EPO: The Basics

In the United States, an exclusive provider organization is a hybrid health insurance plan in which a primary care provider is not necessary, but in which health care providers must be seen within a predetermined network. Out of network care is not provided, and visits require pre-authorization. Doctors are paid as a function of care provided, as opposed to an HMO. In an EPO, the payment scheme is usually fee for service, in contrast to HMOs. In the latter, the healthcare provider is paid by capitation, and receives a monthly fee regardless of whether or not the patient is seen

An exclusive provider organization (EPO) is a network of individual medical care providers, or groups of medical care providers, who have entered into written agreements with an insurer to provide health insurance to subscribers. With an EPO, medical care providers enter a mutually beneficial relationship with an insurer. The insurer reimburses an insured subscriber only if the medical expenses are derived from the designated network of medical care providers. The established network of medical care providers in turn offer subscribed patients medical services at significantly lower rates than these patients would have been charged otherwise. In exchange for reduced rates of medical services, medical care providers get a steady stream of business.

An EPO earns additional money by charging an access fee to the insurer for use of the network. It also negotiates with the medical care providers of the organization in order to set fee schedules and help resolve disputes between the insurer and medical care providers. Sometimes EPOs even contract with one another to strengthen their businesses and positions in a certain geographic area.

The beneficial relationship between medical care providers and the insurer often transfers to the insured subscriber because lower rates of medical services means lower rates of increase in monthly premiums. Although a good deal, the downside of EPOs is that they can be quite restrictive. As a member of an EPO, you can use the doctors and hospitals within the EPO network, but cannot go outside of the network for covered care. For example going to a hospital outside of the network in an emergency, one may have to pay the medical bills partially or completely out-of-pocket