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The puzzling popularity of the PPO.

Surging growth in preferred provider organization (PPO) participation has been fueled by migration away from the undesirable features of health maintenance organizations (HMOs). While employers, consumers, and providers seem to know what it is they do not want from HMOs, the advantages offered by PPO design are not so clear. This is attributable in part to difficulties in determining what a PPO arrangement actually is. But it may also reflect a lack of strong evidence that PPOs control costs, provide active care management, or promote quality improvement.

Health Benefit Plans, Employee↗

The development of a PPO: a comparative case study.

Preferred provider organizations (PPOs) have been under speculation by both the business community and the health care industry in their guests for ways to control health care costs since the first PPO sprang up less than a decade ago. But few of these new health care organizations have been active long enough to establish a reasonable track record. The author has, however, been directly involved with two of them over the past three years and hopes that the following information on their development and the resulting organizational structures will provide others who are interested in PPOs with insight into the complexities of this new concept.

Alabama↗

Does health insurance coverage of office visits influence colorectal cancer testing?

OBJECTIVE: To assess the effect of differing health insurance coverage of physician office visits on the use of colorectal cancer (CRC) tests among an employed and insured population. METHOD: Cohort study of persons ages 50 to 64 years enrolled in fee-for-service (FFS) or preferred provider organization (PPO) health plans, where FFS plan enrollees bear disproportionate share of office visit coverage, for the period 1995 through 1999. RESULTS: Compared with FFS plans, enrollees in PPO plans were significantly more likely to obtain CRC tests [adjusted relative risk (RR(a)), 1.27; 95% confidence intervals (CI), 1.21-1.24]. The association was more pronounced among hourly individuals (RR(a), 1.43; 95% CI, 1.41-1.45) than among salaried individuals (RR(a), 1.09; 95% CI, 1.05-1.10), consistent with a greater differential in office visit coverage among the hourly group. CONCLUSIONS: Disproportionate cost-sharing seems to have a negative effect on the use of CRC tests most likely by discouraging nonacute care physician office visits.

Cohort Studies↗

Method of payment for children's dental services by practice type and geographic location.

The purpose of this project was to evaluate practice type and geographical differences in methods of payment accepted for children's dental services. A survey was mailed to 2000 general dentists and 1000 pediatric dentists randomly selected to provide representation from the 50 United States. Dentists were asked to specify the type of practice and the state in which they primarily practice. The survey included Medicaid, dental insurance, preferred provider organizations (PPO), and self-payment as payment options. Dentists were asked to indicate whether they never, occasionally, or frequently accepted each option of payment for children's dental services. Responses were received from 1245 (42%) dentists, including 723 general dentists and 522 pediatric dentists. Chi-square statistical analysis revealed significant practice type and regional differences in the acceptance of Medicaid for payment. Pediatric dentists accept Medicaid more frequently than general dentists (P < 0.001). Most dentists accept dental insurance and self-payment, while few indicate involvement with a PPO. The study revealed significant practice type differences only in the acceptance of Medicaid as payment for children's dental services. On a geographic basis, there were significant differences in the acceptance of Medicaid and dental insurance.

Adolescent↗

Questioning assumptions about preferred provider arrangements.

The parties in any negotiation to contract for health care services delivered by a preferred provider organization (PPO) represent often divergent views and priorities. The assumptions of each participant in a PPO contracting process need to be thoroughly understood because of their impact on the subsequent business of providing, consuming, and paying for medical services. This article discusses 11 of the most common assumptions about PPOs made by providers, insurers, and purchasers. These assumptions have not been borne out to date by the experience of current PPOs and other alternative health care delivery systems.

Economic Competition↗

Selective contracting in California: experience in the second year.

Now entering its third year of implementation, selective contracting for health services in California continues to benefit the Medicaid program and is taking hold in the private sector. The number of hospitals under contract with Medicaid has increased to 274, and the state budget for inpatient services in FY 1984-1985 is projected to increase by only 1%. Operational preferred provider organizations (PPOs) in the state now approximate 50. Hospitals are contracting with private payers at prices averaging 10%-20%, and as high as 40%, below customary charges. PPO premiums are stated to be 10%-20% below indemnity rates. No measurable diminution of quality or access for Medicaid patients has yet been demonstrated. Selective contracting and its attendant competitive incentives have changed provider behavior and continue to dominate state health policy.

California↗

Real-time claims resolution. Re-engineering how we process and pay for healthcare.

UNLABELLED: A Preferred Provider Organization with about 9,000 providers in three states. PROBLEM: A fragmented and confusing healthcare payment and processing system, which ultimately hurts everyone, the patient, the provider and the payor. SOLUTION: Create a real-time claims resolution system which links everyone for quick payment of the claim at the point of service. RESULTS: Reduces paper and accelerates the claims cycle. KEYS TO SUCCESS: "Re-engineer the current system of processing and paying healthcare claims with a business model that economically benefits all parties."

Evaluation Studies as Topic↗

The emergence and future of PPOs.

A new development in the restructuring of American health care is the dramatic growth of preferred provider organizations (PPOs). Based on a national telephone survey, this paper assesses the future direction of PPOs by examining segments of the market that are believed to be lead indicators of future activity. It includes analyses of "new" versus "old" PPOs, the ten largest PPOs, and the entrance of hospital chains into the insurance market. We conclude that the dramatic growth of PPO enrollment in 1985 is likely to continue in the future, but with increased movement toward vertical integration and joint ventures among providers and insurers.

Cost Control↗

Developing a PPO: challenges and benefits.

When deciding upon which kind of alternative delivery system to develop, Saint Vincent Charity Hospital and Health Center, Cleveland, selected the preferred provider organization (PPO) mode because of four basic advantages: (1) the health care consumer's freedom to choose providers; (2) effective cost containment; (3) coordination of services among allied providers; and (4) health promotion programs. More specifically, the Ohio Health Choice Plan (OHCP) benefits hospitals by assisting to maintain or increase market share, facilitating prompt claims payments, and improving financial mix. Physicians benefit not only because they receive prompt payment and are not a risk but also because the fee-for-service system is retained and their market shares can also be preserved or enhanced. Employers' advantages include savings through controlled utilization, positive employee relations, and improved management information. Employees' benefits include lower out-of-pocket costs and freedom of choice. As a full-service PPO, the organization provides benefits plans designed to meet each employer's needs as well as actuary services, claims screening and processing, benefits coordination, utilization control, management reporting, health promotion activities, and networking capabilities. Four major challenges do confront PPOs: 1. Start-up and operating costs can be significant; 2. The administrative skills required are different from those used in traditional health care systems; 3. The commitment in implementing and operating a PPO; and 4. All participating providers must genuinely accept the PPO. A PPO's success also can be measured in three ways: the development of a strong network; size of enrollment; and effectiveness in utilization control.(ABSTRACT TRUNCATED AT 250 WORDS)

Comprehensive Health Care↗

Evaluating PPO performance using prior expenditure data.

Preferred provider organizations (PPOs) have grown dramatically since 1983, a growth that has been spurred by the hope that they will be able to moderate the rate of growth in health care costs. This remarkable growth has taken place despite the small number of empiric studies that have been published evaluating the effectiveness of PPOs in controlling costs. The experience in the first year of operation of a PPO established by an insurance company for the employees and the dependents of a large midwestern manufacturer is reported. It shows that substantial selection effects were observed, with PPO enrollees substantially more likely to be younger, have more and younger dependents, and to be non-bargaining-unit employees. Enrollees in the PPO also tended to have substantially lower expenditures in the prior year ($596 vs. $821). The effect of the PPO on expenditures was estimated in multivariate regression models controlling for demographic and prior expenditure differences. PPO enrollees were found to have increased their expenditures substantially (P less than 0.0001). Increased expenditures stemming from expansions in outpatient benefits and ineffective utilization management had swamped the effects of reductions in inpatient expenditures and of discounted fees.

Adult↗

Effect of a three-tier prescription copay on pharmaceutical and other medical utilization.

BACKGROUND: In response to rising prescription drug costs, plan sponsors are increasingly implementing three-tiered pharmacy benefits. OBJECTIVE: This study examined the effect of a three-tiered pharmacy benefit on pharmaceutical utilization and expenditures, medication continuation, and use of other medical resources in a population of continuously eligible, commercially insured enrollees of a preferred provider organization (PPO). RESEARCH DESIGN: A quasi-experimental prepost with comparison group design was used. The pre- and postperiods were each 12 months long. SUBJECTS: The intervention group included enrollees whose employer moved from the PPO's two-tier benefit to a three-tier benefit (n = 6881). The comparison group included enrollees whose employer remained under the PPO's two-tier benefit (n = 13,279). MEASURES: Key dependent variables included total prescription claims and costs, net costs (total minus copay), medication continuation, office visits, and inpatient and emergency room use. RESULTS: Relative to the comparison group, the intervention group experienced lower prescription utilization and expenditures and reduced net costs. Medication continuation rates were lower at 6 and 11 months in one of four chronic therapy classes examined; however, discontinuation could not be clearly linked to tier-three medication use. No significant differences in physician office visits, inpatient, or emergency room use rates were found. CONCLUSIONS: Three-tier prescription copays can control drug costs without evidence of change in use of other medical resources in the year following implementation. Future research should examine a variety of three-tier designs.

Cost Sharing↗

Service quality assessment of workers compensation health care delivery programs in New York using SERVQUAL.

Preferred provider organizations (PPOs) provide healthcare services to an expanding proportion of the U.S. population. This paper presents a programmatic assessment of service quality in the workers' compensation environment using two different models: the PPO program model and the fee-for-service (FFS) payor model. The methodology used here will augment currently available research in workers' compensation, which has been lacking in measuring service quality determinants and assessing programmatic success/failure of managed care type programs. Results indicated that the SERVQUAL tool provided a reliable and valid clinical quality assessment tool that ascertained that PPO marketers should focus on promoting physician outreach (to show empathy) and accessibility (to show reliability) for injured workers.

Data Collection↗

Prescription drugs: elderly enrollee reports of financial access, receipt of free samples, and discussion of generic equivalents related to type of coverage.

OBJECTIVE: To compare elderly health plan enrollee's survey responses regarding access to prescription drugs, receipt of samples, and discussion of generic equivalents across healthcare delivery systems and to examine the extent to which member characteristics are related to responses. STUDY DESIGN: Cross-sectional, observational study. PATIENTS AND METHODS: Elderly enrollees (aged 65 and over) in the Preferred Provider Organization (PPO in = 10,2201) and Medicare cost contract (n = 14,635) of a single health insurer responded to a 2001 member satisfaction survey. Multivariable logistic regression was used to estimate the relationship between outcomes (eg, not filling prescriptions) and patient characteristics. RESULTS: Elderly enrollees in a PPO had more comprehensive drug coverage and better access to pharmaceuticals than Medicare enrollees, with 14% of Medicare enrollees reporting that they "occasionally" or "always" skipped filling prescriptions due to cost, compared with 6% of PPO members (P < .001). Similarly, 14% of Medicare enrollees reported taking less medication than prescribed to save money, compared with 7% of PPO members. Ethnicity was one of the strongest predictors of financial access to pharmaceuticals among elderly enrollees, with the predicted probability of "occasionally" or "never" filling medications ranging from 0.06 for Japanese to 0.16 for Filipinos. A majority of members in both health plans reported receiving free samples of pharmaceuticals from their physicians. CONCLUSIONS: Further research is needed to determine which medications are not being filled, the impact of sampling on subsequent drug utilization, and specific chronic conditions for which more extensive coverage is cost effective.

Aged↗

Factors associated with changes in satisfaction with care.

OBJECTIVE: Satisfaction with care is an important outcome for evaluating the effectiveness of medical care. Many factors can influence satisfaction, including disease state, healthcare utilization, and health-status changes. However, few studies have investigated the association between these factors and changes in satisfaction. DESIGN: This study examined the influence of personal characteristics, type of health plan, disease states, and healthcare utilization on changes in satisfaction with care in a prospective cohort over a 12-month period through two surveys, baseline and follow-up. PARTICIPANTS: Enrollees in one of three different commercial health plans: point-of-service product, an unrestricted fee-for-service product, and a preferred-provider organization product. MEASUREMENTS AND MAIN RESULTS: Two multivariate logistic regression models were constructed. The first model evaluated factors that predicted increased satisfaction with care between the two surveys. Compared with respondents who reported no change in health status, both those with improved health status (odds ratio [OR], 1.29, 95% confidence interval [CI95], 1.03-1.61) and those with declines in health (OR, 1.29, CI95, 1.03-1.61) were significantly more likely to report an increase in satisfaction with care. Those with a history of hospitalization were also more likely to report an increase in satisfaction with care (OR, 1.27, CI95, 1.01-1.59). The second multivariate logit model evaluated factors that predicted decreases in satisfaction with care from the baseline survey. Those with reported declines in health status were more likely to report decreases in satisfaction with medical care (OR, 1.43, CI95, 1.13-1.79). Neither age, gender, race, type of health plan, disease state, nor doctor's office visits were related to observed changes in satisfaction with medical care. CONCLUSION: Changes in satisfaction with care appear to be related to changes in health status. However, the relation between these two attributes is not intuitively apparent.

Adult↗

Association between health insurance coverage of office visit and cancer screening among women.

BACKGROUND: Little is known regarding the nuances of insurance benefit design that may affect the receipt of clinical preventive services. OBJECTIVE: To evaluate whether differences in insurance coverage of physician office visits influences the receipt of cancer screening in women who have full coverage for the screening services. DESIGN: Cohort study of women enrolled in fee-for-service (FFS) or Preferred Provider Organization (PPO) health plans, where FFS plans have less generous office visit coverage, for the period 1995 to 1997. SETTINGS AND PARTICIPANTS: General Motors Corporation's employees and their dependents. MAIN OUTCOME MEASURES: Papanicolaou and mammography rates in women aged 21 to 64 years (n = 139,294) and 52 to 64 years (n = 56,554), respectively. RESULTS: Compared with FFS plans, enrollees in PPO plans were significantly more likely to obtain a Papanicolaou smear and mammogram (adjusted relative risk [RRa] = 1.22; 95% CI, 1.21-1.24; and RRa, 1.17; 95% CI, 1.15-1.18, respectively). The association was more pronounced among hourly individuals (RRa, 1.27; 95% CI, 1.26-1.29 for Papanicolaou smears; RRa, 1.17; 95% CI, 1.16-1.19 for mammograms) than among salaried individuals (RRa, 1.10; 95% CI, 1.08-1.12 for Papanicolaou smears and RRa, 1.10; 95% CI, 1.06-1.12 for mammograms), corresponding to a greater differential in office visit coverage among the hourly group. CONCLUSIONS: Benefit structure appears to have an important effect on receipt of cancer screening in women. The findings highlight the need to ensure that future reforms of the health care system do not adversely affect the use of preventive services.

Adult↗

Effects of a behavioral health carve-out on inpatient-related quality indicators for major depression treatment.

OBJECTIVES: To analyze the effects of the 1993 Massachusetts behavioral health carve-out for state employees on readmissions and follow-up treatment after hospitalization for major depressive disorder (MDD). METHODS: The sample consisted of 218 continuous enrollees in preferred provider organization and/or indemnity plans who had any MDD admissions during fiscal years 1992 to 1995. These users accounted for 310 MDD admissions. Eligibility files and behavioral health claims were used to analyze readmissions and follow-up treatment after discharge. Kaplan-Meier survival functions were obtained for pre/post (pre-carve-out vs. post-carve-out) comparisons of the two indicators. Cox regression models were used to estimate carve-out effects on readmission and follow-up treatment while controlling for patient variables. Postdischarge contact categories were also compared. RESULTS: The risk of readmission did not change significantly after the carve-out, in either the Kaplan-Meier or Cox regression analyses. Follow-up treatment was significantly more likely after the carve-out, including in the early postdischarge period. There was a significant decrease in the proportion of discharged patients followed by readmission only, and a significant increase in patients receiving follow-up treatment prior to a readmission. CONCLUSIONS: Under this behavioral health carve-out, follow-up treatment was more likely, and estimated risk of readmission did not change significantly for a seriously ill subgroup of enrollees. This was true even when controlling for patient variables and using data for extended time "at risk" for each indicator. Future research on carveouts should move toward direct clinical quality measurement.

Adolescent↗

PPOs: the employer perspective.

This paper reports the results of a national survey on employer experiences with preferred provider organizations (PPOs). The survey, conducted in 1987, included information from almost 700 telephone interviews with employee benefit managers. We found that 11 percent of employees are in PPOs. PPOs now have a strong presence among employers of all sizes. However, whereas they are a major force in the West, where almost one-third of employees are members, they have garnered only a 1 percent market share in the East. We examine the impact of PPOs on health insurance premiums and on employer satisfaction. The results show that in 1987, the year of the survey, PPOs appeared to provide mild cost savings compared to conventional insurance, and that employers were very satisfied with almost all aspects of PPOs, whereas they were surprisingly critical of their HMOs.

Consumer Behavior↗

Monopolies, Maricopa, and marketing: a case study.

The development of preferred provider organizations in recent years has caused significant concerns about the antitrust implications of these new organizational arrangements among healthcare providers. The potential of being accused of price-fixing, monopolistic, or anti-competitive activity has concerned many health professionals involved in establishing PPOs. This article presents the nature of some of the antitrust arguments and a few representative cases demonstrating various rulings about the anti-competitive elements present or absent from various PPO arrangements. In addition, selected state and federal legislation concerning PPOs is discussed. In addition to understanding the antitrust issues involved in PPOs, establishing a PPO also requires the active involvement of the various key players in determining structural and pricing arrangements. The case study presented here demonstrates the use of marketing principles which emphasize the importance of participation and communication in decision making with physicians in the formation of a PPO.

Economic Competition↗