Health Care Needs Real Competition

The U.S. health care system is inefficient, unreliable, and crushingly expensive. There is no shortage of proposed solutions, but central to the best of them is the idea that health care needs more competition. In other sectors, competition improves quality and efficiency, spurs innovation, and drives down costs. Health care should be no exception.

Yet providers and payers continue to try to stymie competition. Many are actively pursuing consolidation, buying up market share and increasing their bargaining power.

In this article, the authors argue that health care payers and providers must stop fighting the emergence of a competitive health care marketplace and make competing on value central to their strategy.

All stakeholders in the health care industry—regulators, providers, insurers, employers, and patients themselves—have roles to play in creating real competition and positive change. In particular, five catalysts will accelerate progress: Put patients at the center of care, create choice, stop rewarding volume, standardize value-based methods of payment, and make data on outcomes transparent.

Idea in Brief

The Problem

The U.S. health care system is inefficient, unreliable, and crushingly expensive. In other sectors, competition improves quality and efficiency, spurs innovation, and drives down costs. Yet health care organizations are actively consolidating in order to stymie competition.

The Solution

Health care payers and providers must stop fighting the emergence of a competitive health care marketplace and make competing on value central to their strategy.

The Way Forward

All stakeholders in the health care industry can catalyze change in five ways: Put patients at the center of care, create choice, stop rewarding volume, standardize value-based methods of payment, and make data on outcomes transparent.

Here’s the good news: Thanks to the Affordable Care Act, or Obamacare, more Americans have access to health care than ever before. The bad news? The care itself hasn’t improved much. Despite the hard work of dedicated providers, our health care system remains chaotic, unreliable, inefficient, and crushingly expensive.

Leemore S. Dafny is the MBA Class of 1960 Professor of Business Administration at Harvard Business School and the former Deputy Director for Healthcare and Antitrust at the Federal Trade Commission.

Thomas H. Lee, MD, is the chief medical officer of PG Forsta, a leading provider of experience measurement, data analytics, and insights that help companies in complex industries better understand and better serve their stakeholders. He is a practicing internist and a professor (part time) of medicine at Harvard Medical School and a professor of health policy and management at the Harvard T.H. Chan School of Public Health.

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