In the free market American economy, we typically rely on competition to hold down costs while improving quality.
For some purchases, cost is paramount, and we search for bargains. In other cases, quality drives our decision; we look for the best homebuilder or the appliance with the best warranty.
But health care is not a commodity. Patients can’t go to Consumer Reports to choose a hospital as they would for a new refrigerator. Even if they could, the urgency of their illness sometimes precludes advance research.
Increasing consumer welfare
In the health care industry, how critical is competition to improving quality while holding down costs? Those of us who work in this industry have no doubt that Americans enjoy the best health care in the world. We come to work each day committed to making it even better.
A recent report issued by the Federal Trade Commission and the Department of Justice (“Improving Health Care: A Dose of Competition,” July 2004) examines the role of competition in addressing the health care industry’s three most pressing challenges — cost, quality and accessibility. Key factors addressed in this report include:
* Cost. In 2002, 31 percent of the $1.6 trillion spent in the United States on health care went to inpatient hospital care. That’s a significant drop over the past 20 years, as hospitalization rates and length of stays have declined.
By contrast, the percentage of gross domestic product spent on health care has increased, due both to rising costs — largely the result of new technologies –and increased use by an aging population. Competition compels hospitals to constantly examine the cost of care and eliminate unnecessary expenses whenever possible.
* Quality. Different audiences have different perceptions of what drives quality. Is the medical outcome most important, or is it the caring manner and comfort of the facility?
For those in the industry, it’s all of those things. Perhaps the Agency for Healthcare Research and Quality defines it best: Quality is “doing the right thing at the right time in the right way for the right person and having the best results possible.” Competition drives hospitals to continually strive to maintain or improve the quality of care.
* Accessibility. The issue of access will not easily be resolved any time soon. About 15 percent of Americans lacked health insurance at some point during 2002.
Every nonprofit hospital provides charity care to uninsured patients. But our nation as a whole will have to address this issue as the costs continue to rise and uninsured Americans suffer health consequences due to lack of access, especially for routine, preventive care. Shouldering a disproportionate level of charity care unquestionably puts a hospital at a competitive disadvantage and does not serve the community well in the long run.
What does this mean locally?
Over the past generation, the delivery of health care has changed dramatically. Before the advent of managed care, health care networks and outright mergers and acquisitions, patients chose their hospital based on the guidance of their trusted physician.
That guidance, along with proximity or perhaps religious affiliation, often were the only factors considered. News magazines didn’t publish rankings, and hospitals didn’t publish newsletters describing their breadth of services.
With this study, the FTC and Justice Department confirm that, in today’s market, competition “promotes the delivery of high-quality, cost-effective health care.”
In Northeast Ohio, we are fortunate to have vigorous competition. Even though competition won’t solve all of our health care problems, we agree with the report’s overall conclusion: “The fundamental premise of the American free-market system is that consumer welfare is maximized by open competition and consumer sovereignty — even when complex products and services such as health care are involved.”
We see the benefits of that competition every day here in Northeast Ohio. We believe that it makes all of us better at what we do, and makes our community stronger and healthier.
Cathy Ceccio, RN, MA, MSN, is executive vice president and chief operating officer of Akron General Medical Center. Reach her at (330) 344-6000 or via the Web at www.akrongeneral.org.
