Preferred Provider Organization (PPO)
PPO is an acronym for Preferred Provider Organization, Preferred Provider Option, or Participating Provider Organization. These three acronyms refer to an organization that delivers services through a network of affiliated healthcare professionals. Like an HMO, PPO contracts with doctors and other healthcare professionals to follow basic guidelines for care and costs in exchange for a steady flow of patients. Also similar to HMOs, PPOs lower costs by emphasizing preventative care, such as physicals, mammograms, PAP smears, colonoscopies, and other procedures that detect and arrest medical conditions before they become more serious and more costly to treat.
The primary difference between an HMO and PPO concerns care obtained outside the PPO’s network of “preferred” providers. A PPO will pay for care obtained outside the network; an HMO will not. A PPO pays a lower portion of the costs incurred outside the network than it does for expenses from within the network, but it still pays a large portion of an out-of-network bill. Because of this policy, members of a PPO plan have the freedom to visit any doctor or specialist without needing a referral. This flexibility a major benefit for people who want to maintain a relationship with a specialist who is outside the network of preferred providers.