Preferred provider organization

A prepaid insurance plan or policy in which member hospitals and/or physicians contract with a third-party payer to deliver health services for negotiated fees, generally at a discount.


An alternative delivery system (ADS) designed to compete with health maintenance organizations (HMOs) and other delivery systems. A PPO is stated to be an arrangement involving a contract between health care providers (both professional and institutional), and organizations such as employers and third party administrators (TPAs), under which the PPO agrees to provide health care services to a defined population for predetermined fixed fees. PPOs are distinguished from HMOs and other similar organizations in that: (1) PPO physicians are paid on a fee-for-service basis, while in other delivery systems payment is usually by capitation or salary; and (2) PPO physicians are not at risk—the purchaser of the service retains the risk—while HMOs are at risk. The term “contract provider organization (CPO)” is preferred by the American Medical Association (AMA) for the arrangements discussed here. The term “CPO” might be preferable as a method of distinguishing a preferred provider organization from the other “PPO”—the preferred provider option.


Form of health care insurance in which the patient is only able to see designated physicians who are members of the organization. Typically, a person is assigned a gatekeeper or attending physician who provides primary care and, if needed, refers the patient to another physician, such as a specialist. The gatekeeper physician must approve the referral, and the PPO needs to approve, often in advance, visits to the emergency department and hospital admissions; otherwise, the insurance plan will pay neither the physician’s charges nor the hospital bills.


An incorporated group of physicians, hospital(s), nurses, and other health care workers, who jointly assume the clinical and financial responsibilities for delivering health care to enrolled groups of insured patients. The providers are semi-independent agents who agree to provide care at reduced rates.


A managed care plan that offers the patient an option to see a doctor who does not contract with the insurance company; the patient pays a higher fee to use this option.


A type of insurance plan in which participating physicians and hospitals charge reduced fees to plan members.


 

 


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