Coordination Fails---2AC

Katherine Baicker & Helen Levy 13. From the Department of Health Policy and Management, Harvard School of Public Health, Boston (K.B.); and the Institute for Social Research, University of Michigan, Ann Arbor (H.L). 08/29/2013. “Coordination versus Competition in Health Care Reform.” New England Journal of Medicine, vol. 369, no. 9, pp. 789–791.

Many current proposals to increase the value of care delivered in the U.S. health care system focus on improved coordination — and with good reason. Badly coordinated care, duplicated efforts, bungled handoffs, and failures to follow up result in too much care for some patients, too little care for others, and the wrong care for many. A host of current reform efforts aim to reduce these inefficiencies in both public and private markets. These efforts range from penalizing hospitals with higher-than-expected readmission rates, to rewarding primary care providers when patients receive higher-value care, to providing incentives for the adoption of electronic health records. Accountable care organizations (ACOs) and bundled payments are designed to create monetary incentives for coordinated care. The hope is that coordination will improve value by ensuring that the right care is provided in the right place at the right time. These laudable efforts, however, may unintentionally be at odds with another strategy for improving value: promoting competition in health care markets. In general, less competition means higher prices; one well-publicized symptom of the lack of competition in U.S. health care is providers' ability to charge different prices for the same service.1 Competition may drive higher quality, particularly when prices are constrained.2 The benefits of competition in private markets may even spill over to higher quality in Medicare, for which the Centers for Medicare and Medicaid Services (CMS) sets prices.2 A number of policy interventions, such as quality-reporting and price-transparency initiatives, are based on the idea that better information can promote competition and lead to greater value, and these initiatives have the potential to be very effective when patients have a choice of providers. Efforts to promote integrated, coordinated care, however, can generate incentives for provider consolidation that may reduce competition — witness, for instance, the antitrust concerns surrounding the implementation of the ACO initiative.3 Consolidation may take the form of vertical integration, such as a hospital's acquisition of physician groups, which has ambiguous consequences for competition, or of horizontal integration, such as the merging of two hospitals, which nearly always reduces competition.2 Consolidation is most likely to raise prices when providers of similar, rather than complementary, services merge — which is why hospital mergers are closely monitored by the Federal Trade Commission (FTC). There are subtler forms of anticompetitive behavior as well. Bundled payments, a darling of procoordination delivery-system reformers, can spark antitrust concerns, as they have done most famously in the case of computer software. The problem arises because bundling offers providers who have market power in one product domain (such as tertiary hospital care) an opportunity to dampen competition in other product domains (such as primary care) by requiring insurers to contract with them for both products in order to receive discounts.4 There is thus often — though not always — a trade-off between coordination and competition. Well-integrated provider networks may promote coordinated care that improves the allocation of health care resources, but they are likely to undermine competitive pressures to keep prices down while maintaining high quality. Coordinated systems may thus deliver the right care to the right patient at the right time, but at the wrong price. Competitive markets may do a better job of keeping prices low, but with the well-documented drawbacks of fragmentation. Some policies, such as the use of electronic health records, can in theory promote both competition and coordination, but only if they are implemented well — an interoperable health information technology (IT) environment, for example, should promote both, but health IT without interoperability may simply lock patients in to their current providers or provider networks by making it difficult or costly to move their records, reducing competition. The opportunities for a win–win are limited. The current suite of policies for addressing the ills of the health care system does not embody a unified approach to the roles of coordination and competition (see table Key Current Policies and Their Potential Effects on Health Care Coordination and the Competitive Environment.). In part, this lack of coherence reflects the fact that our insurance “system” is really several different systems, including moderately competitive private insurance markets for the nonelderly, nondisabled population and a single government payer, Medicare, for the elderly and disabled that largely pays providers set prices on a fee-for-service basis. These two payers currently pursue different approaches to reform. The most recent round of Medicare reform initiatives focuses on coordination, with ACOs as the prime example. In fact, the FTC has signaled that it will weigh the benefits of integration in improving quality against the potential harms of reduced competition.5 For the privately insured sector, the current focus is on enhancing competition through price transparency and “skin in the game” for consumers.