What is the usual payment arrangement under a Preferred Provider Organization (PPO) contract?

In a Preferred Provider Organization (PPO) contract, the usual payment arrangement is based on discounted charges for in-network providers. PPOs negotiate lower rates with a network of healthcare providers, which gives policyholders the financial incentive to use these in-network providers. When patients receive care from these network providers, they benefit from reduced out-of-pocket costs, as the insurance plan covers a higher percentage of the expenses compared to out-of-network services.

This arrangement facilitates easier access to a variety of services while maintaining cost efficiency for both the insurers and the insured. Patients still have the option to go outside the network, but they tend to pay more for those services. The emphasis on discounted charges aligns with the principles of managed care, aiming to control costs while ensuring access to quality healthcare among the plan members.