Use of a preferred provider plan by employees of the City of Seattle.

Little is known about the use of services in a preferred provider organization (PPO). We studied a preferred provider arrangement between Pacific Medical Center and employees of the City of Seattle. In the second 12 months of this program 8,529 subjects submitted at least one claim; of these, only 420 (4.9%) ever used the preferred provider. Those who used the PPO at least once differed significantly from those who never used it on age, sex, employee/dependent status, and utilization in the previous year. Outpatient and total charges were higher for PPO users than for nonusers before and after control for those characteristics. Those who used the PPO exclusively were similar to those who never used it. People who used both the PPO and other providers were at higher risk for use of services, and had much higher overall utilization, with or without control for other variables. No differences were found between people who obtained only a small proportion of their services at the PPO and those who had most (but not all) of their use at the PPO. Many of these findings can be explained by a self-selection model. It is important for research on PPOs to have an independent manner of assessing who is a PPO user.