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The idea of a free market, defined by rivalry, price cues, and a lack of governmental involvement, is a popular concept. However, there is debate regarding the claim that entry into the market is too easy for hospitals in free markets and that entry restrictions by regulators can promote societal welfare. On the one hand, hospitals freely entering the market may result in more competition and innovation, which would be advantageous to consumers. On the other hand, unrestricted entrance may result in market saturation and lower hospital profitability, resulting in less investment in new construction, equipment, and personnel.
In theory, supply and demand are the guiding principles of the free market. Hospitals will enter the market to supply healthcare services when there is a high demand for them. Patients may pay less as a result of increased competition. Additionally, the prospect of new competitors entering the market may push current hospitals to raise the caliber of their offerings to retain patients. Unrestricted entry into the healthcare industry, however, can also result in market saturation, which can harm both already-existing hospitals and the larger community (Eichner, 2020). In a crowded market, hospitals might need to make more money to pay their bills, preventing them from investing as much. This can result in a decline in the quality of care available to patients and reduced access to healthcare services. Market saturation can also lead to increased competition for patients, which can drive up healthcare costs as hospitals are forced to compete on price.
In conclusion, while there is a valid argument to be made for restricting entry into the healthcare market, this approach also has potential drawbacks. There is a trade-off between encouraging competition and stifling it, as with many other policy choices. In the end, the decision to restrict entry should be based on a thorough evaluation of the potential advantages and disadvantages, taking into account the markets unique characteristics and the regulators objectives.
Reference
Eichner, M. (2020). Americas free-market policy. The Free-Market Family, 1942. Web.
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