ABSTRACT
Preferred Provider Organizations (PPOs) are entities through which insurance companies or employer groups purchase services for their subscribers or employees. PPOs are organizations, not actual providers. The providers who affiliate with a PPO may be physicians, dentists, hospitals, or nonphysician clinicians. The purchaser, on behalf of its members, negotiates discounted fee arrangements with the PPO in advance of service delivery. In exchange for this discount, employer groups or insurance companies provide incentives for clients to utilize the PPO providers. (See Figure 3-1.) PPO Mechanisms https://s3-euw1-ap-pe-df-pch-content-public-p.s3.eu-west-1.amazonaws.com/9781315808352/aeb0b45c-a992-46cd-ae87-e263f7fea1a4/content/fig3_1_B.tif" xmlns:xlink="https://www.w3.org/1999/xlink"/>
In PPO systems, benefit design drives patients to PPO providers, who have discounted their fees and agreed to utilization management procedures in return for increased patient volume. Patients may still choose non-PPO providers, but the PAYOR will reimburse a smaller share of charges, resulting in more cost-sharing by the patient.
