Competitive Pressure

The hospitals will be able to benefit from this merger by increase their revenues as a starter. The main source of profits for hospitals is the physicians because they are the ones that admit patients, referral, and use the services that the hospital’s provide such as labs and tests. Without the physicians’ help, the hospitals will not be able to provide their services. Second, this merge will increase the hospital control over the market. Many hospitals are known for their physicians and their researchers for example, M.D Anderson is number one hospital for cancer care, while Memorial Herman is ranked number 2 for rehabilitation care. So, having the best physicians will increase the hospital’s leverage. Third, the hospital will be able to

Dranove, D. (1998). Economies of scale in non-revenue producing cost centers: Implications for hospital mergers. Journal of Health Economics, 17(1), 69-83. Retrieved from http://search.proquest.com/docview/205800624?accountid=32521

One of the goals of the Affordable Care Act (ACA) was to reduce healthcare spending in the US (DeMichele, 2015). However, the passage of the ACA has spurred activity that is counter to this goal of decreased spending in the form of increased hospital consolidation which many studies show has led to higher prices. While, there are many other effects of hospital consolidation such as the impact on quality of care or innovation, these topics are beyond the scope of this paper.

One area that has contributed to the rise of healthcare costs are the varieties of healthcare services offered to the patient. Competition between providers has caused physicians and hospitals to offer the most current healthcare technologies and modern, eye-catching settings in order to attract and retain clients (Shi & Singh, 2015). Reimbursements for costly procedures and hospital services have been compensated at a higher rate which has also supported the expansion of hospital and specialty procedure settings (Schroeder & Frist, 2013). Renovations of the physical settings and the acquisition of expensive technologies have elevated healthcare services prices to encompass the additional costs of providing high technical services and attracting clients and cause the over-utilization of expensive treatments.

Cost shifting is a challenging trend that the United States healthcare system is currently facing. The

A major change is occurring in the healthcare system as the United States continues to move toward enhancing patient care quality and access while also decreasing cost. This significant transformation is driven by a variety of forces, including changes in managed care, a shift from pay for service to pay for quality, and ever-evolving client characteristics. This paper aims to discuss each of these factors and the ways in which they make this major transformation a difficult one for the nation to undergo.

There are so many different health care providers and types of health care services that we as consumers can receive. All those different services or facilities are going to have competitive prices for our medical care. I think a patient as a consumers are going to benefit from this. Not only do medical facilities have competitive prices but also insurance

The expanded health insurance coverage via the Affordable Care act is having a major effect on managed care hospitals in many avenues. These effects are impacted via the increase in demand for care, the increase of patient revenues, as well as a lower uncompensated care especially for the uninsured. Not surprisingly, the constraints as well as the controls that are being imposed by the managed care have lead to an outrage by the doctors and their patients. Managed care in the United States finds itself under attack from every side. As far as the managed care organizations are concerned, administrators are unease regarding the profitability or the surplus for reinvestment and even the consumers are also worried about the possible closure of hospitals (Goodson, 2010). Managed Care Organizations have been forced to reduce hospital utilization even though there have also been a few facility closures.

Unfortunately, although antitrust agencies are paying attention to recent court actions against mergers, the FTC investigates only 1-2% of consolidations (McCanne, 2014). It is also important to remember than public payers such as Medicare and Medicaid set prices to physicians and hospitals with no room for negotiating and conversely private insurers may use their market-share leverage to negotiate reimbursements. Integrative care in the form of hospital consolidation has been shown to reduce costs by 10-20% but this cost has not been shown to produce a cost savings to private insurers (Cutler & Morton, 2014).

From 1991 going forward, the health care environment again experienced fundamental changes as a result of the deregulation of hospitals which according to Ingols and Brem (as cited in Swayne, Duncan, and Ginter, 2006) was occurring for the first time in a decade. According to the authors, the impact of the move was immediate. Following the deregulation, the financial viability of most hospitals was

Anti-trust laws in the United States have been effectively used to prevent monopolies in industries like telecommunications, oil and gas and computer software. Anti-trust laws are enforced in order to maintain free competition in the marketplace, which generates lower prices and incentivizes the development of high quality products. Today, hospital systems are experiencing an era of heavy consolidation, which include mergers and acquisitions and physician practice buy-outs. According to the Wall Street Journal, hospitals completed 86 merger and acquisition deals valued at $7.9 billion in 2011, which was the most in a decade. Like in other industries, this developing trend in hospital consolidations encourages price fixing and

The present day truly does present a perspective of a world which is ruled by a tremendous amount of change and adjustment. This sort of rapid evolution is a major part of the health care industry. Hospitals are under a great deal of stress, with many people saying that healthcare today in America is an unsustainable proposition. The gaps and pervasive problems in American healthcare need to be fixed decisively rather than skirted around. Mergers are becoming more and more a new way of helping hospitals and other healthcare facilities achieve a new form of stability and a hope of gaining a greater level of efficiency.

Competition drives innovation and ultimately leads to the delivery of better healthcare. Competition has played a vital role in shaping the delivery of healthcare in the United States. Competition results in lower prices and broader access to health care and health insurance. Competition among and between hospitals and physicians intensified with the development of managed care organizations. In addition to putting pressure on costs, managed care plans have pressured providers to use shorter hospital stays and to offer alternative outpatient treatments (Botti, 2007). This led to lower costs and an increase in choice without sacrificing quality. Lower costs and improved efficiency has made health insurance more affordable and available. Another benefit of competition in health care is the innovation in healthcare technology (i.e. endoscopic surgery, anesthetic agents available in ambulatory surgery centers).

With each passing day the health care industry is experiencing an increase in participants due to its perfect competition nature. Due to this increase the industry participants, the industry has vicious competition which in effect leads to an increased in the cost of doing business. Smaller companies within the industry are hard hit by this competition due to their limited resources and therefore find it hard to remain relevant within the industry. Due to the looming threat of closure and liquidation, small companies must explore various strategies they may use to remain in operation. On the other hand large hospitals that are looking to eliminate competition and at the same time improve on their market share and in effect their revenues, merge with those that are struggling with low profitability. These mergers are beneficial to the smaller struggling companies since they provide increased savings on company overheads and availability of specialized machinery. Growth is also expected due to the increased market share as well as the good will already established by the large company. Contrary to popular opinion, mergers are not always between a large and a small company. In the healthcare industry two small companies may come together in order to pool their resources together and be in a position to compete against the large companies.

The problem at Memorial Hospital is the focus on costs instead of health care. When a health care provider does not take the primary business as the core value of the operation and make strategic and tactical decisions based primary on costs, it decreases the consumers’ (patients) satisfaction in long run. As consumers reduce or stop purchasing goods and services from the hospital, hospital may make more cost oriented decisions and falls into a negative cycle. Eventually the hospital may face the fate of loosing business to competitors and the possibility of closing the door.