MANAGED COMPETITION IN PRACTICE - VALUE PURCHASING BY 14 EMPLOYERS

Many large U.S. companies have transformed their procurement of health benefits in the 1990s by combining the principles of managed competit ion with other business tactics to create a business-savvy hybrid of t he private sector's own design, often referred to as ''value purchasin g.'' Until recently, few policymakers or health care observers believe d that large firms would be a force in health system reform. Yet to im plement value purchasing, the large companies in this study created ne w organizational forms, provided employees with financial incentives t o select low-cost health plans, and used business tactics such as comp etitive bidding to negotiate more favorable rates and to improve quali ty among health plans. The financial results were impressive for the c ompanies studied. In addition, the companies' demands on the health ca re delivery system are multiplying as the interface between business f irms and health care organizations changes. These demands will only in crease as the practices we found become more widespread.