Preferred provider organization
In health insurance in the United States, a preferred provider organization (PPO), sometimes referred to as a participating provider organization or preferred provider option, is a managed care organization of medical doctors, hospitals, and other health care providers who have agreed with an insurer or a third-party administrator to provide health care at reduced rates to the insurer's or administrator's clients.
Group purchasing organization
A healthcare group purchasing organization (GPO) assists in promoting quality healthcare relief and assists diverse providers in effectively managing expenses. A GPO aggregates the purchasing volume of its members for various goods and services and develops contracts with suppliers through which members may buy at group price and terms if they choose to. GPOs typically provide contracted discounts on medical supplies, nutrition, pharmacy and laboratory. Some of the large GPOs have expanded contract portfolios to also offer discounts on office supplies and non-medical related services.
A GPO's earnings come from an "Administrative" fee. GPOs may collect an "Administrative" fee up to 3.0% of all sales volumes from the vendors that they negotiate a contract from, upon selling products to their member hospitals. These fees do not influence the prices negotiated. They are used to cover the GPO's operating expenses. If there is a remainder it is distributed back to the GPO owners; thus, GPO owners achieve cost-savings on the goods they choose to buy through group contracts, and also receive distributions back from the GPO. General GPO members may also receive some fee share as part of their member agreement, though this practice is no longer typical; thus the primary benefit to a GPO member is the access to deeply discounted pricing.