Preferred Provider Organization (PPO)

Some combination of hospitals and physicians that agrees to render particular services to a group of people, perhaps under contract with a private insurer. The services may be furnished at discounted rates and the insured population may incur out-of-pocket expenses for covered services received outside the PPO if the outside charge exceeds the PPO payment rate. A PPO  can also be a legal entity or it may be a function of an already formed health plan, HMO or PHO. The entity may have a health benefit plan which is also referred to as a PPO. PPOs are a common method of managing care while still paying for services through an indemnity plan. Most PPO plans are point of service plans, in that they will pay a higher percentage for care provided by providers in the network. Many insurers will offer PPOs as well as HMOs. Generally PPOs will offer more choice for the patient and will provide higher reimbursement to the providers. See also point of service.