Benefits Of Competition In Healthcare

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Economics can relate to competition as well as choice in the world of healthcare. For example market concentration in healthcare is when there are only a select few companies who produce and sell their products to the majority of the healthcare facilities around the country. In other words, these products may be limited and not many companies may make them, so selling them to most of healthcare facilities will create a larger selling market for them. Therefore, it is a useful economic tool because it reflects the degree of competition within the healthcare market. According to Riley (2011), “If concentration is low, than the industry is considered to be competitive and if the concentration is high, than the industry will be
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For example, the higher the amount the calculation is, the better of a chance that company has to having high market power. Consequently, it is important to understand that the HHI takes into account the size distribution of the companies in the healthcare market and the higher the points a company has, the more control they have over other companies and the overall market. Unfortunately, a company with complete market power can raise their prices without losing any of customers to their competitors, but on the contrary, little to no market power will make any company extremely competitive with other…show more content…
Market economics, especially in healthcare has advantages and disadvantages. For example, market economies are based on the concept that people are free to make their own choices about what services or products to purchase within the healthcare industry. This system can be efficient because a capitalist market system aims to produce goods with a minimum of wasted resources (Metcalf, 2012). Then on the downside a market economy will produce what people want, not necessarily what they need, which can raise prices for the average consumer/patient. For instance, the more consolidated a healthcare system is the greater the drawbacks. In other words, higher healthcare prices resulting from greater market power. “Market power increases because it is difficult for insurers to bargain successfully with one of only a few health systems and clinicians gain market power through consolidation by raising prices to the payers” (Cutler & Morton, 2013). Therefore, there are many decisions healthcare facilities need to consider before opening up to the public such as looking for a less concentrated area, identifying new sources of patients for referrals, offering something unique to differentiate from other providers, and creating a healthcare market that has not been built

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