THOSE HOWLS and groans you may have heard from behind closed doors in your local hospital or doctor's office are probably not coming from the patients. More likely they are the protests of the health-care industry being forced to take an unaccustomed dose of competition.
After decades of prosperous living on a cost-plus reimbursement basis, doctors and hospitals are suddenly being hit by competitive pressures from all sides. Hospitals are experiencing new competition from the fast-growing and enormously profitable hospital chains, and the chains themselves are diversifying into out-patient clinics, ambulatory care centers, home health programs and nursing homes.
Doctors are meeting new competition from within their own rapidly expanding ranks as well as from the clinics and pre-paid group practices. So intense is the competition in certain cities that some doctors are said to have reverted to the ancient practice of making house calls.
Adding to the pressure from within the industry are changes in the government's way of doing business with hospitals and other providers under the mammoth Medicare and Medicaid programs. The biggest change will come next year when, under legislation passed with amazing ease as part of the Social Security reform package, the government will begin phasing in a system to pay hospitals a fixed amount for each case treated with a specific diagnosis, a change that will put enormous pressure on hospitals to keep their costs in line.
In the short-run, hospitals may respond to the new Medicare payment system by assigning higher- cost diagnoses to their Medicare patients or by trying to shift unrecovered Medicare costs to the bills of their private patients. But insurance companies--and private employers for whom health insurance has become a major employment cost--are alert to the shifting possibility and they are also beginning to put pressure on health-care providers. In California, private insurers have been allowed to require doctors and hospitals to bid competitively for patient care contracts. States are also beginning to use their leverage under the Medicaid program for the poor to limit coverage to lower-cost doctors and hospitals.
Health competition is not, of course, without its dangers. Health-care providers can prescribe unneeded treatments to compensate for lower caseloads, cut corners to limit patient costs and steer away from complicated cases. And much of the costs of the spawning for-profit industry may be hidden in the tax breaks that attract private investors. But to the extent that competition encourages more efficient care--and forces doctors, hospitals and patients to weigh the necessity of more complicated treatment against its costs--it could provide real relief from the spiral of health-care costs.