Market concentration is an economic jargon used to refer to the measure of competition in the market amongst small firms. On the other hand, market power is also jargon in the same discipline used to imply a firm’s ability to monopolize service production even amidst stiff competition. Market concentration is measured using the HHI, whereby one adds the square roots of the percentage market shares of each competing firm. On the other hand, market power is measured using either the HHI or Lerner Index (Maria Chiara Cavalleri, 2019). With this knowledge, it is vital to note healthcare service provider has been commercialized either partially or entirely globally. It is also worth noting that commercialized healthcare provision faces market concentration and market power.
As noted in the introductory paragraph, the two phrases are a measure of competition. A good illustration can be borrowed from the global healthcare systems. For example, market concentration involves the competition of small firms. In this case, healthcare service-providing firms such as small hospitals targeting middle and low-income earners are often in competition. The healthcare facilities are primarily private-owned institutions. Therefore, they aim to provide healthcare services and make some profit in the process. As far as market power is concerned in a healthcare context, the big healthcare-providing institutions, mostly government-owned facilities, enjoy the monopoly of the market. They do so by offering free or subsidized healthcare services. Therefore, most citizens opt for public service providers.
The two concepts, market concentration and market power, influence the healthcare industry’s evaluation, decision-making, and planning. Firstly, before setting up a healthcare facility, healthcare providers have to assess the market situation. By so doing, they will be in a better position to know the firms that they will be competing with. Therefore, they will plan appropriately by setting up policies that will ensure that they survive in the market. Thus, market concentration and market power significantly influence the healthcare industry regarding planning, decision-making, and evaluation. In addition, healthcare legislation impacts the decisions made by healthcare-providing firms. The federal and state government regulates healthcare facilities in the United States of America (K Walshe, 2004).
Healthcare service-providing institutions vary from one region to another. For example, government hospitals enjoy a market monopoly in third-world countries. However, although government hospitals enjoy a monopoly in the market, they offer low-quality services characterized by a lack of healthcare facilities, drugs, and personnel. On the other hand, private healthcare providers provide better healthcare services as they mainly target the socially and economically privileged members of society. Therefore, the rich opt for private healthcare service providers while the poor have no choice but to receive healthcare services from government hospitals. A different scenario is illustrated in the United States of America. An article authored by Brent D Fulton in 2017 brings to the readers’ attention the concerns in the current trends in the USA whereby a rise in concentration in the healthcare market is noted (Fulton, 2017). Consequently, better healthcare is provided in both private and public healthcare service-providing institutions.
In conclusion, market concentration and market power are economic jargons in the market setup. While economic concentration involves competition between small-scale firms, market power is used in reference to a firm in the marketplace that has gained a monopoly and therefore controls service production. The commercialization of healthcare services has become a global trend. Therefore, healthcare services are provided by both private and public institutions. To regulate healthcare service provision, the federal and national government in the USA is tasked with regulating the healthcare providers and ensuring healthy competition in the healthcare market.
Fulton, B. D. (2017). Health Care Market Concentration Trends In The United States: Evidence And Policy Responses. Health Affairs, 1-9.
K Walshe, S. S. (2004). Social regulation of healthcare organizations in the United States: developing a framework for evaluation. Health Services Management.
Maria Chiara Cavalleri, A. E. (2019). Concentration, Market Power and Dynamism in the Euro Area. SSRN.