Competing for Medi-Cal business: why hospitals did, and did not, get contracts

Although we cannot yet judge the broad consequences of Medi-Cal selective contracting, we can assess the outcome of the contracting process and the role that competition and other factors played in that process. In this study of the qualitative and quantitative characteristics of hospitals in Los Angeles County that bid for Medi-Cal contracts, we analyzed the factors that were important determinants of whether or not hospitals received contracts. We found that hospital dependence on Medi-Cal inpatient revenues was most strongly associated with winning a contract and the presence of a teaching program next most strongly related. We discuss the relative importance of hospital need for a contract and the Medi-Cal special negotiator's desire to include certain hospitals in the program, and conclude with a discussion of our study's implications for competition and regulation methods in Medicaid cost containment strategies.