Sample Essays: New Market Opportunities for Health Care Providers

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One of the new trends practiced recently by some health care providers is consumer-controlled health care system. The advantages of such practice include the provision of competition-driven, affordable, accessible and quality medical services. As opposed to managed care technocrats, who deny access to health care for the purpose of reducing costs, consumer-controlled health care system will allow many Americans to receive necessary care at affordable price (Coddington, 1997). This opens many new market opportunities for health care providers.

One of the recent developments in the field of health care services is the breakthrough in drug therapies and diagnostics that are occurring at a rapid pace. With these innovations we have now entered the Biotech Era with its numerous ethical and financial opportunities. Along with innovative development of medical treatment there is a strong integration of health care and new information technologies. Internet has already influenced the way many consumers purchase pharmaceuticals, receive diagnostics and access health information.

According to some projections fifty million Americans will use Internet for retrieving health care information in 2005 (Herzlinger, 1999). This trend called telemedicine will allow health care providers and niche players to use wireless technology and information industry for enhancement of production and supply. The consequences of such enhancement will produce cost-benefits, transfer the technology to wider markets and shift the provision of health care services aware from traditional models. The demand for telemedicine will require consumer-controlled environment. The leaders of the market may change depending on whoever will be able to predict and follow further market trends. The market-driven health care is not only beneficial for innovations in medical and technology fields, but it will also provide more Americans with an opportunity to receive affordable health care services and give them integrated, supportive and convenient systems that would allow to ease the aching backs and sore feet and provide required treatment for chronic diseases.

Vertical and Horizontal Integration of Health Care Services

The extent of integration between health care providers greatly influences the competition dynamics of the industry (Zuckerman, 1999). For example, in case of horizontal integration, where mergers take place, the amount of competition is greatly influenced by the reduced number of firms and changed size of market players. In case when health care firms are integrated to some degree with the help of such mechanisms, as system membership, it is considered that sellers of competing services and products also experience horizontal integration. Vertical integration can also affect competition by merging or integrating services between their producers (Zuckerman, 1999). For example, the dynamics of competition will change when integration of a health plan and a hospital impacts the relationship between the hospital, which is in the merger, and other health plans, which do not belong to the merger.

While measuring the advantages and disadvantages of types of integration, it is important to note that some previous attempts and their failure can not serve as solid evidence for conclusion. In case with horizontal integration we can see that the effective number of competitors is reduced, while the measured sizes or number of competitors is not affected. Therefore, it is important that in these numbers efforts are taken to count the number of effective competitors. Other efforts could be directed at interacting measures of horizontal integration degree with measures of competition. From this point, considering the specific circumstances, vertical integration may not necessarily be the central, although measurement efforts should consider it, since the importance of vertical integration is increasing. For example, one of the important outcomes of vertical integration is change of the products on the market. In this case merged physician group or hospital sells contracts for complete hospital care instead of selling health care services separately to health plans. This can result in introduction of the new product on the market, while vertical integration itself can produce the entirely new market with different amount of competition (Dougherty, 1996).

Federal Regulation and Provision of Health Care Services

Government regulation is another important factor that may potentially affect the competition. For example, the ease of entry can be reduced by licensure requirements, while activities undertaken by insurers can be restricted by premium regulations. Therefore, there is a big difference between competition in unregulated areas and competition in highly regulated environments (Gordon, 1980).

Both state and federal requirements are imposed at health coverage. Although the state was traditionally responsible for regulation of insurance, there are yet two entities that provide this service: 1) state-licensed state plans; and 2) self-funded (federal) health plans. Therefore, private health coverage is regulated by a number of federal laws, including ERISA and HIPPA. ERISA was launched in 1974 in order to protect workers from losing the benefits provided through the workplace. HIPPA was launched in 1996 in order to ensure that workers do not experience lapses in coverage when they change their jobs (Annas, 1998).

Federal law supervises the operation of self-funded health plans. Self-funded health plans represent the health benefit arrangements that are a subject to sponsorship by employee or employers organizations. According to self-funded arrangement, the responsibility to pay for plan participants’ health care is imposed upon employer (Annas, 1998).

There is no mention in ERISA requirements as for employers’ responsibility to create the employee benefit plan; however, it provides applicable requirements for administration of the plan. These requirements contain reporting and fiduciary standards, requirements for disclosure, claims and continuation coverage (Annas, 1998).

References:

  1. Annas, George J. (1998) Some Choice: Law, Medicine, and the Market. Oxford Press.
  2. Coddington, Dean C. & Moore, Keith D. (1987) Market-Driven Strategies in Health Care. Jossey-Bass.
  3. Dougherty, Charles J. (1996) Back to Reform: Values, Markets, and the Health Care System. Oxford Press.
  4. Gordon, Richard S. (1980) Issues in Health Care Regulation. McGraw Hill Text.
  5. Herzlinger, Regina E. (1999) Market-Driven Healthcare: Who Wins, Who Loses in the Transformation of America’s Largest Service Industry. Perseus Book Group.
  6. Zuckerman, Alan M. & Coile, Russell C. (1999) Competing on Excellence: Healthcare Strategies for a Consumer-Driven Market.

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