Insights (Essays)

Insights (Essays) January 2020

Does Competition have a Place in a Universal Healthcare System?

Dr. Kevin S. Chen and Rina Lamba

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How can we maintain our high quality universal healthcare system – a pillar of our Canadian identity – for future generations in a rapidly changing environment?

The answer is competition.

Competition among businesses has long been encouraged as a mechanism to increase value for customers. Canada’s publicly funded healthcare system has been hesitant to incorporate concepts like competition which are normally tied to the private sector and to increased profits. In fact, some practitioners regard competition as wasteful and undermining. Others believe it is a slippery slope towards private healthcare.

However, competition already exists to a certain extent in public healthcare. Healthcare providers already compete for allocated funding from the government and donors. There is only one pie and everybody is competing for a piece of it.

But if the definition of competition also means that organizations have to deliver better products and services, while increasing quality, and reducing costs, then the healthcare system might benefit by thinking how they can increase value and gain competitive advantage. In fact, it can be argued that competition may be critical to the survival of the Canadian system.

Here’s an example. Currently, Canadian healthcare has been organized around funding that is tied to the amount of healthcare services delivered. Organizations and providers are rewarded based on the number of patients they see. This approach incentivizes healthcare providers to see patients as quickly as possible which may not always work in favour of the patient and could increase costs in the long term from sub-optimal health outcomes.

In order to really increase value, funding should be tied to health outcomes. That would mean incentivizing healthcare providers and organizations to compete based on the outcomes that matter most. An example of this, Kaiser Permanente, America’s largest non-profit health consortium, is a leader in providing quality care through a patient-centered delivery model. Instead of volume related incentives, the model incentivizes quality of care through risk sharing agreements between providers and salary-based physician reimbursement. Incentivization also includes physician bonuses linked to quality of care delivered. One of the positive outcomes achieved through this model is a 30% reduction in 90-day emergency department readmissions.

Another Example. Bundled-care models provide a single payment for an episode of care, such as a hip surgery, knee replacement or cardiac surgery, across multiple settings and providers. This is meant to align incentives with quality and patient experience. Providers share risks and gains and are incented to collaborate and are accountable for quality outcomes. Evaluation of bundled-care pilots in Ontario, showed improvements in length of hospital stay, and a reduction in total costs.

With the recent changes in Ontario and the introduction of Ontario Health Teams (groups of healthcare providers and organizations that are clinically and fiscally accountable for delivering a full and coordinated continuum of care to a defined geographic population), we may be moving in this direction. This is an opportunity for those of us in the healthcare sector to start thinking differently. If we can begin to truly focus on patient outcomes, we can coordinate our services to better service patients. For instance, if a patient is being discharged from a hospital they will recover more quickly if efforts are coordinated with healthcare providers for things like the home care, and/or rehabilitation services.

To do this well, understanding and analyzing the capabilities and resources of an organization is imperative to gaining a competitive advantage. In the case of Ontario Health Teams, organizational culture and relationships are two intangible resources that must be well established and sustainable to create value for patients. Having the opportunity to continually build new relationships and partnerships in other sectors, such as housing and social services may also provide possible opportunities for prevention which can reduce the overall healthcare costs.

Michael Porter, the famous academic who studied competition, traditionally defines competition as the pursuit of every organization to achieve above average profits in their chosen industry. However, he argues that in healthcare, competition does not have to revolve around maximizing profits. Instead it can revolve around maximizing value for patients, where value is the best possible patient outcome per dollar spent. By embracing this view of competition around delivering the best patient value and aligning incentives, we can continue to maintain this important pillar of Canadian society.

About the Author(s)

Kevin Chen, MD, MBA has over 5 years of healthcare experience working in hospitals and clinics across Canada and has worked with leading organizations as a consultant.

Rina Lamba, RN, MBA has over 15 years of clinical and administrative experience working in the public healthcare sector at the municipal and provincial levels.

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