Preferred provider organization

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In health insurance in the United States, a preferred provider organization (or PPO, sometimes referred to as a participating provider organization or preferred provider option) is a managed care organization of medical doctors, hospitals, and other health care providers who have agreed with an insurer or a third-party administrator to provide health care at reduced rates to the insurer's or administrator's clients.

Overview[edit]

A preferred provider organization[1] is a subscription-based medical care arrangement. A membership allows a substantial discount below the regularly charged rates of the designated professionals partnered with the organization. Preferred provider organizations themselves earn money by charging an access fee to the insurance company for the use of their network (unlike the usual insurance with premiums and corresponding payments paid either in full or partially by the insurance provider to the medical doctor). They negotiate with providers to set fee schedules, and handle disputes between insurers and providers. PPOs can also contract with one another to strengthen their position in certain geographic areas without forming new relationships directly with providers. This will be mutually beneficial in theory, as the insurer will be billed at a reduced rate when its insureds utilize the services of the "preferred" provider and the provider will see an increase in its business as almost all and or insureds in the organization will use only providers who are members. PPOs have gained popularity because, although they tend to have slightly higher premiums than HMOs and other more restrictive plans, they offer patients more flexibility overall.[2]

PPO[edit]

Other features of a preferred provider organization generally include utilization review, where representatives of the insurer or administrator review the records of treatments provided to verify that they are appropriate for the condition being treated rather than largely or solely being performed to increase the amount of reimbursement due. Another near-universal feature is a pre-certification requirement, in which scheduled (non-emergency) hospital admissions — and, in some instances, outpatient surgery — must have the prior approval of the insurer and must often undergo "utilization review" in advance.

EPO[edit]

An exclusive provider organization (EPO) is a network of individual medical care providers, or groups of medical care providers, who have entered into written agreements with an insurer to provide health insurance to subscribers. With an EPO, medical care providers enter a mutually beneficial relationship with an insurer. The insurer reimburses an insured subscriber only if the medical expenses are derived from the designated network of medical care providers. The established network of medical care providers in turn offer subscribed patients medical services at significantly lower rates than these patients would have been charged otherwise. In exchange for reduced rates of medical services, medical care providers get a steady stream of business.

An EPO earns additional money by charging an access fee to the insurer for use of the network. It also negotiates with the medical care providers of the organization in order to set fee schedules and help resolve disputes between the insurer and medical care providers. Sometimes EPOs even contract with one another to strengthen their businesses and positions in a certain geographic area.

The beneficial relationship between medical care providers and the insurer often transfers to the insured subscriber because lower rates of medical services means lower rates of increase in monthly premiums. Although a good deal, the downside of EPOs is that they can be quite restrictive. As a member of an EPO, you can use the doctors and hospitals within the EPO network, but cannot go outside of the network for covered care. For example going to a hospital outside of the network in an emergency, one may have to pay the medical bills partially or completely out-of-pocket.

Exclusive provider organization (EPO) vs. preferred provider organization (PPO)[edit]

A PPO is a healthcare benefit arrangement that is similar to the EPO in structure, administration, and operation. Unlike EPO members, however, PPO members are reimbursed for using medical care providers outside of their network of designated doctors and hospitals. However, when they use out-of-network providers PPO members are reimbursed at a reduced rate that may include higher deductibles and co-payments, lower reimbursement percentages, or a combination of these financial penalties. EPO members, on the other hand, receive no reimbursement or benefit if they visit medical care providers outside of their designated network of doctors and hospitals. (Some, but not all, EPOs do allow partial reimbursement outside of the network in emergency cases.)

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