Katherine Baicker, PhD, is a Professor of Health Economics in the Department of Health Policy and Management at the Harvard School of Public Health. She is a research associate at the National Bureau of Economic Research and an elected member of the Institute of Medicine.

ElderBranch interviewed Dr. Baicker to discuss her paper, “Coordination versus Competition in Health Care Reform.” Dr. Baicker wrote the paper along with Helen Levy, PhD of the Population Studies Center at the University of Michigan.

Health Care Reform Focused on Improving Coordination
From Accountable Care Organizations to bundled payments, current efforts at U.S. health care reform are largely focused on improving coordination in the health care ecosystem. This focus has been an outgrowth of clear failures in the current system – from doctors ordering duplicative tests because of a lack of information-sharing, to patients being discharged from hospitals with poor or no instructions for on-going care.

However, a heavy focus on improving coordination appears to come at a price. With coordination, consolidation – either in the form of vertical or horizontal integration – often comes in tow. When this happens, competition may be reduced while prices escalate and quality suffers.

“We wanted to highlight a potential tension between efforts to coordinate care and efforts to promote competition. Policies that focus on coordination but ignore the effect on industry consolidation, for example, may result in higher prices for care. Policies that focus just on making markets more competitive may undermine efforts to reduce the use low-value care through better coordination,” explains Dr. Baicker.

Impact of a Narrow Focus on Coordination
Using the example of electronic health records (EHRs), the authors point to examples where better coordination may have adverse effects on other areas of health care.

While EHRs hold significant promise for improving information-sharing and hand-offs between health care providers, these platforms, as they are today, work well only within closed systems. As health systems use different software for their EHRs, oftentimes they cannot “talk” to each other and easily share data. Therefore, the lack of interoperability may lead patients to be locked into just one health system, thereby reducing competition.

Accountable care organizations, in cases where they lead to industry consolidation, and bundled payments, when they force insurers to contract with certain providers for multiple services, can also have unintended consequences on the cost and quality of health care.

Balancing Coordination and Competition: A Three-Prong Call to Action
The authors voice the need for a more balanced approach to health care reform. With a dual focus on both coordination and competition, policy-makers can better consider the net effects of their proposed changes.

Specifically, Dr. Baicker and Dr. Levy call for three types of changes:

  1. First, they suggest a focus on policies that either promote both coordination and competition, or at least promote one without negatively impacting the other. An example they offer is interoperable health information technology.
  2. Second, they propose that regulatory bodies that deal with antitrust issues specifically consider the trade-off between coordination and competition when looking at health care.
  3. Third, they recommend that policy-makers carefully consider the impact of individual initiatives on consumers and providers across the board.

While calling for change, the authors nevertheless recognize that certain aspects of the today’s health care system need to be carefully considered if change is to be successful: “One of the challenges in balancing these issues is the very different systems under which health care is purchased in the US. Medicare and private insurers operate under different rules and have taken different approaches, often leaving providers facing conflicting incentives. Policies that take this into account may do a better job of striking a balance between the benefits of competition and the benefits of coordination.”

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