12.4 Preferred Provider Organizations
Preferred Provider Organizations (PPOs) consist of a group of health care providers that contract with a group to provide their services.
This type of provider creates a set discounted fee that doctors, hospitals and clinics can charge for specific services for a set group of people. In return, physicians refer patients to doctors and specialists within their organization. These organizations operate on a fee for services rendered basis rather than prepaid plans like HMOs.
Whereas HMOs stress preventive medicine, PPOs pay for curative medicine on a reimbursement plan with discounts to insureds if certain providers are utilized. These providers offer discounts to PPOs in an effort to increase their patient volume, like a quantity discount. If an insured chooses to use a provider that is not in the PPO's network, the PPO reimbursement level will be lower. Deductibles and coinsurance are typically standard.
