Competition and healthcare

This article was first published by Medsuite on 31 December 2022. Please page through the Medsuite link to view the article.

Competition and healthcare

Competition is integral to the functionality of any market; not only is it integral to lowering costs for consumers but it also acts as a quality assurance mechanism. This phenomenon is no different in the healthcare market. Competition in healthcare is vital to ensuring broader access to health services and it also improves quality.

The healthcare market consists of four major stakeholders: providers, employers, payers, and patients. Competition is important in this industry and our understanding of it, ought to encompass all these stakeholders. There is competition among providers as physicians for patients. There is competition among organizations that provide healthcare like hospitals for patients, physicians, and third-party payers. There is then competition among third party payers, organizations like health insurers, medical aid schemes, or hospitals plans for patients/customers based on premiums and benefits.

There is research done by Patrick A. Rivers and Saundra H. Glover in the paper ‘Health care competition, strategic mission, and patient satisfaction: research model and propositions’, which shows the beneficial nature of competition in the healthcare sector. The model developed by these researchers showed how competition in healthcare is directly linked to the outcome of customer/patient satisfaction. More competition leads to more satisfied customers/patients, and better quality.

The case for competition in healthcare leading to overall better health outcomes like improved quality, although supported empirically as research will indicate, ought to be adhered to on principle because choice, which is a fundamental characteristic of a dignified human being, should be facilitated and encouraged in every sphere of life. In South Africa currently there is a level of competition among providers in their capacity as hospitals and physicians, whilst also existing competition among payers in their capacity as medical aid schemes and hospital plans.

The competition in our local healthcare sector is far from perfect. There are areas of improvement which are too plentiful to count some highlighted in the Healthcare Market Inquiry conducted by the Competition Commission. The nature of market competition though is that improvement is naturally baked into the system, since competitors are always looking for ways to distinguish themselves and attract more customers. In healthcare this will obviously motivate stakeholders to perform better or rather in a manner that will be most satisfactory to the customer/patient.

The process of competition which is constantly ongoing in the real world should be widened by eliminating legislative barriers in markets wherein concentration is identified. Instruments like the National Health Insurance Fund, which seeks to monopolize the market in funding, eliminating private sector third party payers and replacing them with the single payer that will be the state, will present even more problems than the ones caused by a market concentrated among a few players.

Politicians in South Africa have promised free healthcare and use that premise as the basis for arguing for the NHI funds existence. Yet currently there is public healthcare system that is effectively free for the poor at the point of use. Obviously, there is no such thing as a free service, rather services funded by taxes.

‘Free’ tax funded services are usually more expensive than they otherwise would be in the market, or much worse in quality. This fact insofar as quality is concerned, is borne out by the clear difference between public health facilities and private ones in South Africa. If a private health facility had a scandal – like the infamous Gauteng Department of Health ‘Life Esidimeni’ scandal – they would have been condemned for an eternity, and rightfully so. Yet government has horror stories like those at its facilities as a norm. The sheer incompetence of government at managing hospitals is borne out by the amount the department of health pays out as damages in medical negligence cases brought against it.

The situation in public healthcare is well documented. Competition from the private sector even at the level of funding, has meant South Africans have another option outside of the dignity stripping buildings, and the stories bear this out, that are public hospitals. Competition in this market from among funders to providers is crucial in giving South Africans a choice to have their health preferences satisfied, whilst the public health system is fixed to deal with its current obligations before more are added.

As important as healthcare is, this is no excuse for the enterprise to be monopolised by the state. There is an understanding even among legislators that monopolies are detrimental to markets. This understanding is demonstrated by legislation like the Competition Act, which prohibits abuse of dominance from enterprises.

This legislation is applicable even to commercial activity done by the state, and the Competition Commission must be commended in its work of having investigated and prosecuted anti-competitive conduct from some State-Owned Enterprises like Telkom and SAA. It can and should do more in this regard, but this shows that anti-competitive behaviour in the market by the state can be reined in. It cannot be that a solution to a concentrated market in health as was rightly or wrongly, identified by the Commission in its Healthcare Market Inquiry, is remedied by monopolising a certain segment (funding) of that concentrated market in the state.

As research has proven, competition is linked to customer/patient satisfaction. As such for that reason alone it should be encouraged at all segments of the healthcare market. Competition will also lead to the lowering of costs, thus furthering universal access to healthcare. The introduction of the monopoly that will be the National Health Insurance Fund should raise concerns among the competition authorities, given the detrimental effect of monopolies in general and be opposed by every citizen. Instead, broader, and wider competition in the healthcare market is something that we should all welcome and lobby for.