Implementing health care reform in Israel: organizational response to perceived incentives

Abstract Devising new incentives was a main element of health care reform in Israel, which created a regulated market that embodies many principles of managed competition. This study examined sick fund directors ’ perceptions of the new incen-tives and their strategic responses to these incentives, enabling the testing of how man-aged competition works in practice. The methodology used was a multiple case study of Israel’s four sick funds. Data were gathered through in-depth interviews with 160 senior officials, analysis of national health insurance legislation, and analysis of pub-lished and unpublished archival documents, newspaper articles, public statements of senior managers, and other published data on the sick funds ’ behavior. The study revealed discrepancies between planned and perceived incentives and highlighted the effect of the latter on strategy formulation. Analysis of sick fund strategies showed that their responses to managed competition incentives deviated from theoretical expectations, compromising some of the objectives of the reform. The study also shows that contextual features account for the specific model of managed competition that was implemented and for the specific strategies employed by the sick funds. Th