Competition: Blessing or Burden for Contemporary Businesses? - Essay Sample

Introduction

The contemporary business environment has been consistently conforming to stiffening competition in almost all sectors. Generally, experts have argued that competition is an avenue for organizations to invigorate the invention of new and improved products and services and engenders the adoption of technologies, strategies, and decisions that are critical in aligning firms to their goals thereby responding to market needs most effectively and efficiently. Despite this admissible argument, competition remains a topic of contention in the healthcare industry, including both health insurance companies and health care providers. While proponents hold that competition provokes better strategies and practices to address the unremitting inefficiencies in the healthcare industry, leading to improved care practices, opponents tend to argue that competition skews services towards profitability hence has no place in protecting the sick (Goddard, 2015). Despite the polarization of the role of competition in the industry, the benefits are self-evident. Competition has played a palpable role in improving healthcare quality and satisfaction, advancing public health, and reducing healthcare costs.

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The importance of competition in the healthcare industry is wide-ranging from providers to insurers. First, it creates an environment that bolsters clinical outcomes, and shifts care provision systems from practitioner-centric to patient-oriented. Research has shown that healthcare providers that operate in environments marked with high competition tend to offer high quality care services than those operating in areas with little competition (Dafny & Lee, 2016). Due to the need to remain competitive in an environment with numerous health providers, health providers are compelled to improve their care provision practices, level of technology, degree of expertise, and focus on the patient. A report on the healthcare market that compared a competitive segment versus uncompetitive segment revealed that patients admitted in hospitals located in areas with high trends of competition are less likely to die (Gaynor et al., 2013). Thus, intensifying competition is a potential predictor of better clinical outcomes.

Secondly, competition has a role in improving access to care, leading to improved care standards for larger populations. As competition within the healthcare-provision sector continues to intensify, more hospitals are likely to adopt expansion and market penetration as a strategy to increase their market share and bolster their competitiveness (Werner et al., 2016). As a result, an increasing number of healthcare facilities are being established in remote areas where access to healthcare services has been a challenging endeavor. Also, care providers adopt strategies and technologies that tend to improve access to care not only as a matter of increasing patient needs but also in responding to competitive strategies of their industry peers (De Silva et al., 2018). The intensification of services such as home-based care, telemedicine, electronic medical records, and cloud data storage is partially related to competition (Loughnane, 2017). Due to competition, an increasing number of care providers are concentrating on the quality of care they provide and their patients' satisfaction, which has dramatically reduced discrimination in the industry, leading to improved access to quality care.

Further, the intensifying competition in the industry has a potential impact on care costs and prices. Generally, care providers tend to commit more resources in acquiring high healthcare professionalism, equipment, machinery, and insurance plans to guarantee high quality services to their patients (Loughnane, 2017). Although this would mean high healthcare costs, healthcare organizations are taking steps to cut down costs to increase profit margins without necessarily suppressing the quality of care. PwC Health Research Institute indicates that healthcare costs have been exhibiting a downward trend from 11.9% in 2007 to 6% in 2020 (PricewaterhouseCoopers, 2020). Reducing costs of factors of production reflects into reducing healthcare prices, making high quality care services more affordable to many. As competition stiffens, providers must find ways to remain profitable by reducing healthcare costs without a respective reduction in quality.

Furthermore, competition has a way of influencing healthcare insurance premiums, making them more affordable by more citizens, healthcare providers, and other organizations. Due to competition, premiums payable on individual care plans have been shrinking over time (Ho, K., & Lee, 2016). Many insurers are adopting price-leadership as a strategy to attract higher numbers of clients for a sustainable competitive advantage (Krabbe-Alkemade et al., 2019). Such leads to a reduction in insurance premium costs making care plans affordable to the broader population. Insurers are also coming up with better options of care plans that are not only affordable but also considerate (Bisceglia et al., 2018). Such impacts are critical in driving healthcare insurance in the right direction and affirming the need for increased healthcare accessibility. For providers and other organizations, insurers are now encouraging informal premium negotiations and discussions, which increases organizations' capacity to guarantee safety and employee health plans.

Finally, various competitive strategies and practices adopted by providers and insurers are critical in sparking better care outcomes while guaranteeing high efficiencies and performance levels. For instance, an increasing number of healthcare providers and insurers are going for mergers and acquisitions. In 2019, CVS Health acquired Aetna at the cost of $70 billion (O'Brien, 2019). Centene also merged with Wellcare at the cost of $17 billion. There are hundreds of such examples across the globe (O'Brien, 2019). Through such competitive strategies, providers and insurers get to rejuvenate their efficiencies and synergies, leading to better professionalism and better economies of scale leading to safe, high quality and satisfactory healthcare outcomes.

Despite the benefits associated with the competition in the healthcare industry, it is paramount to admit that it generates various challenges. First, intensifying competition might shift the focus of many firms within the industry, from patient care to profit-making and market success (Greaney & Richman, 2018). Most competitive strategies primarily focus on ways to maximize sales while cutting down costs, which might not resonate well with the healthcare industry where human lives are involved. Nonetheless, quality of care is a central consideration for most of these firm hence they have to strike a balance between costs and returns in a manner that do not, to the very least, reduce service quality (Bisceglia et al., 2018). While firms in other industries have mastered the art of controlling the quality of products to maximize returns, healthcare firms must hold to high quality as their primary foundations. Bending towards competition might interfere with this goal and lead to duplication of services, thereby reducing the industry's efficiency.

As a response, there is a need for a need to ensure that healthcare organizations do not lose their focus on patient satisfaction in the process of competing. Greater efforts towards regulations, periodic quality assessment, satisfaction measurement, and professionalism in healthcare should be maintained at all costs (Greaney & Richman, 2018). Thus, although firms within the industry should be encouraged to adopt competitive strategies, regulatory measures require to be put in place to caution the firms against unethical and extreme practices that might put lives at risk.

Conclusion

In conclusion, from the analysis, intensification of competition among healthcare firms is a profound response to inefficiencies, unreliability, and high costs that have been daunting the industry, especially for the last few decades. Competition in the healthcare industry provides a ground for spurring innovation, improving care quality, bolstering efficiency, and cutting down healthcare costs and prices. Such positive enhancements lead to high care quality, care accessibility, safety, and low costs. Due to competitive markets, healthcare firms are adopting frameworks that aim to increase patient involvement in care provision, interprofessional collaboration, diversifying approaches to care, and integrating technology in practice, ultimately leading to the achievement of healthcare goals. Such goals might be difficult to attain without robust competitive markets. However, it is important to note that beneficial competition can only be maintained if all parties involved, including providers, insurers, regulators, pay close attention to their natural roles.

References

Bisceglia, M., Cellini, R., & Grilli, L. (2018). Quality competition in healthcare services with regional regulators: A differential game approach. Dynamic Games and Applications, 9(1), 1-23. https://doi.org/10.1007/s13235-018-0245-y

Bisceglia, M., Cellini, R., & Grilli, L. (2018). Regional regulators in health care service under quality competition: A game-theoretical model. Health Economics, 27(11), 1821-1842. https://doi.org/10.1002/hec.3805

Dafny, L. A., & Lee, T. H. (2016, December 1). How to bring real competition to the health care industry. Harvard Business Review. https://hbr.org/2016/12/health-care-needs-real-competition

De Silva, D. G., Jung, H., & Kosmopoulou, G. (2018). The impact of regional competition on the health care industry. Applied Economics, 50(48), 5135-5141. https://doi.org/10.1080/00036846.2018.1467551

Gaynor, M., Moreno-Serra, R., & Propper, C. (2013). Death by market power: Reform, competition, and patient outcomes in the National Health Service. American Economic Journal: Economic Policy, 5(4), 134-166. https://doi.org/10.1257/pol.5.4.134

Goddard, M. (2015). Competition in healthcare: Good, bad, or ugly? International Journal of Health Policy and Management, 4(9), 567-569. https://doi.org/10.15171/ijhpm.2015.144

Greaney, T. L., & Richman, B. D. (2018). Promoting competition in healthcare enforcement and policy: Framing an active competition agenda. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3267556

Ho, K., & Lee, R. (2016). Insurer competition in health care markets. National Bureau of Economic Research. https://doi.org/10.3386/w19401

Krabbe-Alkemade, Y., Groot, T., & Boter, J. (2019). The impact of hospital competition and insurer concentration on health care volume and cost in Dutch hospitals. Maandblad Voor Accountancy en Bedrijfseconomie, 93(7/8), 203-213. https://doi.org/10.5117/mab.93.34164

Loughnane, C. (2017). Governing healthcare: The case of universal health insurance – by competition. Reframing Health and Health Policy in Ireland. https://doi.org/10.7228/manchester/9780719095870.003.0009

O'Brien, J. (2019, December 23). Top 6 healthcare mergers of 2019. HealthLeaders Media. https://www.healthleadersmedia.com/finance/top-6-healthcare-mergers-2019Pricewaterhouse

Coopers. (2020). Medical cost trend: Behind the numbers 2020. PwC. https://www.pwc.com/us/en/industries/health-industries/library/behind-the-numbers.html

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