Over the years Dr. Arian has noticed that patients really don’t understand the philosophical and pragmatic differences between PPO and HMO health insurance. Understanding the differences is vital if you are shopping for health insurance. This short segment should help you understand the difference between them.

PPO health insurance is basically a fee-for-service payment model. Doctor’s get paid for what they do and get nothing for what they don’t do. This is perhaps the oldest payment model and is similar to other professional services. It came under scrutiny over the last decades when some “bad” doctor’s started to charge for things they didn’t do or had the patients do things they didn’t really need to run up the bill.

HMO insurances proposed a new model to control costs whereby the Doctor’s get a monthly fixed amount (these days about $22.00/month) for carrying you as a patient on their roster whether they see you or not. When they do see you, no matter how often or how long, they do not get reimbursed. The fee is taken out of the pot of money their monthly stipend has accumulated. It was thought this would prevent Doctor’s from doing unneeded procedures,and ordering unnecessary visits. It would motivate Doctor’s to keep their patient’s healthy. It made sense initially but problems eventually emerged with the HMO system.

In our opinion the problem with the HMO system is it goes against human nature. Think about it. If you are running a medical office and getting money every month to carry a patient on a roster, do you want them to come in? NO! It costs you money. Do you want to see them? No! It costs you money. If they call in for an appointment are you going to get them right in? NO! It costs you money. Better to drag out the appointment and see how long you can delay them while looking like you are soooo busy and just cant fit them in. Do you want to have a beautiful, comfortable office they can rest and relax in and nice caring staff? NO! The last thing you want is for them to WANT to come in. You want nothing that looks nice, is nice, feels good and causes them to linger or return. Dr. Arian has long joked that if you line up 100 office lobbies, he can tell which ones take PPO and which take HMO. As a Doctor, do you want to have a patient come in for lab results? NO! That costs you money. Better to have a medical assistant call and tell them everything is fine or send a 49 cent letter with the results stating all good. Finally, when a patient finally gets an appointment and comes in for treatment as an HMO patient, are you happy to see them as an HMO Doctor? NO! The patient is harming you financially by being there and every minute you spend with them is money being lost.

Contrast the above to the PPO model. PPO offices are like gorgeous little flowers trying to attract bees. PPO offices want you to come a lot and stay awhile. They want you to be happy and comfortable. They want to get you in for your appointment fast. Competition is fierce and slow appointments give the competition time to steal a patient. They do not like No-Show or late appointments. Revenue is dictated by the number of slots filled. Medical care is personalized and painstakingly complete because it is reimbursed as so.

Why then would anyone want to have HMO health insurance? This is a reasonable question to ask in light of the fact many HMOs seem to be doing OK. In all fairness here are the benefits. HMO insurance is cheap and way better than nothing. HMO’s are very big on preventive medicine. If they can keep their patients healthy they can keep their patients out of their office where they cost the Doctor money. HMO’s have a full panel of specialists under their wing. By definition they must offer full specialty consultation options. They often have their own Urgent care to help contain costs.

Regardless of what HMO’s bring to the table it all goes back to the Doctor-Patient interaction. Do you want to see a Doctor who is eager to see you and who stakes his entire income and survival on your coming to see him or one that is not eager to see you and considers you a financial loss. The choice to us seems obvious and is the reason we have resisted becoming an HMO provider now for many, many years.

So what is the best type of health insurance looking toward the future? In our opinion it will be a combination of the two systems. One that offers a low base stipend for carrying a patient on the roster and additional fees for services based on what is done while factoring in quality outcomes.

Certainly the argument PPO vs. HMO is much more complex than we allude to here. But in our opinion and simply put, reward is better than punishment in motivating people.

Written by
