What is a Preferred Provider Organization?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 09 September 2019
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A preferred provider organization, or PPO,is a type of managed care organization that is often offered as part of health insurance coverage in the United States. The basic concept of this approach is to offer members of the insurance plan access to highly qualified medical professionals who have also agreed to provide care at reduced rates to all members of the plan. While the exact structure of the PPO will vary somewhat from one provider to the other, most plans of this type provide greater benefits if the member utilizes physicians and healthcare facilities that are part of the network. A reduced benefit is often available in the event the member uses a doctor or facility that is not considered part of the network.

A point of service plan that is structured as a preferred provider organization is available in multiple settings. Group insurance plans offered through employers and other types of organizations often use this model. Individuals who wish to secure personal health insurance coverage are also often offered this type of plan. Many people prefer this approach, since it does provide the ability to pick and choose their healthcare providers from the list of physicians supplied by the insurance provider. This is in contrast to most HMO or health maintenance organizations, where the plan administrators assign the member to a primary care physician.


Another benefit of most preferred provider organization plans is that members can choose to use doctors outside the plan, but at a reduced benefit. For example, using a primary care physician that is part of the PPO may mean that the member only pays 20% of the charge for the office visit. In contrast, seeing a physician that is outside the network may mean that the out of pocket expense is 50%. This encourages members to seek medical care from within the network, but still provides the option of going outside the network if circumstances dictate and receiving some sort of benefit from the coverage.

Primary care physicians, specialists, and even healthcare facilities such as hospitals benefit from being members of the preferred provider organization. Since most patients who have the coverage will choose to make use of the healthcare services provided within the network, this means an increase in business for the healthcare providers. In addition, when the PPO has a reputation for quickly processing claims, this also means the doctor or hospital receives payment quickly, a factor that is often an important consideration when deciding whether or not to accept insurance plans offered by different providers.

When evaluating a preferred provider organization, it is a good idea to obtain a list of healthcare providers that are currently enrolled in the network. This will not only make it possible to determine if the individual’s current providers are included, but also allows the individual to identify specialists and various healthcare facilities that do accept the insurance plan. Doing so can come in handy if some type of unusual medical situations arise at a later date, since the insured party will already be aware of the selection of in-network care options that are available in the immediate area, and can plan accordingly.


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