Competition, Regulation, and Rationing in Health Care

Here is the classic that started the ongoing debate over just how much competition and regulation are necessary in the health care industry.

Category: Healthcare

This title is part of the Healthcare Administration list.

Of Interest:

Health Care Risk Management: Organization and Claims Administration

Managing a Health Care Alliance: Improving Community Cancer Care

Managing Doctors

The Health Care Marketplace

The White Labyrinth: Guide to the Health Care System

This book is an interesting compendium of proceedings from a 1977 conference conducted by the Bureau of Economics of the Federal Trade Commission. Included papers focus on competition in selected sectors, insurance and alternative delivery systems, and competition and regulation. Such an important and comprehensive array of research belongs on the library shelves of all economists, policymakers, health care administrators, professionals in the health care field, and anyone concerned about the nature and future of the health care industry.

Competition in the Health Care Sector covers a landmark Federal Trade Commission (FTC) conference in June 1977. The conference was attended by over 600 individuals, including healthcare administrators, government policymakers, sociologists and other academics, and medical doctors. All were present to try to get a better appreciation for the role and impact of economics in healthcare services. At that time (and still true today), Medicaid and Medicare were growing larger, health maintenance organizations (HMOs) were assuming a central place in the healthcare system, payment methods were proliferating and becoming more complicated, and consumers were becoming more informed about and involved with their healthcare options. Both government agencies and the private sector recognized that economic principles and phenomena were at work in the healthcare sector. The FTC conference was called to clarify the economic factors and their effects in healthcare in order to gain better control over the sector, particularly its escalating costs.

The 24 chapters in Competition in the Health Care Sector are presented in four sections. The first is “Opening Remarks and Introduction,” followed by sections on “Competition in Selected Sectors,” “Insurance, Competition, and Alternative Delivery Systems,” and “Competition and Regulation.” Many of the chapters are titled “Comment,” which contain comments by an individual on one of the topics presented in the four major sections. There is also a detailed index that leads readers to specific subjects of interest.

Despite its general title, the first section gets right to the substance of the conference as connoted in the title. It is a staff report prepared by the FTC’s Bureau of Economics. At the time of the conference, Greenberg was a staff economist with the FTC and presumably he had an appreciable hand in the report. There is a note that the FTC “has not adopted the report in whole or part.” But this is a pro forma entry because there is little to adopt or reject in this government paper. The staff report is a summary of the lengthy and often detailed informative and analytic papers that follow in the remaining 400 pages of Competition in the Health Care Sector.

In an address opening the conference, Michael Pertschuk, then FTC chairman, stresses that, “The Federal Trade Commission is not a health or medical agency...[W]e recognize, along with most Americans, that the delivery of health care is business, an industry of vast proportions and vital effect. Health care has become [the FTC’s] business.” That the FTC, charged with monitoring and regulating businesses, has come to regard the healthcare industry in the same terms as other business sectors plainly evidences the nature of modern-day healthcare.

Healthcare executives and administrators as well as doctors and related health professionals concurred with the perspective of the FTC Chairman. Dr. Theodore Cooper, dean of Cornell University’s Medical College at the time, said in his opening remarks that, “I have to admit that one can no longer discuss health policy without an appreciation of the importance of economic factors.” Dr. Cooper also stated that, “the political and technical discussions about health policy will continue to expand.” And he said that, “if the conference can clarify how competition fits into the ‘scheme of things,’ this will be a milestone for doctors, patients, and hospitals.”

The critical issue of competition in the healthcare industry was omnipresent during the conference. Most of the topics covered during the conference addressed, to some degree or another, the effects of competition. The impact of competition on physicians, hospitals, and insurers was analyzed. Another area of discussion focused on the interrelationship between competition and alternative means of payment. Appropriately for a conference sponsored by the FTC, the interrelation of competition and regulation came under study.

Analyses follow the introduction of each topic. For example, “Competition Among Physicians,” is followed by expert commentary. The style of the papers is, as is well described by the author, “a mix of technical jargon and mathematical exposition common to most economists, and language suitable for non-economists and public policy-makers.”
The conference did not arrive at definite conclusions about the place and effects of economics on the thriving, sprawling, complex healthcare industry that encompasses innumerable organizations and professionals of many different kinds. It did, however, succeed in its objective of presenting data, offering illuminating analyses, providing knowledgeable perspectives, and eliciting expert commentary. All this is offered in a reprint of a 1978 book that still has a place on everyone’s bookshelf as a fundamental text and reference on economics in the healthcare field.

Warren Greenberg has a Ph.D. in economics from Bryn Mawr University. Author of many books and articles in the area of industrial organization economics and healthcare, Greenberg is also a professor of Health Economics and of Health Care Sciences at George Washington University.

Warren Greenberg, Ph.D. is a professor of health economics and health care sciences and a senior fellow with the Center for Health Policy Research at the George Washington University. He is also a scholar in residence at the Agency for Health Care Research and Quality. Mr. Greenberg’s research at AHCRQ focuses on the quality of care in horizontal and vertical consolidations of hospitals within an industrial organization context. He also examines the structure of vertical integration in health care. From 1971 until 1979, Mr. Greenberg was a staff economist with the Federal Trade Commission. He was a lead economist on many of the FTC’s activities in the health care industry and was responsible for economic analysis of antitrust litigation. Mr. Greenberg was a visiting associate professor of managerial economics at the University of Maryland and a visiting professor at Ben-Gurion University (Israel). He is the author of numerous articles on industrial organization economics and health care that have been published in the Journal of Law and Economics, Economic Inquiry, Journal of Risk and Insurance, Health Services Research, and other leading journals.