Preferred provider organizations: the new health care partnerships

It is a rare hospital organization that is not involved with an HMO, PPO, or other alternative delivery system. It is a strategic imperative for most hospital organizations to participate in ventures which can direct blocs of patients. Preferred provider organizations have all the elements necessary to ensure the success of new financing and delivery arrangements--but why have so many failed to reach their promised expectations. This article describes the objectives of each of the four major participants in a PPO arrangement: providers, employers, employees, insurance carriers/administrators. Each of these partners must benefit from the new delivery/financing mechanism. Arrangements will differ given the local stage of HMO development, hospital and physician cultures, insurance company traditions, and the general "competitiveness" of the marketplace. A successful PPO arrangement will effectively address the objectives of each partner; it will provide a mechanism for bringing providers and purchasers together in developing exciting new health care financing programs.