Preferred provider organizations, or PPOs, cover medical care dispensed both within and outside their networks, while health maintenance organizations, or HMOs, solely cover services provided within their networks, explains WebMD. However, PPO members typically pay additional charges for care provided outside the designated network of health care providers.
There are several similarities between HMOs and PPOs, explains 360 Degrees of Financial Literacy. Both organizations oversee the networks of physician's groups, medical laboratories and hospitals that provide care for their members. In addition, HMOs and PPOs seek to reduce the costs of health care by emphasizing preventive care and by utilizing specialized management approaches to identify and eliminate superfluous medical procedures.
However, there are a variety of differences between the two types of health care providers, explains 360. Upon joining, new HMO members are required to select a primary care physician, or PCP, from the provider's network. PCPs determine the type and level of care given to members. In contrast, PPO members are not required to select PCPs and are under no obligation to seek care from professionals within the providers' networks. However, care provided by parties outside a PPO network incurs additional charges.
Another difference between the two types of health care organizations is how they handle co-payments, explains 360. As of 2015, HMOs typically charge co-payments of between $5 to $20 per visit, while PPOs charge 10 percent of the total cost of treatment for medical care offered within their networks, and up to 40 percent for services rendered elsewhere. Coverage plans vary by state and by chosen benefits or deductibles.