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The Puzzling Popularity of the PPO

March/April 2004
Health Affairs, Vol. 23, No. 2
Robert E. Hurley, Bradley C. Strunk, Justin White

Discontent with the undesirable features of health maintenance organizations (HMOs) has fueled surging growth in preferred provider organizations (PPOs). While employers, consumers and providers seem to know what they don’t want from HMOs, the advantages offered by PPO designs are unclear, in part, because of difficulties in determining what actually constitutes a PPO arrangement. The PPO industry itself appears to characterize itself less by what a PPO is than by what it is not-namely an HMO. Even less clear is what value PPOs yield in controlling costs, providing care management and promoting quality improvement. PPO growth also represents a retreat from the 1990s’ era of benefit expansion because financing these benefits, particularly via provider discounts, has proved unsustainable. In this vein, the PPO option is an instrument for private purchasers to realign what they wish to pay for health benefits with what they believe they can afford to pay. For consumers, continued PPO growth almost certainly translates into paying more to try to hold onto what they have.

Free access to this article is available at the Health Affairs Web site.


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The Center for Studying Health System Change Ceased operation on Dec. 31, 2013.