Coordination vs. Competition in health care: remember the patient!

by Joshua Freeman, M.D.

Two of the most prominent policy recommendations for improving health care in the U.S. have been increasing coordination of care and competition. Both have very positive aspects, but also have very real pitfalls. 

Coordination of care sounds like a no-brainer. Everyone would like the physicians caring for them in one setting (e.g. in the hospital, in a specialist’s office, or in a rehabilitation facility or nursing home) to know what has been done for them previously, what the results were, and what their previous providers thought. At minimum, we want to think that there is communication, and that often expensive laboratory tests and x-rays are not repeated because our current provider cannot access those done somewhere else. In addition, coordination of care should mean that care is delivered in the most appropriate setting, and that when we move from one setting to another, it is for medically-necessary  reasons, not because the move makes more money for the providers or facilities.  

Competition in health care also has value if it prevents artificially inflated charges and costs, just as it does in other parts of the marketplace. This may be most obvious in price-sensitive elective care, such as the Lasik and contact lenses cited by Sen. Rand Paul. (1). But is most important when absent and prices rise, as in the case of hospitals with a lock on a local market. While business leaders often extol the benefit of competition, all prefer to have a monopoly on the market, or at least be one of only a few players in a market that often colludes on pricing to maximize profits. 

So both coordination of care and competition can be beneficial in the health care marketplace. But what about when they are in competition with each other? A recent article in the New England Journal of Medicine addresses this question. Its authors, Katherine Baicker and Helen Levy, point out that despite the potential benefits of care coordination and its older cousin, consolidation, it can be anti-competitive. Some health care consolidations have been investigated by the Federal Trade Commission for this very reason. (2) The problem is not an ideological commitment to competition, it’s the results: the merger of two hospitals providing similar care raises prices, as does movement of care from low-cost venues such as doctors’ offices to higher-cost (and reimbursement) venues such as surgi-centers and hospitals. 

Health information technology is a prime example of the tension between coordination and competition. Heavily pushed and subsidized by the federal government as a way to improve coordination of care, it can in theory promote both, but only if implemented well. An interoperable health information technology (IT) environment could do both. But health IT without interoperability may simply lock patients into their current providers or provider networks by making it difficult or costly to move their records, thereby reducing competition. The opportunities for a win-win are limited. Most providers who use EMRs will acknowledge their advantages‚ at least within their system, but complain about the huge amount of time it takes to enter data. Moreover, many large systems have bought the components of systems that facilitate billing, but often not those that offer great patient care advantages. Interoperability is hard to find. There are many communities around the country where competing hospitals, (even when using the same IT system!), have them customized to their own institution without ready access to competing hospitals.  

Market forces driven by consolidation, market share and profits are often in conflict with the best interests of patients in terms of access, choice, costs and sometimes quality. This is where physicians are often right when they talk about meddling by bureaucrats. 

The issue is, however, that the policies adopted by Medicare and private insurers (often quite different) are indirect. They attempt to influence both the quality and cost of care by financial incentives or disincentives. This permits, indeed encourages gaming of the system, trying to maximize income while minimizing costs and ignoring the impacts on patients.

Instead of giving market forces a free hand to develop health care markets in their own self-interest, these approaches could explicitly encourage cost-effective care of high quality: 

  Coordinate care, but block monopolies.

  Encourage consolidation between organizations providing complementary rather than the same services. 

  Do not pay increased costs because a system has a monopoly.

  Demand that health IT systems be interoperable. 

  Follow evidence-based treatment approaches. 

  Measure quality outcomes that control for severity of illness and the

 socioeconomic risk factors of patients.

A single-payer health system, Medicare-for-all, could have the clout to rein in the present excesses of an unfettered health care marketplace pursuing its own self-interests over the primary needs of patients and their families. It could also help to resolve the tension between coordination of care and competition. Within a single risk pool for the country, all parts of the private sector could compete on a level playing field. Those offering the best access to services and products of high quality would win. 

That would be win-win for all of us. If we are all in, and if even the most privileged have to use the single-payer system, that will protect the interests of the most vulnerable better than any form of competition that allows private companies to opt out of covering them, and puts the poor, sick and old in a separate system in which others do not have a stake.

That would be evidence of a core commitment to social justice.

Suggested Reading:

  1. 1. Freeman, J. Rand Paul on  health policy. Health Care Disconnects blog, October   , 2013.
  2. 2. Baicker K, Levy H. Coordination versus competition in health care reform. N Engl J Med 369 (9): 789-91, 2013.

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