PPO stands for preferred provider organization. PPOs are made up of doctors, hospitals, and clinics contracted to provide health care for patients with a specific health insurance plan. Patients who use providers within their PPO will pay much less for medical care than if they use providers outside of the PPO.  As with HMOs (health maintenance organizations), a patient insured under a PPO usually has one doctor within the organization designated as his or her primary care physician. This is usually a doctor in family practice, internal medicine, or pediatrics in the case of a child. These primary care physicians can then refer their patients to specialists if necessary.

 An important difference between PPOs and HMOs is that HMO providers are paid in advance for services that may or may not be needed, while PPO providers are paid as the services are used. Another important difference is that most PPOs cover some percentage of a patient's medical costs even for care given by providers outside the organization.  HMOs do not, except in emergency situations or when a needed medical procedure is not done by anyone within its network. Commonly, PPOs cover 80 percent of out-of-network costs once a deductible is met.  Many patients feel that PPOs allow them to have greater choice of doctors and health care facilities.

For additional information, see America’s Health Insurance Plans.