Monopoly: Healthcare Edition (Part 2)
What is a monopoly? According to Merriam-Webster it is “complete control over the entire supply of goods or a service in a certain market”. The Economic Times sees it as “A market structure characterized by a single seller, selling a unique product in the market. In a monopoly, the seller faces no competition, as he is the sole seller of goods with no close substitute.” The Federal Trade Commission (FTC) defines a monopoly more liberally as “a firm with significant and durable market power”. Greater than 50% “of the sales of a particular product or service within a certain geographic area” is the threshold stated on the FTC website.
Rather than assuming that monopolies are inherently good or inherently evil, let’s try to look at it objectively.
Advantages of Monopolies (Pros)
Monopolies make a lot of money and shareholders and local communities can benefit greatly from their high profitability.
Securing a monopoly can enable competition in the international marketplace thanks to the magic of the interweb.
High quality products or goods are a necessary foundation of a monopoly which benefits the market.
A monopoly being able to alter the economies of scale will lead to increased efficiency and lower internal costs, which can potentially be passed on to the consumer.
Patents grant a limited monopoly and the profitability that can secure drives innovation.
Disadvantages of Monopolies (Cons)
By definition, monopolies limit or exclude competition, so they control the pricing and are under no obligation to lower prices and can potentially raise them at any time.
Monopolies can stymy innovation because research and development requires a significant investment and they already control the market.
There is no guarantee that a monopoly will maintain and continue to produce a high quality product or service.
A monopoly wields the power to restrict supply and create a manufactured scarcity, driving up prices artificially.
Suppliers can be at the mercy of the market dominance of the monopoly, which can control prices for supplies and raw goods as well as fees for services and labor.
If there were a common thread binding the pros and cons together it would be that degree of altruism expressed by the business / corporation / firm drives whether monopolies area advantageous or disadvantageous to the consumer. We could conclude that monopolies aren’t inherently good or evil. The problem is that even if Mother Teresa was running the business, she would eventually receive her last rites and move on to eternity. With succession or changing of regimes comes the potential for the loss of the founder’s original vision and the opportunity for tyranny.
Do you think that Old Man Potter from “It’s a Wonderful Life” gave two shits about anything other than making a profit at all costs? I’d still like to toss his miserable old ass down a flight of stairs for sticking it to Uncle Billy like he did. Hateful old bastard. Sadly, not every Ebenezer Scrooge responds to the call of the three spirits the way that he did.
Put aside all of the mission statements and core values that businesses like to tout. These are good for what they are intended for: loyalty building and public relations. At their core, all businesses (and even most charities) are ultimately about making money. Even if the business is passionate about the service that they provide, they cannot continue to provide it indefinitely if they aren’t profitable. It’s simply not sustainable.
So, to the heart of the matter, how does all of this apply to healthcare? Think about the advantages and disadvantages above and see how they may apply. During their lifetime, nearly everyone participates in the healthcare system in one way or another. Directly or indirectly. For younger people, it is typically for acute illness, injuries or obstetrics / gynecology services. For the elderly, there is a shift towards chronic illnesses. The marketplace is enormous.
What is the real vision and aim of the monopolizing organization? Not the bullshit that they mumble to each other at meetings. What are they really trying to accomplish? Either correctly or incorrectly, I above summarized the net effect of a monopoly, in this case we are exploring the concept of a healthcare monopoly, as boiling down to the intentions of the system.
Have you ever seen shows like “Flip or Flop” that focus on purchasing distressed properties, making some renovations and then selling them for a profit? There are multiple iterations of the same theme. Some people do it and many dream about it. Looking for the diamond in the rough is a very popular concept.
For some healthcare organizations, this is the end game. Remember the illustration from Part 1 about the theoretical monopoly in northeast Tennessee? Picking up from where we left off, once a significant portion of the assets within a geographic region are secured, a merger or sale to a similar sized or larger entity can be pursued. Carried out to its fullest, the culmination of this process would lead to one unified healthcare system. While this is unlikely, it is difficult for some to check their lust for imperialism and dynasty building, so you never can know for sure. It’s improbable but certainly not impossible.
Achieving a regional healthcare monopoly requires a great deal of influence. Political connections. Attorneys. A deep understanding of the game and all of its rules. And an ability to influence change of the rules if they don’t suit your needs. They have an immense amount of power. Representatives hob nob with the who’s who of this and that. They have influence all of the boards and organizations that need influencing. They are the movers and the shakers.
Even if a “flip” is not the intent, a similar if not identical process tends to occur once a monopoly is actuated. In this case, the system may be content to secure and hold a regional fiefdom. Seize control. Cut and consolidate services. Maximize profit. Underperforming facilities are closed or repurposed. Competition is assimilated or driven out. Wages are cut. Prices are raised. Healthcare organizations, especially those that have reached monopoly status, are big time employers. When they suppress wages the effects can be so profound that it can adversely impact the median income of the region, pushing some below the poverty line. Healthcare is a business. Run by businesspeople. Businesspeople who want to make money for themselves and their stakeholders. And of course, the emperor and his court must receive their fair share of the spoils.
In my opinion, the establishment of healthcare monopolies is the culmination of capitalism going unchecked or being allowed to run amok. Ironically, if the process is allowed to replicate and reach full maturity, it makes us vulnerable to ever increasing tyranny and ultimately places us on the precipice of socialism. Can you see how? This is precisely what antitrust legislation is supposed to protect us the people from. Business is good. Competition keeps the business honest and humble. Unchecked power is extremely dangerous.
Do you favor or are you opposed to healthcare monopolies?
If we find ourselves living an a region served by a monopoly, is there really anything that we can do about it short of relocating?
“Money talks, bullshit walks.”
- Stephen King
“Power and the money, money and the power
Minute after minute, hour after hour
Everybody’s running’, but half of them ain’t lookin’
It’s going on in the kitchen, but I don’t know what’s cookin’”
-Coolio
“We know that no one ever seizes power with the intention of relinquishing it.”
- George Orwell
Sources:
ftc.gov
Gaille, Brandon. “8 Pros and Cons of Monopolies”. Brandon Gaille Small Business and Marketing Advice, 18 August 2015, brandongaille.com
Mathur, Vrinda. “Monopoly Market: Characteristics, Pros and Cons & Effects. Analytics Steps, 20 April 2022, analyticssteps.com
