HMOs require patients to see only in-network doctors and choose a primary care physician, while PPOs offer more flexibility but can be more expensive. PPOs allow patients to see any doctor or hospital, while HMOs have fixed costs for services and keep medical records in one place. Patients should consider their health needs and the number of network providers before choosing.
A health maintenance organization (HMO) and a preferred provider organization (PPO) have several differences, such as which doctors can see patients, how much services cost, and how medical records are maintained. The most significant difference between the two organizations is the ability to select healthcare professionals. As the name suggests, a preferred provider organization allows a patient to select any health care provider, in or out of the network, whereas a health maintenance organization usually requires a patient to select a primary care provider who can refer other specialist physicians.
Choice of health care provider
PPO offers choice and flexibility, but is often more expensive. With a PPO, patients can see any doctor they want or visit any hospital they choose, usually within a preferred network of providers. You don’t need to designate a primary care physician and can usually see any specialist without referral.
In contrast, an HMO requires patients to see only doctors or hospitals in their provider list, 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 can make it more difficult to switch doctors or seek a second opinion. Generally, the HMO will not cover, without prior approval, medical expenses incurred in seeing someone who is not under contract with the HMO, but will usually have defined cover for emergency medical treatment when patients travel outside the normal coverage area.
There are a few exceptions: A large HMO like Kaiser Permanente may allow patients to use hospitals or specialists who perform a service that their contracted doctors and facilities do not provide. Unless the health situation is an emergency, obtaining services like these usually involve approval processes and can require a great deal of paperwork and red tape.
Cost differences
Depending on the PPO’s terms of coverage, a doctor or hospital outside of 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 charges, with the patient paying the remaining balance out-of-pocket. HMOs generally have a fixed cost for each service, which makes it easy to plan ahead for medical costs. Often the organization pays a certain percentage of the bill, and once a specific deductible is reached, 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. As a result, 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 within or outside the network, it does not store medical records in one place, which can mean a patient may spend more time trying to transfer records clinics.
Choose an organization
Often, employees are not given the choice of which insurance they can get as their company will only offer one or the other. When given the choice, they usually have a choice between health maintenance and preferred provider organizations. Depending on a patient’s health needs and income levels, PPO may ultimately be a better choice because it provides access to more health care providers and medical facilities. It is advisable to ascertain the number of network doctors and facilities offered in PPO plans before deciding, as some HMO plans may be better deals when the HMO contracts more providers than a PPO does.
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