What is a Preferred Provider Organization in Medical Billing?

One of the most common types of insurance providers is known as a Preferred Provider Organization (often described by the acronym PPO).

When working with patients in a Medical Office, there are many different types of Insurance options. Each type of insurance has it’s own set of advantages and disadvantages, and it is important to understand these so you can assist your patients when they are using their insurance.

A preferred provider organization (PPO) is a network of healthcare providers (doctors, hospitals, specialists) who have decided to contract with an insurer to provide healthcare services at reduced rates. Many different insurance companies offer PPO plans at varying rates.


The insurance network contracts define the reimbursement terms for all levels of healthcare  service for the providers in the network.


Typically, patients with Preferred Provider Organization plans are responsible for payment of copayments and deductibles when they use a network provider. These are lower when they pay higher premiums or have larger out-of-pocket costs. However if the premium is low, then the co-pay and deductibles are higher.

A patient’s co-payments amount to 10 percent of charges for care inside the network and 30 to 40 percent for non-network treatment.

To avoid paying large co-payments out of their own pockets, most PPO members choose to receive all of their health care within the PPO network.

The Preferred Provider Organization insurer may reimburse up to 90 percent of the cost for care received within its network, but around 70 percent of the costs for non-network care. Most PPOs give full coverage for emergency treatment regardless of where it is performed and who provides it.

When part of a PPO, patients are free to see any network specialist at any time. But if they go ‘outside the network’ (known as out-of-network), their co-payment will typically run 30 to 40 percent of the physician’s cash price charges.

PPO patients usually do not need a referral to see a specialist, but they may need to have certain procedures authorized in advance.If they fail to get permission from a PPO provider to see a non-network specialist, they could end up paying the entire bill.