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Trend Toward Competition Among Individual Providers Could Further Fragment Market,
Reduce Continuity Of Care

Health Affairs Paper Advocates Competition Between Integrated Systems As Best Path To Increased Quality, Cost Restraint

BETHESDA, MD — Competition in health care should occur between integrated provider systems, not at the individual provider level, because increased competition between individual providers is likely to increase market fragmentation, according to a new paper published today on the Health Affairs Web site.

Alain Enthoven, emeritus professor at the Stanford University Graduate School of Business, and Laura Tollen, senior policy consultant at the Kaiser Permanente Institute for Health Policy, write that a proposal published in the Harvard Business Review last year that encourages competition at the “disease or treatment” level fails to focus on prevention, primary care, and improving population health.

The proposal for competition at the “disease or treatment” level essentially eliminates all restrictions on choice of providers, which Enthoven and Tollen argue would hamper systemwide quality improvement efforts and drive increases in health care spending. Under that arrangement, providers have no incentive to deliver total patient care in the most cost-effective way, the authors write.

“Under a completely free-choice model, a patient with diabetes would seek out the best provider for diabetes, and a patient with congestive heart failure would do similarly,” the authors write. “Putting aside doubts that ill patients will regularly travel far from home to centers of excellence, the problem remains: Many patients have multiple chronic conditions.

“In addition, people with chronic illnesses also need primary care. It simply cannot be good medicine for people with multiple chronic diseases to receive primary care and care for each of their conditions in separate locations, with different sets of doctors who don’t communicate regularly,” they write.

Enthoven and Tollen advocate competition between prepaid integrated delivery systems (IDSs) that integrate financing and management of health care delivery, and incorporate all levels of health care delivery from hospital to physician offices.

“We believe that the health care market should be based largely on risk-adjusted prepayment and consumer choice of IDSs,” they write. “The systems themselves would have the following characteristics: processes to ensure the provision of appropriate, evidence-based care; the full spectrum of care coordination; use of comprehensive, shared patient records; and the ability to improve efficiency on a large scale.”

While many believe that such prepaid managed care plans were rejected in the managed care backlash of the mid-1990s, Enthoven and Tollen argue that the backlash was driven by workers who were enrolled in HMOs by their employers without a choice of plans. In employment groups in which individuals have responsible choices, a very high percentage of individuals happily choose integrated systems where available. Enthoven and Tollen support a system in which employees are given a choice of IDSs and receive the full savings resulting from the more economical systems, such as what the federal government and California state government offer.

The paper can be read at http://content.healthaffairs.org/cgi/content/abstract/hlthaff.w5.420.


Health Affairs , published by Project HOPE, is the leading journal of health policy. The peer-reviewed journal appears bimonthly in print with additional online-only papers published weekly as Health Affairs Web Exclusives at www.healthaffairs.org. The full text of each Health Affairs Web Exclusive is available free of charge to all Web site visitors for a two-week period following posting, after which it will switch to pay-per-view for nonsubscribers. The abstracts of all articles are free in perpetuity. Web Exclusives are supported in part by a grant from the Commonwealth Fund.


Health Affairs , published by Project HOPE, is the leading journal of health policy. The peer-reviewed journal appears bimonthly in print with additional online-only papers published weekly as Health Affairs Web Exclusives at www.healthaffairs.org. The full text of each Health Affairs Web Exclusive is available free of charge to all Web site visitors for a two-week period following posting, after which it will switch to pay-per-view for nonsubscribers. The abstracts of all articles are free in perpetuity. Web Exclusives are supported in part by a grant from the Commonwealth Fund.

©2005 Project HOPE–The People-to-People Health Foundation, Inc.