SLATE:… While we can all agree that emergency care is important and that hospitals should be paid for providing it, it’s not at all obvious that we should compensate hospitals more generously for all procedures, including elective procedures for run-of-the-mill insured patients. These higher reimbursement rates make it hard for independent providers of medical services—those that aren’t part of existing hospitals—to compete with hospitals, even when they’re capable of performing procedures for less. In short, higher reimbursement rates for hospitals entrench the monopoly power of hospitals. It’s funny how that works out.
There are steps we can take to curb the power of our monopolistic hospitals. The Obama administration, to its great credit, is seeking to rein in the practice of paying hospitals more for the same medical services. But that’s just the tip of the iceberg. Barak Richman, a law professor at Duke, a leading expert on concentration in health care markets, and, for the record, a fan of Obamacare, has identified two paths forward. Our government can simply accept that the market power of hospitals will continue to increase while making more of an effort to force them to accept low reimbursement rates. This approach is certainly worth trying, yet it ignores the fact that because hospitals are big employers, they wield a great deal of political influence. Whenever bureaucrats try to tame hospitals, lawmakers ride to the rescue of the big medical providers.
The second path is to rely on antitrust enforcement to crack down on hospital mergers and acquisitions and, more importantly in the long run, to make it easier for new medical providers to enter the business and to compete with hospitals. Naturally, hospitals hate this kind of competition, particularly from specialized providers that focus exclusively on providing one or two medical services inexpensively. To the hospitals, these providers “cherry-pick” and “cannibalize” their most profitable business lines without ever having to take on the larger burdens of running hospitals. There’s some truth to these complaints, which is why governments should compensate hospitals directly for care that it wishes to subsidize. But we need smaller, more efficient competitors to keep the big hospitals in check and to drive down medical costs for society as a whole… (more)
