Competitive Bidding as a Cost-Containment Strategy for Indigent Medical Care: The Implementation Experience in Arizona

The State of Arizona recently instituted a competitive bidding process, in order to establish a health services delivery system for indigents and to determine capitated reimbursement levels for providers in that system. This article describes the implementation of that bidding process, and identifies factors which had a significant impact on the implementation experience. Implementation of competitive bidding in Arizona encountered problems which appear to be common to the implementation of innovative public programs. It also uncovered political liabilities that suggest that effective implementation of competitive bidding for indigent medical care contracts in other environments will be difficult, even if technical implementation problems can be overcome.