Competition fills the prescription.

• Position: Health care industry - Industry Overview

For a change, Presbyterian Hospital in Charlotte didn't direct its advertising at potential patients this fall. That's because they have less and less to say about where they end up when they get sick or hurt.

Instead, Presbyterian targeted employers reviewing their health-care contracts. In Charlotte, employers had 20 managed-care companies blitzing them with ads and beating on their doors.

"These were no warm, fuzzy, 'Oh-Presbyterian-is-so-great!' consumer ads," says Stacey Brown, PR manager. "It's the employers who choose managed-care plans. We wanted them to make sure Presbyterian was in the one they choose."

Change was the constant for North Carolina hospitals in 1995. Many changed marketing strategies, others bought out independent physician practices, and some even snuggled up to cross-town rivals. It was their common response to a common force. "Managed care is driving the train," says Stephen Morrisette, former executive vice president of the 147-member North Carolina Hospital Association.

And what happened to the proposed cure-all, universal coverage? "The whole mood for reform dissipated substantially," says Christopher Conover, a consultant to the N.C. Health Planning Commission. The private sector took up the slack with 17 health-maintenance organizations operating by fall, says Paul Mahoney, special assistant to the North Carolina insurance commissioner. The result was a slugfest.

"I probably had 15 or more calls," says Jane Barrier, vice president of human resources for SouthTrust Bank of Central Carolina in Concord. "Each one had the most to offer for the money, and each one was the leading company in the Southeast."

By forming alliances, hospitals attempted to amass enough bulk to resist managed-care insurers' demands for deep discounts. In Asheville, Memorial Mission Medical Center and St. Joseph's Hospital started cooperating to cut costs. Memorial had just spent $24 million on a new heart center and St. Joseph recently completed a $10.5 million renovation.

In Wilmington, New Hanover Regional Medical Center and Cape Fear Memorial Hospital also began collaborating. Kevin Krisher, Cape Fear Memorial vice president for planning and marketing, cites "downward pressure on revenues, a constant pressure to become more efficient."

Ten large hospitals, including Presbyterian in Charlotte and Moses H. Cone in Greensboro, announced in October they were creating an alliance, called the North Carolina Health Network, to give them...