Managed Care’s Makeover: Can PPOs Handle the Task?

John A. Marcille

Every state in the country is responding to the managed care backlash. From Bismarck to Baton Rouge, aspiring state senators are lapping it up, saving their best populist oration for that big, bad — and anonymous — creature, managed care. In good times, easy targets are elusive and like gold.

Preferred-provider organizations had better define themselves or run for cover. As described in this month’s cover story, attention is about to land on PPOs. Anything that counts 100 million in its ranks can’t go unnoticed for long. PPOs have a point in arguing that because most of them are discounted fee-for-service shops, they don’t warrant the scrutiny HMOs get.

But a system that truly coordinates a patient’s care (reducing unnecessary costs along the way) is a good thing. Abuses by some HMOs have given managed care a bad name, but PPOs have an opportunity to restore that image. If the fragmented entities that compose each PPO can set aside proprietary concerns, develop a common infrastructure, establish baseline health status for enrollees, and then monitor their care, PPOs have an opportunity to be a “quality leader” in managed care. This is larger than any single PPO; it may take an arm of government, such as the Agency for Health Care Policy and Research, to define standards and maintain a national database.

This is in PPOs’ best interest — not just for regulatory prophylaxis, but also to help them survive the next economic downturn. More and more, employers are placing health care costs back on users. As Robert Trinka, of McKenna & Associates, told Senior Editor Mike Dalzell for this story, “The basic driver of all this stuff,” meaning the state of the market, “is money and employers’ willingness to pay.” The notion of choice has proven too powerful to yank back from employees, but when benefit costs finally reassert themselves, workers who want the choices their PPOs give them will to have to fund it themselves. PPOs that can find efficiencies through higher-quality operations — not deeper discounts — have the best chance to flourish.

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