A preferred provider organization has characteristics of both managed care and an indemnity plan.

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A preferred provider organization (PPO) combines elements of managed care and indemnity plans. Like managed care plans, PPOs usually have a network of healthcare providers that contract with the plan to offer discounted rates to members. However, unlike strict HMOs, PPO members can see any provider they choose, inside or outside of the network, without a referral. Like a traditional indemnity plan, PPO members usually don't need to choose a primary care doctor and don't need to get referrals to see specialists. PPO members also usually don't need to obtain pre-approval for medical services, making it less restrictive than some managed care plans.

A Preferred Provider Organization Has Characteristics of Both Managed Care