The Study of Preferred Provider Organizations

This report summarizes the results of a study of five employers who included a preferred provider organization (PPO) in their employee health-benefit plans. The study analyzed employee participation in and satisfaction with the PPOs, differences between PPO and non-PPO participants in their use of health-care services and the costs of those services, and provider experiences with PPO membership. All the PPO plans studied were successful in attracting indemnity plan enrollees to PPO providers, although the participation rate was significantly lower in the one plan that offered a small PPO and little incentive to use it. The PPOs successfully curbed the level of outpatient use in general and mental health care in particular. Results for inpatient services are inconclusive. The two enrollment PPOs and the optional PPO with the smallest and most cost-sensitive provider panel showed the largest savings. The authors found no evidence that favorable health selection accounted for their findings of lower utilization levels. Both patients and providers seem satisfied with the PPO experience. Very few PPO physicians would change their original decision to join the PPO.