Rural hospitals: Organizational alignments for managed care contracting

In order to facilitate the process of determining how best to respond to the recent growth of rural managed care, this study discusses various organizational alignments for managed care contracting. The organizational alignments are divided into three categories: remain independent, enter into a contractual arrangement, or develop an informal agreement. For each category, the article explains the option, examines advantages and disadvantages, and presents empirical evidence about the observed effects. The purpose is to present a comprehensive menu of possibilities so that rural hospitals, given their own needs and objectives, may evaluate the options. Although situations differ for individual hospitals, certain general conclusions emerge. First, contracting with managed care organizations as an independent entity is likely to be most attractive to rural hospitals that have a strong patient base. Second, rural hospitals will be more likely to enter into contractual arrangements for managed care contracting when financial pressures dominate the potential loss of autonomy and control. Finally, developing an informal agreement with other healthcare providers for purposes of managed care contracting is likely to be desirable as an intermediate step, or way of experimenting with collective action before entering into a contractual arrangement.