Provider participation in competitive bidding for indigent patients

In this analysis of provider decisions in bidding for indigent medical care contracts, a general conceptual framework is developed where each provider bid is associated with a series of decisions and uncertain events that define a set of possible outcomes. The uncertainty surrounding probability and outcome estimates and the variation in provider objective functions lead to bidding behaviors that can vary widely across providers. The general framework is then applied to a discussion of the bidding strategies employed in the Arizona experiment by four different types of bidders. The article concludes with a discussion of state actions that can reduce provider uncertainty in the bidding process.