Sunday, November 18, 2012

More Competition for Hospitals

Here is a great development that shines a bright light on the issue of competition in health care:  The Surgery Center of Oklahoma.  An article by Jim Epstein in Reason alerted me to this.

In a nutshell, the (for-profit) Surgery Center was started by a group of surgeons to provide an alternative to surgery within hospitals.  They have a focus on transparent, all-inclusive prices for various surgeries, from knee repair to hernias and even bunion removal.  You can see their prices right on the website -- an adenoidectomy for instance costs $2695, all-in.

The Center appeals to a variety of patients, in particular those with high deductible plans and to self-insuring employers, who can direct their employees to the Center and thereby save money.

Oklahoma, it turns out, did away with their Certificate of Need law, making it easy for such a business to enter the market (funny that the common abbreviation for Certificate of Need is CON).

So, here are a few questions to ponder:

Are businesses like the Surgery Center cost-increasing or decreasing?  Is this just more surgeons looking for business, so that by the phenomenon of supplier-induced demand we will just end up with even more surgeries (that don't really need to be done)?

Isn't this just adding more costs to our health care system --look at the nice building they have, and think of all the equipment inside?

Aren't centers like this just cherry picking the paying patients, leaving the uninsured to be treated at hospitals?

Won't this mean that existing hospitals in Oklahoma will have to raise their prices, since they have to continue to exist and they still have to cover the uninsured?

How far can the "unbundling" of hospitals go?  How strong are the economies of scope for hospitals?

Do CON laws prevent competition from raising costs of health care or do they stifle cost-reducing innovations?