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Preferred provider organizations (PPOs) appear to be a promising approach to controlling medical care costs. This report documents a study to determine the origins, purposes, and effects of state laws that might apply to PPOs. Specifically, the study considers whether these laws limit the cost control capabilities of PPOs, and whether the laws provide adequate protection for the consumer. The report is divided into sections that (1) define and describe the various types of PPOs; (2) identify the laws that govern third-party payers; (3) analyze the ways in which these laws may be applied to inhibit the cost-containment activities of PPOs; (4) review the contents of new PPO enabling legislation, the rationale behind them, and the way they affect the function of existing PPOs; and (5) describe other types of laws that may affect the formation and development of PPOs. Appendixes present state-by-state summaries of the PPO enabling legislation and a compilation of applicable legal authorities.

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