Competition in the Not-for-Profit Sector Parts I & II
Part I
Competition vs. Monopoly:
When two or more organizations provide comparable products, the consumer
has a choice. The producers must carve a niche for themselves
through variation in the price, style, availability, or quality of their
product. However price and supply pressures can negatively affect
quality. In addition, the expense of marketing their brands
consumes capital. On the other hand, monopolies reduce the
consumer’s choice. Much of the control and decision-making swings
to the monopoly. In so doing, it achieves a more comfortable state
of existence for itself. Thus it can devote the time and energy to
more theoretically focused activities. That is, in a fashion
similar to that identified in Maslow’s hierarchy, survival and safety
must be relatively assured before higher endeavors can be seriously
attempted. Witness the tremendous research and development that
took place at Bell Labs when Ma Bell dominated the telecommunications
industry. It is a fact that monopolies can be beneficial. It
is also a fact that power corrupts. Such corruption is what led to
the myriad anti-monopoly laws currently on the books. Therefore,
some of the resources of a monopoly are often utilized (and/or kept in
reserve) to defend itself in court. Additional monies are consumed
in efforts to eliminate competition as it arises. In other words,
while competitive organizations use up significant portions on winning
the marketing battle, monopolies similarly dedicate monies to activities
which are not beneficial to the consumer.
Summary: Competition breeds short-sightedness, but tends to cause
sensitivity to the consumer. Monopolies can behave in ways that
serve their own interests above the consumer’s, but since they are
pressured less regarding short-term survival they can create longer
range plans and dedicate more of their resources to pure research.
Part II
Given the above information, it is not surprising that “managed
competition” has become popular. It is an attempt to have the best
of both worlds. This often takes the form of the awarding of
contracts to providers who are paid to deliver a certain product for a
defined length of time. However it can also be seen in other
arrangements. For instance—licensing can be considered a form of
managing competition. It provides a barrier which can only be
crossed if the potential competitor meets certain criteria.
Nowadays, managing competition is an industry in and of itself.
While this management used to be done by governments, it is now
sub-contracted by them to large private concerns. Thus, the
government has only one entity to monitor, where it previously had many.
In such cases, the government has essentially designated a monopoly,
albeit for a limited time. It has assigned a managed care company
to oversee, limit, authorize, refuse, arrange, and/or pay for services.
This writer asserts that despite their protestations to the contrary,
managed care organizations even prescribe services. They do so
when they adhere to schedules and formularies based upon generalizations
and force the direct service provider to do the same. Anyone who
has attempted to obtain authorization for a service that was not on a
managed care organization’s authorized list can attest to this.
The managed competition between the managed care organizations occurs
when the time for contract renewal arrives.
So, has something been accomplished? Or has the end result been to
apply another layer to a deep and involved process? The answer
most likely depends upon where people were when they started. If
they had good, honest, vibrant, dedicated, innovative, efficient, and
skilled providers in the first place, then the arrival of a managed care
company is an expensive, unnecessary, unwelcome, and/or damaging
intrusion.
On the other hand, if there was political favoritism, callous disregard
for the consumer, overpricing, and/or unimaginative low quality service,
then the arrival of managed care could bring a breath of fresh air.
The unfortunate thing is that the decision to bring in managed
competition/care is frequently made at the State or Province level, but
traditional catchment areas were based upon city, county or regional
designs. This can have the unfortunate effect of “throwing the
baby out with the bathwater”. That is, excellent service delivery
systems in some areas will be interrupted and distracted by a process
that is not necessary. If the right resources for a competitive
environment do not exist then the damage could be severe and permanent.
That is, if there are not enough resources or consumers to go around,
then the introduction of an artificial competitive environment will
either make proper service delivery impossible, or force geographic
entities to join together. This, again is an artificial construct.
The result is a vehicle that addresses neither previously existing
region exactly.
We should not paint with a broad brush. Some areas will benefit
from managed care/competition by achieving both significant cost savings
and vast increases in the amount and quality of available care.
However, some areas will strangle inventiveness, reduce quality of care,
and line the pockets of managed care executives.
Managed care/competition is like any other service. Buy it if you
need it. Leave it on the shelf if you don’t.