Thus, there will be a greater move towards exclusive or semi-exclusive relationships between certain managed care organizations and certain providers. Accordingly, Phase III begins the push toward extensive delegation of services by physicians. Independent hospitals in a Phase III market quickly learn that they have an unacceptable amount of excess capacity, which cannot be satisfied fully by the formation of physician-hospital organizations or other networking efforts. Thus, Phase III usually triggers rapid consolidation among independent hospitals. Because of this consolidation, those networks that have established the infrastructure needed for Phase III will begin extensively to integrate their delivery efforts in order to gain control over the primary care base.
Consolidation clearly is the name of the game.
This consolidation sets the stage for Phase IV, when managed care yields to managed competition. Next month, we'll explore Phase IV and its implications for all market phases.