Thursday, March 18, 2010

Quality Competition in Health Care by John Goodman

An interesting article discussing the market's effects on health care where government intrusion is not a factor.

Most providers don’t compete for patients either on price or on quality. Since out-of-pocket payments by patients are well below the true cost of their care, demand exceeds supply and services are rationed by waiting — just like in Canada. In such an environment, quality improvements do not increase provider income and quality degradation does not decrease it. That’s why so much of the health care system resembles the Department of Motor Vehicles.

In some specialized markets, however, providers actively seek more customers, often advertising directly to patients — on TV, in magazines, etc., sometimes in other cities and sometimes nationwide. For example, New York’s Mount Sinai Medical and Memorial Sloan-Kettering and Massachusetts General in Boston are all aggressive advertisers on cancer care. In these markets, third-party payment significantly exceeds the marginal cost of care, and supply often exceeds demand.

Providers in these markets typically compete for patients based on quality. They need patient-pleasing services in order to attract their clientele in the first place and to retain them as ongoing customers. And their activities raise an obvious question: Why can’t we have quality competition system-wide?
Read full article here.

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