An alternative delivery system (ADS) for health care which is a cross between a health maintenance organization (HMO) and a preferred provider organization (PPO). As in PPOs, the providers are paid on a fee-for-service basis and generally the providers are not at risk. However, beneficiaries have less freedom in obtaining their care from providers outside the panel than they do in PPOs (where other providers may be employed by the patient, but at some financial penalty). Unlike an HMO, which is established and operates under specific HMO statutes and regulations, an EPO operates under state insurance statutes, codes, and regulations. An EPO could also eliminate the commercial insurance layer in health care financing and, through employer direct contracts, provide capitation as well as other forms of payment directly to physicians and community-based health organizations.