The Effects of PPOs on Health Care Use and Costs

Are Preferred Provider Organizations (PPOs) effective as a strategy for controlling costs? If so, which design components and which activities are associated with costs savings? Using 1988-1990 claims data from a national managed care company covering thousands of employees, investigators studied three aspects of PPOs: 1) overall effects of PPOs on health care use/costs; 2) cost management activities associated with PPO cost savings; and 3) effects of PPOs on care patterns and use of specific medical procedures for which appropriateness of use is often questioned (for example, tonsillectomies, cataract surgery, and mastectomies).