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This page created October 2000 by Michael Wynne
This page examines the behaviour of not for profit community services
when they are placed in a competitive marketplace and have to compete
with groups whose primary focus is competition and market dominance.
The experience from the USA is that not for profit groups and government agencies seldom compete effectively against large for profit corporate groups. The former are oriented and focussed on care and the community. Corporations are primarily focussed on the business of the market and on competition. Human and financial resources are diverted from care to these activities.
There is no reason why it should be different when the same competitive forces are transplanted to Australia. The more aggressive the competition the more readily not for profit groups go under. This is in part because they devote more of their efforts to care, provide services based on need rather than profit, are not driven by an imperative to grow, and are committed to serve the community rather than to securing market dominance. The exceptions are the not for profit groups which emulate the philosophy and ethics of the for profits - like the HMO Kaiser or the hospital group Sutter Healthcare.
Corporations claim their greater competitiveness is because their size gives them a competitive advantage in purchasing and that they can provide the same service more cheaply. When the giant Columbia/HCA was evaluated against a group of not for profit hospitals this advantage was found to be minor. The advantage came in providing fewer staff, in restricting services to those which made money, in providing less charity care, and in charging more when they had taken control of the market. Charging more in a region where they had control of the market allowed them to undercut and put smaller competitors out of business in those regions where they were establishing control.
One could add to this some problems for the community - an inability or unwillingness to respond to local requirements, and an inability to exhibit genuine care and flexibility in response to local situations. They were unable to meet the complexities of our society. There are some exceptions to this general criticism.
THE IMPACT OF COMPETITION ON CARE:- While these examples are corporate providers rather than purchasers they nevertheless illustrate the problems in competition. As Robert Kuttner has shown not for profit groups survive by adopting the thinking and practices of the corporations which set the competition agenda. Managed care is no different. Kaiser is a not for profit HMO, yet its practices in denying care, being deceptive in its dealings and in cutting staff at the expense of care have been as ruthless as many of the for profit HMO's - eg. Aetna.