Nonprofit hospitals in a competitive environment: behavior in the Arizona indigent care experiment

The initial expectations of a group of urban nonprofit hospitals about the implementation of a prepaid, competitively bid program for the provision of indigent medical care were that their participation in the program would be limited to the provision of inpatient care on a subcontracted basis. In reality, as the program evolved, nonprofit hospitals played an increasingly active role which included the provision of care as a primary contractor on a full, risk-sharing basis. This evolution in nonprofit hospital behavior resulted from a change in the overall hospital environment in the community, as well as the somewhat negative experience of the hospitals as subcontractors and a more realistic assessment of the benefits and costs from participating in the program.