Competition is Really Good for Healthcare

The author rebuts an earlier commentary by Dr. Leigh Dolin published in the Lund Report.


OPINION --Dr. Leigh Dolin’s argument for a single-payer healthcare system would be convincing but for two factors. First, given the rampant recalcitrant Republican resistance to the Affordable Care Act — even after it passed the Supreme Court’s scrutiny — it seems highly unlikely that a system which largely eliminates for-profit payers and providers would ever garner serious consideration in the U.S. Second, true competition between hospitals and physician groups based on outcomes for specific conditions has rarely been attempted.

I am not offering an argument either for or against single-payer healthcare. The potentials for enormous savings and universal health insurance coverage outweigh the drawbacks experienced by other systems like Britain’s National Health Service. However, other options can be more realistically implemented and may be congruent with the Affordable Care Act.

Competition in healthcare has the potential to improve quality while reducing costs without disrupting the reforms now being implemented. Unfortunately, competition has been mistakenly equated with performance measures, which in turn have been assumed to result in improved healthcare quality.

Dr. Dolin noted that pay-for-performance programs have not produced evidence of improved patient outcomes. But better outcomes should not be the result of competition; improved outcomes should be the basis upon which providers compete with each other. Paying providers more as an inducement to conform to practice guidelines is like giving a teenager $100 as an inducement to behave well while the parents go away for the weekend. When outcomes data is readily available, excellent providers will earn more by driving patients and payers to them because they deliver more value.

For example, if I had to have a CABG (coronary artery bypass graft surgery), one of the most frequently performed surgical procedures in the United States, where should I go to ensure the best outcome? The information is available but not easy to find. I suspect more people research a new car purchase than investigate the best cardiac surgeon and hospital. Do candidates for this procedure ask about — or do physicians offer — data on providers with the lowest mortality and morbidity rates?

How many people know that the volume of surgeries performed is inversely proportional to the mortality rate and make their decisions accordingly? And, as it is reasonable to assume lower mortality and morbidity rates equate to lower costs, do payers contract with quality providers or merely seek to negotiate deeper discounts with any provider who meets a minimal standard?

In my own field, spine care, consumers must choose from a supermarket of services and, for most services, there are no price tags on the shelves. This is tragically ironic because there are at least a dozen evidence-based guidelines which largely agree on the types of interventions likely to produce the best results for acute low back pain, but many providers do not follow any guideline, thus increasing the likelihood of a poor outcome. The number of failed back surgeries and patients with chronic pain have continued to increase as a result.1

True competition in healthcare requires mandatory measurements and reporting of patient results. Recognizing value in healthcare, defined as the health outcome per dollar of cost expended,2 will bring patients and payers to excellent providers, improve quality, and lower costs.

Implementation of the Affordable Care Act may be the beginning of competition based on value, but its success requires that consumers — patients and payers — demand transparency and that providers pay more attention to outcomes than incomes.

J. Michael Burke has been a practicing chiropractor in the Portland area for 30 years and is now affiliated with the Aspen Grove Wellness Center located in Beaverton.

1 JAMA, February 13, 2008—Vol 299, No. 6

2 Redefining Health Care by Michael Porter and Elizabeth Tiesberg, Harvard Business School Press, 2006.


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Leaving aside the feasibility of a universal healthcare system Dr. Burke makes some excellent points. The single most remarkable characteristic of the current healthcare system in the US is the high per unit costs of treatment (as well as the rate of cost inflation). In other words everything we do - from colonoscopies to hip replacements, x-rays to prescription meds - costs more than anywhere else in the world, and is increasing at a rate many times the Consumer Price Index (of all other goods and services) or GDP growth of the rest of the economy. This is rather odd, given that we have the most "privatized" system of healthcare among our peer group of developed economies. One would expect the exact opposite - competition should be driving costs lower and continued innovation working to keep costs down (for example, think of the price of last laptop computer you bought compared to your first). To the average economist this would signal that something is very wrong with the marketplace for healthcare goods and services. And Dr. Burke puts his finger directly on it: price transparency and provider networks. Moreover the two are linked, for the simple reason that the "price" that a providers actually gets paid for a service (as opposed to the "billed", or listed, price) is usually determined by the provider's contract with your insurer. Believe it or not, these prices are considered by insurers to be proprietary trade secrets! In fact providers are _contractually prohibited_ from sharing this information. This causes patients and employers alike to have no idea what a procedure or service actually costs, and completely masks price transparency, which any functioning market requires in order to allocate resources efficiently and rationally. Provider contracts further compound the problem by acting as barriers to true competition. My practice may be better, faster and cheaper than the one down the street, but if I'm not in your network of providers (i.e. haven't agreed to give your insurance company deep discounts to my billed rates) you effectively have been barred from coming to me. This is blatantly anti-competitive. And what about those cost savings that insurers supposedly wring from providers in the form of discounts to services? They sure don't seem to be showing up in the form of lower insurance premiums. If we are going to have a privatized healthcare system (unlike the rest of the developed world, but then again we do like to do things our own way), then let's have a real market-driven system without the distortions and blatant market manipulations Dr. Burke so accurately identifies.

Dr. Burke sees the Affordable Care Act as “the beginning of competition based on value”. But with that statement, he misses the point of my opinion piece. The current system of competing health plans, which is continued under Obamacare, is competition based on profit. Of course, patients want value, but until the profit motive is removed, health insurance plans will do their best to mislead patients in order to maximize their bottom lines. And I am getting very tired of the argument against single payer insurance that it is “unlikely”. If all those who recognize that a single payer plan is the best approach would stand up for what they believe in, it would instantly become much less unlikely. Leigh Dolin