10 Cases of How Competition in Health Care Lower Costs and Raise Quality Outcomes

This lack of competition for patients has a profound effect on the quality and cost of health care. Providers typically do not disclose prices prior to treatment because they do not compete for patients based on price. Payments are usually not made by patients themselves but by third parties — employers, insurance companies or government. But according to Devon M. Herrick, Ph.D., a senior fellow with the National Center for Policy Analysis, in health care markets where providers do compete for patients, not only do prices come down, but outcomes improve.

February 27 2013 by ChiefExecutive.net


Patient Education for Drugs as a Product. DestinationRx.com is a pharmacy benefits management company. In addition to operating an online mail-order drug delivery service, it also offers a Web site to help patients identify low-cost therapeutic substitutes to the drugs they currently take. In addition, the firm is partnering with Safeway supermarkets to install drug comparison kiosks in store pharmacies.

Retail Clinics. Walk-in clinics in shopping malls and drug stores offer primary care services. They compete by offering low money costs and low time costs. In order to ensure a consistent level of quality, nurse practitioners follow computerized protocols, and EMRs are a natural adjunct of that process. Further, once an EMR system is in place, electronic prescriptions are a straight-forward next step. And electronic prescribing allows the use of error-reducing software. Thus, one study found MinuteClinics follow treatment guidelines better than traditional medical practices.

Telephone-Based Practices. TelaDoc now has two million customers — paying for something that is almost impossible to get from a conventional general practitioner: a telephone consultation. It offers patients access to a doctor at any time of day from any location. And because each on-call physician needs access to patients’ medical histories (and the treatment decisions of previous physicians), personal and portable EMRs are a necessary part of the company’s business model. The physicians prescribe drugs electronically — facilitating the use of safety-enhancing software that checks for harmful interactions. Concierge Medical Practices. Some innovative physicians are re-bundling and re-pricing medical services in ways that are not possible under third-party insurance. For a fixed monthly fee, they offer such services as price and fee negotiations for diagnostic tests and specialist services, patient education and more convenience and accessibility for primary care. Concierge physicians tend to relate to their patients in much the same way lawyers, accountants, engineers and other professionals interact with their clients — including phone calls, e-mail consultations and convenient Webbased services.

Medical Tourism. Increasingly, cash-paying patients are traveling outside the United States for surgery. Facilities that cater to such medical tourists typically offer: (1) package prices that cover all treatment costs, including physician and hospital fees, and sometimes airfare and lodging as well; (2) electronic medical records; (3) low prices that are often one-fifth to one third the cost in the United States; and (4) high-quality care in facilities (and by physicians) that meet American standards. Moreover, a new company, Healthplace America, has been formed to facilitate medical travel within the United States. It offers price and quality transparency for a network of 15 hospitals. Savings are typically 30 percent to 50 percent.

Third-Party Payer Innovations. Some entrepreneurs are adopting innovative practices within the third-party payer system. For example, American Physician House-calls treats Medicare patients with multiple health problems in their homes and assisted living facilities. Because each specialist needs to know how others are treating the patient, EMRs and the consequent coordinated care are a necessary part of the treatment model. If a senior is readmitted to a hospital, the company loses a paying client. Thus, it has a financial incentive to adopt the best medical practices as part of its business plan. What lessons can we learn from these examples of entrepreneurship in health care? The most important is that entrepreneurs can solve many of the health care problems that critics condemn. Public policy should encourage, not discourage, these efforts.

Read: http://www.ncpa.org/pdfs/st318.pdf