A health maintenance organization (HMO) and a preferred provider organization (PPO) have several differences such as which doctors patients can see, how much services cost, and how medical records are kept. The most significant difference between the two organizations is the option to select health care providers. As its name implies, a preferred provider organization allows a patient to select any health care provider, inside or outside of the network, while a health maintenance organization usually requires a patient to select a primary care provider who can give referrals to other medical specialists.
Choice of Health Care Provider
The PPO offers choice and flexibility, but is often more expensive. With a PPO, patients can see any doctor they wish, or visit any hospital they choose, usually within a preferred network of providers. One does not have to designate a primary care physician, and one can usually see any specialist without referral.
Conversely, an HMO requires that patients see only doctors or hospitals on their list of providers, and in addition, patients must choose a primary care physician who will direct care and refer patients to approved specialists. This type of organization offers fewer choices and may make changing doctors or seeking second opinions more difficult. Generally, the HMO will not, without prior approval, cover medical expenses incurred by seeing someone who is not contracted with the HMO, but usually will have defined coverage for emergency medical care when patients travel outside the normal coverage area.
A few exceptions exist: a large HMO like Kaiser Permanente may allow patients to use hospitals or specialists that perform a service that their contracted doctors and facilities don’t provide. Unless the health situation is an emergency, obtaining services like these usually involve approval processes and may require a great deal of paperwork and red tape.
Cost Differences
Depending upon the PPO's terms of coverage, a doctor or hospital outside the preferred provider list will cost more than those in the network; the organization will typically pay a range of 70 to 80 percent of accrued expenses, with the patient paying the remaining balance out-of-pocket. HMOs generally have a set cost for each service, which makes it easy to plan ahead for medical costs. Often, a set percentage of the bill will be paid by the organization, and once a specific deductible has been met, the patient is required to pay the remaining balance with their own money.
Medical Records
When a patient chooses a primary care provider with an HMO, medical records are kept together within the organization. Accordingly, when a patient is referred to a different provider, any related medical records are usually automatically forwarded to the new facility. While a preferred provider organization allows patients to choose providers in or out of the network, it does not store medical records in one place, which can can mean that a patient may spend more time trying to get medical records transferred.
Choosing an Organization
Frequently, employees are not really given a choice as to what insurance they can get as their company will only offer one or the other. When given a choice, they can usually choose between the health maintenance and the preferred provider organizations. Depending upon a patient's health needs and income levels, the PPO may ultimately be a better choice because it does provide access to a greater number of health providers and medical facilities. It is wise to ascertain the number of network physicians and facilities offered in PPO plans before deciding, as some HMO plans may be better deals when the HMO contracts with more providers than does a PPO.