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Regulating the cost of institutional healthcare through competitive bidding.

A system for prospective rate setting based on the theory of auctions is proposed. In order to guarantee that competition will achieve public health goals, the State Health Planning and Development Agency will issue a limited number of patient day certificates. Hospitals can obtain these certificates by offering bids in the form of rate increases. Hospitals offering low rate increases will receive patient day certificates with authorized rate increases equal to their own proposed rate increases plus a bonus. Hospitals offering high rate increases will receive only a base rate increase equal to the smallest rate increase offered by any hospital. This approach enjoys the cost minimizing benefits of competition while restraining hospital capital expenditures.

Contract Services↗
PubMed1984

Provider participation in competitive bidding for indigent patients.

In this analysis of provider decisions in bidding for indigent medical care contracts, a general conceptual framework is developed where each provider bid is associated with a series of decisions and uncertain events that define a set of possible outcomes. The uncertainty surrounding probability and outcome estimates and the variation in provider objective functions lead to bidding behaviors that can vary widely across providers. The general framework is then applied to a discussion of the bidding strategies employed in the Arizona experiment by four different types of bidders. The article concludes with a discussion of state actions that can reduce provider uncertainty in the bidding process.

Arizona↗
PubMed1983

Competitive bidding and voucher payments for implementing the new federalism with special emphasis on programs for the aging.

Principles from the economics of decentralization are applied to the planning and budgeting of social services for the elderly. The standard model of corporate decentralized planning and budgeting is extended to allow different levels of government to pursue qualitatively different goals. A safety-net voucher plan is also proposed to protect the most vunerable population from possible termination of services due to poorly formulated local plans. Such a decentralized planning and budgeting system would make Federal and State influence on local plans proportional to their contribution to total expenditures.

Aged↗