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Competition in Healthcare

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Read the following prompt and write a 7 sentence response as per the last line's instructions. This is a subject that is being discussed more often on Wall Street.

Coopetition between the insurers and service providers, such as hospitals and physicians, is one way these groups maximize the benefits for the relevant parties - often in the form of lowered costs as a result of integrated business platforms and practices. While these entities are officially competing with each other for business, they do cooperate in some areas for increased efficiency and lowered costs.

The "coopetition" between insurers and providers - is that providers are increasing trying to "take on risk" - i.e., provide both insurance and healthcare services to large employers within their geographic regions.

Many of the hospitals have acquired so many physician practices in every possible segment of medicine that they can literally serve most needs "in-network". At the same time, insurers are buying up service providers in some segments of the market.

They are doing this to both gain leverage against each other, but, also to probably just see how far they can actually assume the other's model. One assumption is that hospitals in the end will be able to provide more and more services and therefore sell a very good insurance & care product to employers.

That said, their revenues may not increase much because this new insurance & care product would not let them perform a ton of unnecessary procedures that they surely do now (as they are now mostly paid on a fee-for-service basis and incur only the most basic penalties for poor performance).

They'll be far more vigilant when it's their own money they are spending. In short, the model of Kaiser Permanente will probably spread around the country, but it is not certain whether it will result in a lot more revenues. It's possible that it'll be more profitable, though - in which case it may be worth betting on.

Do you see any gaps in this reasoning? Agree or disagree? What are some further considerations?

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Solution Preview

Healthcare M&A
Coopetition between the insurers and service providers, such as hospitals and physicians, is one way these groups maximize the benefits for the relevant parties - often in the form of lowered costs as a result of integrated business platforms and practices. While these entities are officially competing with each other for business, they do cooperate in some areas for increased efficiency and lowered costs.
The "coopetition" between insurers and providers - is that providers are increasing trying to "take on risk" - i.e., provide both insurance and healthcare services to large employers within their geographic regions.
Many of the hospitals have acquired so many physician practices in every possible segment of medicine that they can literally serve most needs "in-network". At the same time, insurers are buying up service providers in some segments of the market.
They are doing this to ...

Solution Summary

Characteristics of competition as it relates to healthcare industry are examined.

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