Posted by http://www.mja.com.au/public/issues/mar15/komesaroff/komesaroff.html on March 28, 1999 at 19:40:18:
Ethical implications of competition policy in healthcare
We need to debate the ethical and philosophical questions underlying the application
of market economics to healthcare
Paul A Komesaroff
MJA 1999; 170: 266-268
Introduction - Assumptions underlying competition policy - Effects of competition policy - Ethical and cultural
implications of competition policies in healthcare - Conclusion - References - Authors' details
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Introduction
The Melbourne Age of 28 July 1998 reported the case of Dr Stephen
Vaughan, a medical oncologist, who, after 23 years in public hospitals,
resigned, disillusioned and dispirited. According to the Age, Dr Vaughan
left medical practice because the value he holds dearest -- caring --
seems to have disappeared. In Dr Vaughan's own words:
The personal dimension of care is regarded in the public sector as
an optional extra -- but it shouldn't be optional. It is essential. . . .
Public hospitals used to be the holder of the values of community
and personal caring, irrespective of ability to pay . . . but now
they're just another organisation chasing the buck, and if you don't
get paid you don't do it.1
As the responses in the letters columns seem to attest, this experience of
contemporary medicine is common in Australia today. There appears to
be a widely felt sense that the opening up of medicine to commercial
interests and the promotion of economic competition have undermined
fundamental values and seriously threaten patient care. It is widely felt,
too, that these issues have been substantially neglected in the public
debates, which have focused almost exclusively on technical issues of
financing at the expense of ethical and cultural questions.2
I shall argue that the social policy which promotes economic competition
as a major technique for regulating the healthcare industry raises a wide
range of issues about the organisation and dynamics of healthcare and is
likely to lead to a variety of outcomes that are not beneficial. Before
committing ourselves irrevocably to such a policy we need to consider
not just the economic variables, narrowly defined, but also the
underlying ethical and philosophical questions.
Assumptions underlying competition policy
Soon after taking office, in May 1996, the Minister for Health, Dr
Michael Wooldridge, declared the government's commitment to
promoting competition in the healthcare sector:
One fundamental of micro-economic reform has been the
application of competition principles to industry -- including those
where public sector funding and provision has been significant, as
it is in the health sector. These principles are based upon an
approach [in] which decisions about the use of resources are
made in the light of independent bids for the provision of goods or
services made by players who are not in any way in collusion.3
An increasing emphasis on the role of the market in regulating decision
making is at the centre of the national competition policy for healthcare
in Australia (Box). Its advocates argue that enhanced conditions of
competition among doctors, hospitals and insurers should be supported
for two reasons: because they are necessary to contain healthcare costs
and because they will provoke a shift in the healthcare power balance
from providers -- that is, doctors -- to consumers -- that is, patients.
Many of the assumptions underlying such a perspective, however,
depend on a view of human action and relationships that can be
contested on both philosophical and factual grounds. For example, it is
assumed that consumers always act out of self-interest, that they use
their own money to buy all goods and services, and that they seek the
best price quantity/quality combination to maximise total utility. Similarly,
it is assumed that providers are also primarily concerned with their own
interests, adapt their prices and throughput in the light of consumers'
purchasing, act to maximise profits by increasing market share at
acceptable prices, and always seek to use labour and resources
sparingly.
All of these assumptions are mistaken, at least with respect to medicine.
Although economic constraints of some kind are obviously unavoidable,
it does not follow that these must be derived from the market. As is
widely acknowledged, the healthcare market is not a perfect one.9
Individual patients by and large do not behave like typical consumers.
Ordinary people cannot always understand the complex healthcare field,
their needs are immediate, and decisions need to be taken under
conditions of duress. In addition, patients become dependent on doctors
with whom they have established ongoing relationships of trust and who
in turn are sincerely committed to their patients' interests.
Effects of competition policy
Where competition policies have been introduced elsewhere it is not
clear that they have produced beneficial effects. Indeed, economic
competition in healthcare may raise costs rather than reducing them.3,10
For example, in California, where these models have been heavily
promoted, healthcare-spending growth is faster than in any other
American state and costs are now the second highest in the country.
Likewise, in New Zealand, where similar policies were introduced over
the past six years, it is claimed that distortions created by the economic
incentives have led to overservicing in some areas and underservicing in
others.11-13
Similarly, the effect of competition policies on consumer choice has been
mixed. Limitation of the sovereignty of physicians does not necessarily
mean increased possibilities for patients. On the contrary, to the extent
that market-based incentives tend to operate against the most needy and
vulnerable members of the community, the indigent and socially
disadvantaged populations are likely to be worse off under a more
competitive system. In the US, where it is commonplace for healthcare
organisations to seek openly to maximise their profits by restricting
medical care in individual cases, this appears commonly to be the
case.3,14 In Australia, the introduction of casemix funding has openly
discouraged admissions for social or compassionate reasons by
attributing low weights in these categories, and there is evidence that
specific social groups may be particularly disadvantaged.15
Ethical and cultural implications of competition policies in healthcare
The promotion of market-based incentives and discentives as the main
regulating mechanism for the healthcare system affects not just the
"economic variables" -- it also influences the quality of healthcare in
general and the experiences of patients and doctors that emerge from it.
Indeed, competition policies explicitly seek to challenge many of the
traditional norms underlying medical practice, on the assumption that
these are simply devices for protecting the financial interests and power
of physicians.10
As both doctors and patients have always recognised, however, the
medical relationship cannot be understood purely as a commercial
relationship. Patients come to doctors because they are experiencing
pain, illness or fear. They offer access to their bodies and to the intimate
recesses of their personal lives. They grant wide discretion and
decision-making power to doctors, on the understanding that doctors
will exercise their judgement in a disinterested and compassionate
manner. It is mutually agreed that the power of doctors is subject to
rigorous ethical constraints arising from the long tradition of medicine,
which have been upheld by the professional organisations for hundreds
of years. These constraints, which constitute a complex, self-generated
system of professional norms, limit the nature of personal relations
between doctors and patients, the use and dissemination of information,
licensing and credentialling of practitioners, and specific commercial
practices such as fee splitting, advertising, self-referral, and ownership of
pharmacies and hospitals by physicians. They primarily reflect altruistic
concerns of doctors to separate personal and financial considerations
from the paramount professional goal of doing what is best for their
patients, even if, undeniably, they also have the effect of protecting
doctors' financial interests. They do not prohibit competition, but rather
channel it into non-economic forms, such as competition for reputation,
recognition and status, and social influence.
Emphasising economic values undermines the role and power of ethical
values.16 This fundamental shift may in the longer run prove deeply
significant for society as a whole, for it may lead to changes in the
structure and dynamics of the clinical process itself.
A crucial aspect of the medical encounter is that it is not purely
"instrumental" in character. It does not merely subserve technical
functions, the solution of problems in biochemistry or physiology through
the application of scientific modes of thought and analysis. It is also
involved in setting goals, in identifying and scrutinising meanings, and in
establishing the frameworks within which the technical problems are
identified and given a value. These latter functions are "non-instrumental"
in character, and become possible because of the peculiar nature of the
contact between doctor and patient: its intimacy and openness, its
reliance on vulnerability and trust, the moment of sanctuary it offers with
respect to the utilitarian relationships of everyday life. It is through the
contact that the doctor is granted with the lifeworld of the patient that the
healing process becomes possible. This contact, which occurs through a
variety of mechanisms, including language and touch, stands at the
irreducible core of clinical medicine.
It is an unavoidable consequence of the introduction of the unrestrained
operation of market forces into healthcare that economic values
penetrate to the heart of the medical relationship. Indeed, it is precisely
the rationale of the policy that financial imperatives take over as the
motivating principle of all medical decision making. To open up the
clinical relationship to such forces, to subject it to criteria that are purely
calculable and quantitative, risks undermining the dynamic structure on
which the entire medical enterprise rests. The physician becomes the
agent of the hospital or the system rather than of the patient. His or her
primary obligation to act on behalf of the patient is displaced in favour of
conformity to a complex system of economic incentives and
disincentives. The scope for disinterested, compassionate care is greatly
contracted.17 The opportunities to respond to individual needs, to the
specific details of the predicament of a particular patient, are severely
contracted in the face of the overwhelming power of economic
imperatives.18
Health-financing policies cannot be understood as exclusively technical,
or "value free", mechanisms for regulating the healthcare system. Rather,
they must be interpreted and evaluated in accordance with philosophical
and ethical criteria and in relation to their social and cultural
consequences.19 We need to ask not merely Is this a way to balance
the books? but also Is this the kind of healthcare system we want to
have? If this simple test is adopted it becomes immediately apparent
that a reliance on economic incentives to regulate the quality and
distribution of healthcare resources is, through its effect on the conduct
of doctors and the outcomes for patients, very likely to lead to
consequences widely considered unacceptable.
Conclusion
Clearly, action to limit healthcare costs is widely supported in the
community. Among the possible strategies for achieving this end, an
enhanced emphasis on economic incentives and disincentives has gained
popularity around the world. Although the stated aim of this policy is to
reduce healthcare costs and increase consumer sovereignty, whether it
will achieve these objectives is open to question.
The employment of economic competition as a key device in the
regulation of the healthcare system, however, is more than a mere
technical solution to a fiscal problem. It is an intervention that raises
issues at medicine's philosophical core. One of the major objectives of
competition policies is to challenge the traditional system of norms that
guide the behaviour of physicians; the implications of this are potentially
far-reaching. The possibility that the introduction of economic
imperatives at the heart of the medical endeavour may compromise it in
a fundamental way also needs to be considered. The globalisation of the
economy -- in the dual sense of the elimination of national boundaries
and the universalisation of economic values -- has the capacity to
profoundly transform the nature of the entire domain of healthcare. To
be sure, it may usher in lower prices for some services and enhanced
availability of others. However, the cost of these gains may be very high,
for it may also lead to the corruption of some of the central values of
medicine, and to a contraction of the sphere for individual action in
favour of the uncompromising demands of the ever-expanding system.
This scenario -- and that depicted by Dr Vaughan -- may, of course, be
too bleak. Perhaps the traditional values of medicine will prove to be
sufficiently resilient to survive under the changed social and economic
conditions, as indeed they have over the millennia. Naturally, it is to be
hoped that this will be the case. Nonetheless, it is essential that
proposed new directions in healthcare policy are subjected to rigorous
scrutiny in relation not merely to narrowly conceived fiscal criteria but
also to cultural and ethical ones in open, public debate.
References
1.Toy M-A, Birnbauer B. This man has been a cancer specialist for
23 years. Last week he quit. Why? The Age (Melbourne) 1998;
28 July: 1.
2.Lown B. Physicians need to fight the business model of medicine.
Hippocrates 1998; 12: 25-28.
3.Wooldridge M. Opening. In: AMA Summit proceedings.
Competition in health: a brave new world? Canberra: Australian
Medical Association, 1996; 2-9.
4.Glaser WA. The competition vogue and its outcomes. Lancet
1993; 341: 805-812.
5.Enthoven AC, Kronick R. Consumer-choice health plan for the
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6.Kuttner R. Physician-operated networks and the new antitrust
laws. N Engl J Med 1997; 336: 386-391.
7.Changra J, Kakabsadse A. Privatisation and the National Health
Service. Aldershot: Gower, 1985.
8.Fels A. The ACCC approach to health. In: AMA Summit
proceedings. Competition in health: a brave new world?
Canberra: Australian Medical Association, 1996; 14-20.
9.Reinhardt UE. Accountable health care: is it compatible with
social solidarity? London: Office of Health Economics, 1997.
10.Robinson JL, Luft HS. Competition and the cost of hospital care.
JAMA 1987; 257: 3241-3245.
11.Pezaro D. The New Zealand view. In: AMA Summit
proceedings. Competition in health: a brave new world?
Canberra: Australian Medical Association, 1996; 9-13.
12.Hemenwon D, Killen A, Cashman SB, et al. Physicians'
responses to financial incentives: evidence from a for-profit
ambulatory care center. N Engl J Med 1990; 322: 1059-1063.
13.Hillman A, Pauly MV, Kerstein JJ. How do financial incentives
affect physicians' clinical decisions and the financial performance
of health maintenance organisations. N Engl J Med 1989; 321:
86-92.
14.Brown ER, Dallek G. Changing health care in Los Angeles. In:
Ginzberg E, Berliner HS, Oston M, Brown ER, editors. Changing
US health care: a study of four metropolitan areas. Boulder:
Westview, 1993.
15.Ruben AR, Fisher DA. The casemix system of hospital funding
can further disadvantage Aboriginal children. Med J Aust 1998;
169 Suppl Oct 19; S6-S10.
16.Pellegrino ED. Ethics. JAMA 1994; 271: 1668-1670.
17.Agich GJ, Begley CE. Some problems with pro-competition
reforms. Soc Sci Med 1985; 21: 623-630.
18.Weber M. Science as a vocation. In: Gerth HH, Mills CW,
editors. From Max Weber: essays in sociology. London:
Routledge and Kegan Paul, 1964; 129-158.
19.Charlesworth M. The new ideology of health care: ethical issues.
In: Halasz G, on behalf of the Psychiatrists Working Group,
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Australian psychiatry and the Australian community. Melbourne:
Psychiatrists Working Group, 1997; 104-110.
A version of this article was given as an oral presentation at the Australian
Medical Association conference Competition in health, Canberra, 31 July
1998.
Authors' details
Department of Medicine, Monash University, Melbourne, VIC.
Paul A Komesaroff, PhD, FRACP, Associate Professor, and Director, Eleanor
Shaw Centre for the Study of Medicine, Society and Law, Baker Medical Research
Institute, Melbourne.
©MJA 1999
What is competition policy?
Competition policy is an economic and political strategy for ensuring that
market forces operate as the principal device for the regulation of
economic relations. Several approaches reflect the range of economic
theories and philosophical perspectives represented.4
In the United States, antitrust laws are used to break up arrangements
such as fee schedules by medical associations, corporations among
hospitals, collective bargaining between providers and insurance carriers
and payer reimbursement. More recently, managed care has emerged as
a major approach to cost containment.5,6 In the United Kingdom under
the Thatcher Government, certain services were contracted out to
private firms and hospital and general practitioners were granted a
substantial degree of financial autonomy.7
In Australia, a National Competition Policy was introduced in 1995 with
bilateral support, establishing competition and cost considerations as the
guiding principle of public policy at every level of government. This
policy is enforced through a framework of law -- including the Trade
Practices Act 1973, the Competition Policy Reform Act 1995 and
the Prices Surveillance Act 1983 -- and two key regulatory bodies,
the Australian Competition and Consumer Commission and the National
Competition Council.8 These regulatory bodies have very wide powers
to oppose "anti-competitive conduct and unfair market practices" of all
kinds, and to regulate "mergers or acquisitions of companies, product
safety/liability and third party access to facilities of national significance".