Question

Sarah suffers acute back pain. Not satisfied with the specialists in her own network, Sarah elects to see a back specialist outside the network established by her healthcare provider. Her healthcare provider pays the amount that the same appointment would reasonably have cost with an in-network specialist, and Sarah has to pay the additional costs out of her own pocket. Which type of healthcare provider does Sarah belong to?

Option 1: Preferred Provider Organization (PPO)
Option 2: Health Maintenance Organization (HMO)
Option 3: Exclusive Provider Organization (EPO)
Option 4: Point of Service (POS)

Answer 1

Sarah is part of a Preferred Provider Organization (PPO) where she has the flexibility to choose an out-of-network specialist at an additional personal cost.

Step-by-step explanation:

Sarah belongs to a Preferred Provider Organization (PPO). In a PPO, patients have the flexibility to see specialists outside their network, but will incur additional costs. Sarah's healthcare provider pays the amount that the service would cost with an in-network provider, but since Sarah elected to see an out-of-network back specialist, she must cover the excess costs. This healthcare arrangement contrasts with that of Health Maintenance Organizations (HMOs), where patients are usually required to stay within the network and out-of-network services are not covered unless it's an emergency or there's a prior arrangement. Both PPO and HMO are strategies to manage healthcare financing and provider incentives differently to mitigate effects like adverse selection and moral hazard.