Health Care Competition


Majority of markets is left for consumers to decide the quantity and prices that prevail. In this case, the government plays a limited role in regulating the markets. It is a typical scenario where competitors vie to satisfy the market demand while the consumers decide among the varieties of bundles because of the differences in prices and quality. Competition in a market guarantees optimal utility for the consumer privy to perfect market information. Various forms of competition common in the healthcare industry are categorized into two main forms: price and non-price competition.

Forms of Competition

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Price competition normally results from offering similar quality of Medicare at different prices by different healthcare providers. Price competition is the common form of rivalry in the healthcare industry. Borrowing from the law of demand, consumers tend to order more services offered at low prices compared to expensive services. Competitors in the healthcare industry use this tactic to compete effectively among themselves by lowering their prices over any other player. This form of competition favors large-scale healthcare providers because of the benefits of economies of scales (Greenberg, 2002).

Non-price competition compounds the various forms of competition in the healthcare industry. First, competitors in the industry invest in enhancement of quality in their packages to drive weak providers outside the market. For instance, some hospitals employ experienced healthcare personnel with reputable educational backgrounds. Additionally, a hospital that invests in quality healthcare provision can employ enough attendants to reduce time delays in serving customers. Such hospitals attract more clients compared to those with doubtful accreditations and capacities.

Second is geographical competition, another non-price competition common in the healthcare industry. Hospitals create rivalry in the provision of Medicare by looking for optimal locations as a way of maintaining market dominance in a given place. Hospitals enjoying locational economies of scale have higher chances of competing over those in disadvantaged locations. Therefore, healthcare institutions in strategic locations experience influx of patients because of their accessibility and low costs incurred to utilize their services. Hospital providers, like other businesses, compete for location advantages to safeguard an enabling competitive position (Scanlon et al., 2008).

Benefits, Pitfalls, and Alternative to Health Care Competition

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Proper, Burgess, and Green (2004) identify various effects emanating from competition in Medicare provision. However, there is consensus among different stakeholders that competition influences healthcare both negatively and positively. Competition among different actors in the healthcare industry is of essence in many ways. It increases chances of innovation leading to augmented quality of drugs and services. Competition by medical providers forces each player to devote more in the manufacture of superior drugs and services, which will increase the number of clients seeking their services. It also reduces the hustles of accessing branded drugs that are usually expensive. Availability of cheap generic drugs replaces the need to scramble over limited and expensive branded drugs. It reduces the overall cost of accessing medical services in different healthcare providers. Another benefit of increased competition in the healthcare industry is reduced pain and side effects when efficient treatment methods are used. In a bid to woo more clients in a competitive market, healthcare providers invest in innovation to come up with new ways of treating patients, and with considerable satisfaction. Thus, competition can remarkably transform the quality of healthcare because it has power to determine the levels of service delivery across the industry. However, in the absence of competition as a prime driver in Medicare, government’s regulation will streamline any standstill experienced in the sector.

On the other hand, increased competition in the healthcare industry changes the focus of medical providers from patient centered to profit maximization. This poses a significant danger in medical practices once profit concerns are of priority than the patients’ needs. As a result, competition may put the health of a patient a risk as providers shift attention to streamlining operations and expanding sales. Secondly, competition has a tendency of duplicating medical services offered to patients leading to increased cost of Medicare provision. Duplication of medical services increases the overall cost of that service because there are possibilities of over capacity. For instance, specialization of hospitals in the provision of a given service may reduce the overall cost of providing that service. Therefore, specialization becomes almost impossible under competitive environment making it entirely difficult to take advantage of economies of scales (Greenberg, 2002).

Essence of Competition and use of Competitive Intelligence

Competition in the healthcare industry is of utmost importance because it minimizes potential weaknesses of the public healthcare controlled by the central government. Private firms’ participation in health spurs development leading to enhanced patient care. However, various challenges face firms in the competitive industry. The solution to the challenges lies on a firm’s competitive intelligence. Competitive intelligence allows different players in a competitive environment to strategize on the ways of countering their competitors in an attempt to maintain lead in a sector. Therefore, U.S (United States) healthcare system needs to accommodate healthy competition to boost national health. In addition, proper competition reduces the overall cost of providing Medicare in U.S (Greenberg, 2002).

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Influence of Competition on Health Service Provision and Patient Choices

Greenberg (2002) asserts that competition in the healthcare sector enhances the quality of healthcare in the U.S. In addition, competition reduces the cost of medical provision because innovation favors the use of affordable medical services that are of high quality. On the other hand, enhanced quality of medical services offered at lower cost creates rivalry among medical providers leading to availability of various services. As a result, patients benefit from the accessibility of numerous bundles to choose. This increases patient choices leading to contentment from a preferred medical package. It is apparent that competition gives a patient the opportunity to decide the services that offer them high quality at low cost possible.

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