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Medicaid Managed Care And Provider Consolidation

JHHSA, Vol. 23 No. 3, (2000)

In the thrust toward constructing economic value, health care provider firms have been
consolidating at a marked rate. Medicaid managed care programs have been rapidly
emerging with the objectives of containing health care costs and improving services for
beneficiaries. However, there are concerns that the trend toward achieving market efficiency
through merger is largely incongruent with the economic and health value objectives of
Medicaid managed care programs in the stales. Discordance among value objectives arises
primarily because of inefficient and market concentrating horizontal merger strategies
employed by firms and disruptions in quality of care that occur during the transition to
integrated health care systems. By promoting vertical integration strategies and filling in the
quality gaps created by an active merger environment, Medicaid offices advance stale
objectives of cost containment and quality while recognizing that providers operate in a
complex and competitive environment that necessitates consolidation for organizational

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