What is the difference between an HMO and a PPO plan?

Written by Vu Le, DDS

The main differences between a PPO and an HMO plan is how the doctor's office is paid, how much you the patient are paid, and unfortunately, how you are treated and diagnosed. When you understand these important disctinctions, you will understand why it makes a big difference which one you choose.

Fundamentals of HMOs and PPOs

An HMO plan (stands for Health Maintenance Organization) is also known as a capitated plan, pre-capitated plan, DHMO, or DMO. The dentist is paid largely before the patients walk in the door. The insurance plan assigns a block of people, anywhere from 1,000 to 20,0000 or more patients, to a given dental office. That dental office receives a set fee per head per month, or per-capita, which is where we get the term capitated. Normally, this is $3 to $5 per head. So the dental office may get $10,000 per month to handle 3,000 patients. When the patients come in for routine exams and xrays, neither the patient nor the insurance company typically pays anything. For any dental procedure beyond that, a greatly reduced fee (usually 75% off normal) is dictated by the HMO. The patient is responsible for this entire reduced fee. The HMO pays nothing beyond the capitation check each month. There is typically no dental coverage outside of the one assigned dental office, which is usually printed on the insurance card. To be profitable, a doctor must see no less than three schedule columns patients at once.

A PPO plan (stands for Preferred Provider Organization) is also known as a Preferred Plan or a DPO. There is no capitation check involved. The dentist is paid after services are rendered by the insurance company and by the patient's co-payments and deductibles. The insurance plan allows patients to go to any dentist on the PPO's provider list, and to any doctor outside of the PPO list with a higher out-of-pocket expense. This out-of-network penalty varies from neglible (many of our providers) to absolutely no insurance coverage at all. To join the PPO provider list, the doctor must sign a contract agreeing to accept lower fees, usually 20-40% from normal. To be profitable, a doctor must see one or two columns of patients at once.

HMO and PPO plans compared

The following is a table comparing the two most popular types of insurance plans and is culminated from the experience of doctors and patients in the dental field. Of course, your experience at a given office may vary. Most of the differences between the two come down to the differing economics. Also, these dollar amounts are estimates, and they will vary with your plan, your dentist, and your area.

Employer's Perspective	HMO	PPO
Premiums to Ins Co	Lower	Higher
Patient's Perspective	HMO	PPO
Available Appointments¹	Fair	Better
Choice of doctors	One	List
Out of Network Coverage	None	Usually Some
Cost for checkups	Low to None	Low to None
Cost for basic: fillings	Low: $10-$50	Varies, but higher
Cost for major: crowns	Low: $250	Higher: $250-$450
Time waiting	Longer	Shorter
Time with doctor	Shorter	Longer
Size of office	Larger	Smaller
Personal attention	Less	More
Deep cleanings proposed²	More often	Less often
Crown upgrades offered	More often	Less often
Elective services offered	More often	Less often
Dentist's Perspective	HMO	PPO
Simultaneous patients to maintain profitability	3 or more	1 or 2
Need to hire more associate dentists	Greater	Lesser
Total Payment for fillings	$10-$50	$50-$260
Total Payment for crowns	$250	$500-$1000
Lab Budget to make crowns	$40	$75-$150
Total Payment for checkups	Under $30	At least $50

¹ Why would an HMO have poor appointment availability? To quote the managing doctor of an HMO practice, "There are only so many discount seats on an airplane, we have only so many slots in our day for HMO patients." HMO practices never calculate the capitation into the office production, so an HMO patient checkup books $0 and a PPO patient visit books $90 - $160. So HMO patients are delayed treatment to make room for higher paying patients. They are literally on the lowest tier to group dental clinics.

² Why would HMO patients have more deep cleanings? The truth is that basic cleanings pay the doctor $0 and a deep cleaning at least pays $100-$200. There is tremendous pressure for the HMO doctor to push his diagnosis to a deep cleaning. The patient alone pays the fee, so the insurance company doesn't care if it's done too often. On the PPO side, the insurance company has to pay 80% of a much higher fee, so more documentation and xrays are required from the dentist to justify the need for a deep cleaning. Tartar must be visible on the xrays and pocket depths must be submitted. There are much looser safeguards against overtreatment/overbilling for HMO patients.

Recommendations

Having briefly working in an HMO setting, I would never let anyone I care about sign up for an HMO plan. There are too many incentives for overdiagnosis, overtreatment, low quality dental materials, and high volume dental work. With that said, a lot of people have a dental HMO as their one and only choice for dental care. My advice to those patients is to at least get a second opinion on dental work before proceeding with it, and to avoid the high-pressure sales tactics.

Whenever you do have the option, opt for a PPO plan. Regardless of which office you choose, you'll have more choices and the doctor will have better incentive to give you better treatment.

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