More competition should lower healthcare costs (letter to the editor)

Oconomowoc Focus, September 7, 2006

To the editor,

Some people apparently believe that the new Aurora Health Care hospital in Summit will lead to duplication of services and consequently higher costs, which consumers will bear. I say that their complaints ignore not only logical business practice but the laws of economics as taught in high school business classes or Economics 101.

Businesses like Aurora Health Care spend money on capital expansion in order to compete in a marketplace where they see a chance to supply a service to the public that will lead to profits. Likewise, businesses such as ProHealth Care, a division of national healthcare giant United Health Care, spend money on capital improvements to supply a new and/or technologically improved service to their existing customer base. This corporate capital spending is used to acquire new customers as well as to compete better against potential new competitors such as Aurora.

This spending of corporate money is done with profit as the motivation. It is those profits earned supplying consumer services to the community that pay for the expansion and renovation. It does not merely create a direct cost to the community with no apparent benefit, as some are claiming.

By that logic, companies could build excessive capacity and somehow have the community pay for it rather than spend their own money. That isnt the way business works. A company that builds excessive capacity will find there arent enough paying customers to offset the expense of building that capacity and will either eventually shut it down or start competing on price with their competition. By lowering prices, they draw price-sensitive customers away from the competition and fill their capacity at a lower profit margin.

In reality, more competition leads to lower prices for the public, not higher. If one competitor charges prices that are inordinately high, their competitors will undercut them and take away much of their business.

Are prices at car dealers, fast food restaurants or grocery stores lower when there are fewer competitors or when there are more? All of these competitors can be said to have duplicative facilities, yet its this competitive duplication that leads to lower prices for the consumer. Imagine how much a hamburger might cost if there were no competitors allowed to McDonalds.

I say let Aurora build, let ProHealth renovate. Potential new employees, customers and taxpayers will all be better for it, in quality of service and most likely in price, as well.

Its the (economic) law.

Dwight Vickers
Pewaukee