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Related Experiment Videos

Evaluating PPO performance using prior expenditure data.

J Zwanziger1, R R Auerbach

  • 1RAND Corporation, Santa Monica, CA.

Medical Care
|February 1, 1991
PubMed
Summary
This summary is machine-generated.

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Preferred provider organizations (PPOs) did not control costs as hoped. PPO members, despite lower prior spending, had higher healthcare expenditures due to expanded outpatient benefits and poor utilization management.

Area of Science:

  • Health Services Research
  • Health Economics
  • Public Health

Background:

  • Preferred provider organizations (PPOs) have seen significant growth since 1983.
  • This expansion is driven by the expectation that PPOs will moderate healthcare cost growth.
  • Empirical evidence on PPO cost-control effectiveness remains limited.

Purpose of the Study:

  • To evaluate the effectiveness of a PPO in controlling healthcare costs during its first year of operation.
  • To identify factors influencing PPO enrollment and their impact on expenditures.

Main Methods:

  • Analysis of data from a PPO established for employees and dependents of a midwestern manufacturer.
  • Multivariate regression models were used to control for demographic and prior expenditure differences.

Related Experiment Videos

  • Comparison of expenditures between PPO enrollees and non-enrollees.

    • Main Results:

    • Significant selection effects were observed: PPO enrollees were younger, had more/younger dependents, and were non-bargaining-unit employees.
    • PPO enrollees had lower prior-year expenditures ($596 vs. $821).
    • Despite selection, PPO enrollees experienced a substantial increase in expenditures (P < 0.0001).

    Conclusions:

    • The PPO's cost-control goals were not met in its first year.
    • Expanded outpatient benefits and ineffective utilization management negated savings from reduced inpatient costs and discounted fees.
    • PPO effectiveness in moderating healthcare costs requires further investigation and potentially different strategies.