A preferred provider organization (PPO) is a network of doctors and hospitals who form a corporation to provide medical services to self-insured businesses or for health insurance companies. A preferred provider organization negotiates with the business or insurance company to provide medical services at discounted rates in return for a large volume of patients. For members, a preferred provider organization is the least restrictive form of managed care organization. Many employers offer a preferred provider organization to help employees get used to managed care. Preferred provider organizations are the most popular type of employer-sponsored health plan in the United States. In 1999, Medicare added preferred provider organizations to its menu of health care insurance options.

A preferred provider organization is not like a health maintenance organization. Members choose from a large list of providers in private practice. They generally pay a small co-payment to see a network provider and can see providers outside of the network by paying extra. They usually do not need a referral from their primary care doctor to see a specialist. The goal of a PPO is to lower costs for the insurance company, the employer, and the patient. A PPO uses a utilization review board to monitor the cost of health care by determining whether a patient should be hospitalized or not and whether services are medically necessary. This review can take place before, during, or after hospitalization. In some cases, a utilization review board monitors quality too.