accept any change that might have unintended consequences when they need care, all have worked together to undermine the ability of competition to lower healthcare costs. As Jacob Hacker’s New York Times review of Rosenthal’s book notes:
…in every other rich country, the government not only provides coverage to all citizens; it also provides strong counterpressure to those who seek to use their inherent market power to raise prices or deliver lucrative but unnecessary services — typically in the form of hard limits on how much health care providers can charge.
In the United States, such counterpressure has been headed off again and again. The industry and its elected allies have happily supported giveaways to the medical sector. But anything more, they insist, will kill the market. Although this claim is in conflict with the evidence, it is consistent with the goal of maximum rewards to (and donations from) the industry.
The authors of the ACA recognized that effective competition requires price transparency that had not been present. How can a provider who wants to provide lower cost, higher quality imaging studies with no waiting times compete with a “branded” provider like a famous academic medical center unless consumers have the data necessary to judge whether or not the lower cost provider can adequately meet their needs? Martha Hostetter and Sarah Klein summed it up nicely in a Commonwealth Fund article they wrote several years ago.
It’s no secret that the U.S. health care market is unlike any other market: patients rarely know what they’ll pay for services until they’ve received them; health care providers bill different payers different prices for the same services; and privately insured patients pay more to subsidize the shortfalls left by uninsured patients. What’s more, prices for health services vary significantly among providers, even for common procedures such as laboratory tests or mammograms, although there’s no consistent evidence showing that higher prices are linked to higher quality.
For these reasons, consumer advocates as well as some employers and health plans are pushing for greater price transparency. They argue that if consumers realized that they could receive high-quality services from lower-cost providers, they would seek them out. This, in turn, could encourage competition among providers based on the value of care—not just on reputation and market share.
Competition is part of our culture, but so is the pursuit of advantage by dominating markets by leveraging government relationships and academic reputations to preserve institutional advantages. How often have health systems sought regulatory approval of consolidations, mergers, and acquisitions by implying that the new union will allow them to expand services and lower costs through more effective competition? As often as not a cynical observer would view those claims as cover for a strategy to ensure their ability to demand higher reimbursement for their services through their new market controlling advantage.
In most industries where there is real competition the managers are focused on production costs with an intensity that few healthcare organizations ever demonstrate. The goal is to set a competitive price that is a function of the cost of production because they know that price, plus their reputation for quality will draw consumers to them, and their sales and profitability will rise. That dynamic between production costs and price rarely exists in healthcare institutions despite the inroads into better understanding the cost of production and eliminating waste to lower the cost care that some practices have gained from Lean. It just seems easier for most providers to ask for more money from payers or increase the volume of services provided to the point that despite indifference to costs there is an acceptable margin that sustains the enterprise while the cost of care rises to the detriment of patients, their employers, and the economics of the community.
I have always been surprised by the lack of interest in the cost of care that seems apparent in the conversations and behavior of many clinicians. A charitable explanation is that they feel that their role is to provide excellent care, and the cost of that care is the concern of some other professional. Perhaps thinking about the business side of healthcare seems intrusive to their need to focus on practice, or a little shady or less professional than just focusing on the activities of practice. Ironically, in all my years as a healthcare leader, I could always count on a full house when I called a meeting to discuss physician compensation. A meeting for making the case for the links between cost, quality, service, and patient engagement as manifestations of our professionalism did not draw as large a crowd. It was amazing to me that so many “A” students who started so many conversations with reassurance about quality care being their most important professional concern were not able to understand that being concerned about the cost of the care we were providing was an equally important issue because cost at any level was important to our patients and our community.
I do believe that if we could restructure healthcare in ways that assured success for those organizations that were focused on maximizing access, quality, service, and cost by eliminating the 25% of what we do that adds no value, then competition could lower the cost of care in those markets where there are multiple competing organizations. Multiple competing medical organizations does not describe the state of practice in many places in America. Getting to a competitive market from places like the rural areas of Northern New England, large parts of “fly over America”, and many beautiful but thinly populated parts of the great northwest will require a long drive. Nevertheless, in these areas applying the same principles that will enable success in lowering the cost of care through effective competition where it exists can enable the control of the cost of care.
Don Berwick’s concept of the third Era of Medical practice, the “Moral Era,” is highly compatible with competition that will lower the cost of care. I believe that organizations that try to follow these recommendations will eventually succeed in a well regulated competitive environment.
- Reduce mandatory measurement.
- Stop complex individual incentives.
- Shift the business strategy from revenue to quality.
- Giving up ‘professional prerogative’ that undermines teamwork.
- Use improvement science, like Lean.
- Ensure complete transparency.
- Protect civility
- Hear the voices of patients and families.
- Reject greed.
Will it be possible for markets, as many members of Congress believe, to lower the cost of care and the expense that is imposed on individuals and society for care we need? That question is another way of asking “Are consolidation, competition, and innovation the answer?” Either way you ask, the answer is the same: “It depends.” Providing healthcare is a vast and complex process where the positive possibilities of the market, or consolidation, competition, and innovation, are dependent on making major changes to the overall structure and processes that are imbedded in the current dysfunctional system.
The Triple Aim is easy to quote but so far the will to lay the regulatory foundation necessary to make a real market solution possible has been consistently blocked by the loudest proponents of market solutions. We all find it easy to say that markets work differently in healthcare, but it has been impossible so far to find a bipartisan way to deliver on the concept that functioning markets and competition can lower the cost of healthcare.
The experience with the ACA underlines the fact that complex social legislation will encounter major resistance without bipartisan participation in its creation. Medicare and Medicaid were passed by a bipartisan process and the road to understanding and acceptance was still difficult. A single payer system where the role of government is to be the payer and regulator does not change the challenge. We still have miles to go on the road toward the Triple Aim. Competition is always more fun on a level playing field with a well described set of rules. Most games evolve over time. Those thoughts are reassuring because we have no other choice but to continue to try to play competitively.