THE DYNAMICS OF MARKET-LEVEL CHANGE

Health care exhibits a competitive dynamic today that increasingly res embles that in other service industries. Organizations are becoming la rger to achieve scale economies and to increase market power. Vertical integration, whether through ownership or complex contracts, is also being pursued both to seek efficiencies and to improve the bargaining position of the organization. External forces that are driving these c hanges include more aggressive activities on the part of purchasers to contain their costs, developments in information technology, manageme nt innovation in other service industries, and advances in medical tec hnology. Within the health care industry, there is a pattern of organi zations taking the initiative to respond to these external forces-ofte n in anticipation of them-and other organizations then responding to t he pressures in turn placed on them. Although information on strategie s is communicated rapidly throughout the country, what is attempted an d what succeeds differs a great deal across communities. The nature of current health care institutions in the community, including the pres ence of large entities with extensive capital and strong management in a particular segment of the health system, and the community's experi ence with managed care are important factors in the path that change t akes.