What is a Preferred Provider Organization?

A Preferred provider Organization ('PPO') is an administrative entity that meets the common needs of two constituencies: providers (including hospitals, doctors and medical specialty organizations) and payors (including a range of insurers, self-insured organizations and other entities responsible for financing the health care programs of their members, employees or beneficiaries). The PPO identifies networks of providers and contracts for their medical services at discounted rates. In turn, the PPO offers its payor-clients access to these providers and discounts for a small access fee. The multi-leveled transactions and communications associated with these functions are facilitated by advanced information technology in the best PPOs.

Colorado Health Insurance Payors benefit financially from the discounted fees paid for medical services, while their members, employees and beneficiaries benefit by having access to a wide range of PPO member providers. Beneficiary co-payments are also reduced because they are based on these reduced fees.

Health Insurance Providers benefit financially because they have access to the increased patient population offered through the PPO, at fair and predictable rates of payment.

There are currently more than 400 PPOs operating in the United States. Some serve only a limited geographic area, or focus on a limited number of medical specialties. A small number are national in scope and provide network coverage throughout the country. Still others are risk-bearing organizations.

Whatever their particular structure or scope, PPOs now provide access to affordable health care for more than 100 million Americans. Current estimates are that PPO membership will continue to grow by as much as 15% annually for the next five years.