Preferred provider organizations (PPOs) are groups of health care providers that contract with employers, insurance companies, union trust funds, or others to provide medical care services at a reduced, negotiated fee. Like HMO’s, they may take the form of group practices or separate individual practices. PPOs typically differ from HMO’s in two aspects. First, they provide benefits on a fee-for-service basis as their services are used. Fees are usually subject to a schedule that is the same for all participants in the PPO. Second, plan participants have financial incentives to use the preferred provider network. A participant’s access to specialists is not controlled by a primary care physician, as is the case in most HMO plans and all POS plans. The proportion of employers offering PPOs increased from 36 percent in 1993 to 59 percent in 1996.
Exclusive Provider Organizations
Exclusive provider organizations (EPOs) are similar to PPOs in their organization and purpose, but, unlike PPOs, EPOs limits their participants to participating providers. In general, individuals covered by an EPO are required to receive all their covered health care services from providers that participate with the EPO. Because of the severe restriction on choice of provider, only a few large employers have been willing to convert their entire health benefits program to an EPO format.
Point-of-Service Plans
although not really a health care provider per Se, a point-of-service plan (POS) is a hybrid arrangement that combines aspects of a traditional medical expense plan with an HMO or a PPO. In a POS plan, a participant’s access to a provider network (usually an HMO) is controlled by a primary care physician. Participants retain the option to seek care outside the network but at reduced coverage levels. POS plans are sometimes referred to as “open-ended HMO’s.” The POS plan is the fastest-growing health plan in the United States. In 1996, 36 percent of employers offered a POS plan, up from 28 percent the year before. Although POS plans remain most common among the largest employers, dramatic growth is characteristic of all size groups.
Other Managed Care Organizations
Physician-hospital organizations (PHOs) are organizations that are jointly owned and operated by hospitals and their affiliated physicians and typically are developed to provide a vehicle for hospitals and physicians to contract together with other managed care organizations to provide both physician and hospital services. Carve-out plans are health care programs managed separately from an employer’s general health care plan by HMO’s or PPOs that specialize in a particular type of care. An HMO or PPO that specializes in a particular type of care may be more successful at controlling costs for that type of care than a general-purpose medical care network. Mental health, substance abuse, prescription drugs, and dental care are some of the more common types of care approached in this manner.
