ABSTRACT
This chapter considers the competitive market mechanism that generated significant efficiency gains in other industries, examples of new types of competition emerging in the healthcare industry, and regulatory challenges facing states as the competitive changes unfold. It also considers examples outside the healthcare industry, which illustrate issues likely to arise as private-sector innovators work to generate new types of efficiencies in the healthcare industry. The chapter considers two sources of the competition: new types of providers operating in a local area and competition from providers located in larger geographic areas. It explains the potential benefits offered by retail clinics and specialty hospitals, the implications for general hospitals and primary care physicians (PCPs), and challenges facing policy makers. The role of patients in demanding particular diagnostics, medications, and/or treatments raises some of the issues when examining the managed care backlash.
