As managed care's presence grows, PHLs can take advantage of their strengths by subcontracting with the new locus of care - MCOs. The array of state PHLs have both core areas of expertise (e.g., rabies testing, blood lead) and often close relationships with safety net providers that result in test volume (e.g., clinical testing for indigent populations served by LHDs). By obtaining subcontracts to perform testing in these areas for these populations, PHLs can preserve and fortify their key strengths. In Tennessee, the PHL has not been entirely successful in its bids to subcontract with the TennCare HMOs. Still, this lack of success appears to be largely a function of late action - the PHL did not approach the HMOs until well after TennCare had been implemented (the PHL generally feels it was left out of initial TennCare policy development). Other elements of the public health infrastructure in the state (e.g., the LHDs) have successfully re-engineered themselves to compete on the open market for HMO contracts.
Most of those interviewed believe that building tangible demand from managed care is not a viable model for PHLs in the long term. Dependence on user fees is potentially a major liability for the public health infrastructure in that it may put the state's capacity to respond to public health at the mercy of market demand. Furthermore, most PHL directors acknowledge that private concerns will ultimately be able to offer tests less expensively than the state can. For these reasons, most PHLs are reducing their capacity to provide patient care testing rather than increasing it.