Competitive Health Care Markets

Defining key terms:
Barrier to entry: An obstacle, like a regulation or high costs, that makes it difficult for a person or company to enter a market like health care. Competitive market: Many options for services and products in which no individual person or group has significantly greater control or influence than others. Consolidation: Combining health care providers, such as small practices or hospitals, into a larger organization.

Defining key terms:

Barrier to entry: An obstacle, like a regulation or high costs, that makes it difficult for a person or company to enter a market like health care.
Competitive market: Many options for services and products in which no individual person or group has significantly greater control or influence than others.
Consolidation: Combining health care providers, such as small practices or hospitals, into a larger organization.

Competitive Health Care Markets Defined

Competition gives patients more options for care and the best opportunity to benefit from that care.

A competitive health care market has a variety of providers who offer patients (consumers) particular services or products. Providers in a competitive market are more likely to offer a wider range of services and at a more affordable price to attract customers. Patients have more choices for getting the care they need because they can decide between multiple providers and treatment options based on their preferences and budget.

Importance of Competitive Markets in Health Care

Competitive markets must attract and support the success of many types of providers. This benefits both clinicians and patients.

Some characteristics of competitive markets in health care include:

Low barriers to entry to encourage more providers — including small and rural practices — to participate
Limited provider consolidation to ensure many options are available
Level playing fields that remove unfair advantage of one group over another — so that, for instance, a large urban practice or corporate provider does not have an unfair advantage over a small rural practice or regional provider
Incentives to improve services, efficiency, and affordability
Ability for patients to choose providers and insurance plans
Price transparency that lets consumers compare costs

Competition and Value-Based Care

Value-Based Care — health care focused on quality of care, provider performance, and the patient experience — benefits from competitive health care markets.

People have more choice for who makes up their care team and where they receive care, putting them at the center of their health care. Competitive markets also help expand care delivery options like virtual care and at-home care and motivate personalized care approaches to meet patients’ individual needs. These are all hallmarks of value-based care.

Competitive Markets in Action

Here’s an example of how competitive markets can help improve health outcomes for patients.

Creating choices for people seeking care

Beth has been experiencing knee pain for months. The area where she lives has a thriving market for health care. She uses an online comparison tool recommended by her primary care provider to search for specialists in the area, look at the backgrounds of providers, compare prices, and read patient reviews. After careful consideration, she picks a knee specialist who best meets her care and cost needs.

Additional Information

Learn more about how the CMS Innovation Center promotes competitive markets in health care and the future of value-based care:

Examples of CMS Innovation Center models that promote competitive markets: