Using the market to regulate health care price: why heart hospitals will have a competitive advantage in the world of post-diagnostic related group pricing.
For the past 20 years, the federal government has reimbursed hospital services by administrating pricing. Simply put, under such a system the government dictated the prices of medical services. Not only has administrative pricing failed to control medical inflation, but such failure could have been predicted from a review of basic economics. Accordingly, to eliminate the deleterious effects of administrative pricing, it is not surprising that the government is gathering information on hospital quality and cost in anticipation of a return to a system in which the price for hospital services is determined by the market. For some hospitals, this will be good news because they will be able to negotiate a more favorable rate of reimbursement. Unfortunately, for some hospitals a market system will be bad news because the government is not going to negotiate a provider contract with every hospital. In short, when the government returns to a market system for pricing of hospital services, competition among hospitals is going to become even more competitive.
McLean
Thomas R
TR
Third Millennium Consultants, LLC, 4970 Park, Shawnee, Kansas 66216, USA. tmclean@dnamail.com
D002300:Cardiac Care Facilities / Q000191:economics* / Q000592:standards; D004465:Economic Competition; D019981:Health Care Sector; D006291:Health Policy; D017722:Hospital Charges; D017721:Hospital Costs; D006801:Humans; D007250:Inflation, Economic; D007349:Insurance, Health, Reimbursement; D006278:Medicare; D011445:Prospective Payment System; D011787:Quality of Health Care; D012051:Reimbursement Mechanisms; D014481:United States