How Competitive Is the Supply of Healthcare?

By Sobha Fuller, DNP, RN-BC, NEA-BC

Some argue that health is “different” from other consumer goods. One way in which it may be different is in the role of suppliers. The role of supplier in the health sector and for instance, the Apple, Inc. provide a product or good. The difference between the both suppliers is the demand of the good. Popularity of an iPhone drives the demand and the price is set. For the supplier in the health sector, it is the healthcare provider who offers a service or medical care. Typically, medical care is needed and typically not because of popularity. 

Comparison of Suppliers' Influence on Consumer Behavior

Various suppliers have mastered the art to influencing consumerism. Apple offers the bells and whistles of the iPhone and provides a status of accessibility and mobility. (1) Though there are a limited number of Disney locations, the demand for visits to Disney remains strong. Disney created a consumer-centered approach by providing concierge services, accessibility and information mobility. (2) Healthcare providers drive demand by through their clinical expertise, and sometimes it is collaborative with patient preference such as cosmetic surgery. Healthcare providers are seen similarly to attorneys as an expert or agent of information and should provide full disclosure of the information so the consumer can give an informed consent for the service. (3)

Consider the Supplier-Induced Demand

Supplier-induced demand is when a healthcare provider as the supplier decides based on his/her own clinical experience on what treatment plan/service each patient would receive. For example, during flu season, every patient with a sore throat needs a throat culture. The demand for the throat culture was depicted by the provider. It may not be needed. Supplier-induced demand may not be beneficial for the consumer, the patient. Suppliers such as healthcare providers can act as agents to share information with the patient. Many times, the information is not readily available for the patient. Thus, the patient is uninformed for the purpose or the cost of the throat culture. (4) Healthcare providers typically use their clinical experience to determine the need for services and may have a bias in what treatment to provide. Consumers such as patients should be part of the decision-making process with a full disclosure of the cost, risk and benefits of the service. (3) There have been a number of times where unnecessary tests are conducted because of a provider’s preference or experience. The possibility of provider-induced demand calls into question the effectiveness of the usual demand-side policies for managing unnecessary utilization. Patient copayments, deductibles or health savings accounts that encourage consumers to examine the value of medical services and limit their spending to services they value most may not work well when healthcare providers predetermine the decision of medical services. (5)

Reduce Unnecessary Utilization with Supply-side Mechanisms

Supply-side mechanisms typically derail unnecessary utilization, which includes pharmacy formulary, no copayment annual physical, prior authorization letter, a specialist referral and step therapy to limit services/cost. (6,7) The supply-side mechanism with the greatest effect appears to be the prior authorization, which requires a healthcare provider to state the reason for the medical service (necessity) along with evidence-based guidelines. For example, the prior authorization process for the Synagis injection for premature babies can be cumbersome if the patient does not meet the criteria. This injection is offered in five doses, and the retail cost is about $1,500 per injection. (8) Qualification for the injection therapy is very stringent due to the cost of each injection. If the prior authorization is not approved due to guidelines, the healthcare providers are given an opportunity to appeal by providing compelling evidence for the treatment, otherwise the justification of the medical service will not be approved.

Access to Healthcare on Demand

Population health management is the continuum of healthcare for consumers whether they believe they need it or not. The demand for primary care access is on the rise, while the supply of primary care physicians is on the low. (9, 10) Across the nation, many retail pharmacies, hospital systems, technology industries and insurance companies have created “so-called” primary care market accessibility. Neighborhood urgent care clinics, doc-in-the-box grocery stores/pharmacy clinics and free-standing emergency rooms have given the consumer opportunities to access healthcare but perhaps a false veil of having access to true primary care with a possibility of overprescribing antibiotics. (11,12) Primary care healthcare providers need to partner with other suppliers to leverage the use of healthcare devices and apps for medication refill reminders, clinic appointments, annual flu vaccine reminders, video visits and gamifying milestone achievement of health goals to attract patients to access true primary care and decrease ER/urgent care utilization. (13,14,15) Leveraging partners in different sectors may shift consumer thought to accessing primary care in a way that is convenient and sensitive to cost utilization.

Closing Thoughts

The concept of supply and demand in healthcare is no different from other industries. Creating the Disney environment in healthcare has altered the patient experience to a supplier-induced demand. (16) Bringing accessibility and information mobility to the consumer such as the use of the Amazon Alexa app to locate different types of medical services and creating transparency by displaying a healthcare report card will impact popularity with consumer. (17) Patient safety strategies and staff engagement have brought forth automobile and aviation tactics into the healthcare sector, including "stop the line," where suppliers and consumerism have jointly influenced the demand on medical services. (18,19) Supplier-induced demand with an opportunity to be sensitive to the concept of the Quaduiple Aim - the right population, patient experience, cost utilization and care team well-being - and consumerism will drive the competition of healthcare demand across the nation. (20)


  1. Apple Aims for iPhone Sales Boost in New Marketing Strategy -
  2. My Disney experience -
  3. Patient-Centered Informed Consent in Surgical Practice -
  4. Management of Sore Throats in Children: A Cost-effectiveness Analysis -
  5. Deductibles -
  6. My pharmacist says he needs "prior authorization" -- what's that all about? -
  7. Pharmacy formulary -
  8. Synagis Prices, Coupons and Patient Assistance Programs -
  9. Solutions to the Primary Care Physician Shortage -
  10. Researchers Investigate Primary Care Professional Burnout -
  11. The largest healthcare company in the US is sounding the alarm on a new kind of emergency room that charges 20 times more than a regular doctor visit -
  12. Nearly half of antibiotics inappropriate in urgent care, CDC study says -
  13. Text notifications for refill reminders and order updates -
  14. Getting patients in the door: medical appointment reminder preferences -
  15. Reducing Preventable Emergency Department Utilization and Costs by Using Community Health Workers as Patient Navigators -
  16. Disney Disrupting Orlando Healthcare -
  17. New Alexa Healthcare Skills -
  18. Better consumer engagement leads to better patient safety -
  19. Is It in You to Stop the Line for Safer Care? -
  20. From Triple to Quadruple Aim: Care of the Patient Requires Care of the Provider -