Difference between HMO and PPO

Difference between HMO and PPO

Difference between HMO and PPO - HMO's

Difference between HMO and PPO - HMO's are prepaid health plans. As an HMO member, you pay a monthly premium. In exchange, the HMO provides comprehensive care for you and your family, including doctors' visits, hospital stays, emergency care, surgery, lab tests, x-rays, and therapy. The HMO arranges for this care either directly in its own group practice and/or through doctors and other health care professionals under contract.

The HMO system completely eliminates traditional fee for service medicine in which doctors are paid for each patient visit. Instead, a doctor agrees to assume responsibility for a certain fixed number of a health plan's patients; and the physician is paid a flat fee every month for each of the patients on his list, whether the doctor actually sees the patient that month or not. This is called a "capitated plan". HMO's were originally conceived supposedly to give doctors an incentive to focus their energies on keeping patients well (as if they weren't already doing that); so that their patients would need expensive medical care less often.

Difference between HMO and PPO - PPO's

PPO stands for Preferred Provider Organization. These organizations also have contractual relationships with insurance companies. However, PPOs are more loosely organized and are not as restrictive as HMOs.

Under this system, doctors contract with an insurance company to accept specified reduced fees for their services; and the doctors also agree not to bill patients for the difference between their normal fees and what the insurance pays them. The insurance company then markets its group (or "panel") of doctors to major employers to provide medical services at some lower cost to the employer than traditional Indemnity Health Insurance.

Because doctors under this sort of program are paid a fee each and every time they see a patient, their natural inclination is to encourage patients to come to the office for evaluation if they call in with some sort of medical problem. In this way, PPO's are like Indemnity Insurance, because there is an incentive for doctors to actually see and examine their patients in person.

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Difference between HMO and PPO