Friday, July 03, 2009

Competition vs Competition

We Americans have a strong faith in the potential of competition as an inducer of higher levels of performance. We are less aware that competition can take different forms with correspondingly different results.

The June 21 issue of The Boston Sunday Globe included an article about competition between two health care providers in the Boston area. It seems that Beverly Hospital, a major north shore provider, wants to build a radiation treatment facility. Massachusetts has a Certificate of Need law in effect, so Beverly needs the approval of the state’s Department of Health to proceed.

That approval is being opposed by Partners, a Boston-based institution that recently opened a cancer center in the nearby town of Danvers. The center offers radiation treatment. Partners is arguing that its own facility is sufficient to serve the needs of the community and that the Beverly center would constitute an unnecessary duplication of costly services.

Partners – a merger of the Massachusetts General Hospital and Brigham and Women’s Hospital - is the biggest, most prestigious, richest, and most powerful provider of health care services in Massachusetts. Its market clout is such that it has been able to get health insurance companies to pay it higher rates than those paid to other providers in the area.

One would like to think that health care providers would compete on the basis of cost and quality. But that is not at present the case. As to cost, health insurance will cover services provided to the affluent residents of the north shore regardless of whether they get their care from high-cost Partners or lower-cost Beverly. Prestigious Partners is assumed to provide care of higher quality, though it offers no data to prove it and the assumption might well not be true.

So while Partners’ development of a cancer center in Danvers provided competition to Beverly, the result has been to increase the cost of health insurance in Massachusetts. The effect on the quality of care is not known.

Competition ought to be a good thing, but not the kind of competition that exists between health care providers in Massachusetts.

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