CPT Coding System

CPT Coding System

Current Procedural Terminology (CPT), Fourth Edition, is a listing of descriptive terms and identifying codes for reporting medical services and procedures. The purpose of CPT is to provide a uniform language that accurately describes medical, surgical, and diagnostic services, and thereby serves as an effective means for reliable nationwide communication among physicians, patients, and
third parties

The American Medical Association (AMA) first developed and published CPT in 1966. The first edition helped encourage the use of standard terms and descriptors to document procedures in the medical record; helped communicate accurate information on procedures and services to agencies concerned with insurance claims; provided the basis for a computer-oriented system to evaluate operative procedures; and contributed basic information for actuarial and statistical purposes.

The first edition of the CPT code book contained primarily surgical procedures, with limited sections on medicine, radiology, and laboratory procedures.
The second edition was published in 1970, and presented an expanded work of terms and codes to designate diagnostic and therapeutic procedures in surgery, medicine, and the specialties. At that time, five-digit coding was introduced, replacing the former four-digit classification. Another significant change was a listing of procedures relating to internal medicine.

In the mid- to late 1970s, the third and fourth editions of the CPT code were introduced. The fourth edition, published in 1977, represented significant updates in medical technology, and a procedure of periodic updating was introduced to keep pace with the rapidly changing medical environment. In 1983, the CPT code was adopted as part of the HealthCare Common Procedure Coding System (HCPCS) (Formerly called as HealthCare Financing Administration's (HCFA) Common Procedure Coding System) . With this adoption, HCFA mandated the use of HCPCS to report services for Part B of the Medicare Program. In October 1986, CMS also required State Medicaid agencies to use HCPCS in the Medicaid Management Information System. In July 1987, as part of the Omnibus Budget Reconciliation Act, HCFA mandated the use of CPT for reporting outpatient hospital surgical procedures. Today, in addition to use in federal programs (Medicare and Medicaid), CPT is used extensively throughout the United States as the preferred work of coding and describing health care services

ICD coding system

ICD coding system

ICD (International Classification of Disease) is a coding system for which the first edition was published in 1900, and it is being revised at approximately 10-year intervals. The most recent version is ICD-10, which was published in 1992. WHO is responsible for its maintenance.

In US, the coding is still based on ICD-9-CM, which contains more detailed codes.
ICD consists of a core classification of three-digit codes, which are the minimum requirement for reporting the reason for the encounter. An optional fourth digit provides an additional level of detail. At all levels, the numbers 0 to 7 are used for further detail, whereas the number 8 is reserved for all other cases and the number 9 is reserved for unspecified coding.

The basic ICD is meant to be used for coding diagnostic terms, but ICD-9 as well as ICD-10 also contains a set of expansions for other families of medical terms. For instance, ICD-9also contains a list of codes starting with the letter “V” for reasons for encounter or other factors that are related to someone’s health status. A list of codes starting with the letter “E” is used to code external causes of death. The nomenclature of the morphology of neoplasms is coded by the “M” list.
The disease codes of both ICD-9 and ICD-10 are grouped into chapters. For example, in ICD-9, infectious and parasitic diseases are coded with the three-digit codes 001 to 139, and in ICD-10 the codes are renumbered and extended as codes starting with the letters A or B; for tuberculosis the three-digit codes 010 to 018 are used in ICD-9, and the codes A16 to A19 are used in ICD-10. The four-digit levels and optional five-digit levels enable the encoder to provide more detail. Table below gives examples of some codes in the ICD-9 system.

Example of a Four-Digit Code Level in ICD-9 and the Five-Digit Code Level as Extended by the ICD-9-CM
________________________________________
Code Disease
________________________________________
001 - 139 Infectious and parasitic diseases
001 - 009 Infectious diseases of the digestive tract
003 Other Salmonella Infections
- 003.0 Salmonella gastroenteritis
- 003.1 Salmonella Septicemia
- 003.2 Localized Salmonella Infections
- 003.20 Localized Salmonella Infection, Unspecified
- 003.21 Salmonella Meningitis
- 003.22 Salmonella Pneumonia
- 003.23 Salmonella Arthritis
- 003.24 Salmonella Osteomyelitis
- 003.29 Other Localized Salmonella Infections
- 003.8 Other Specified Salmonella Infections
- 003.9 Salmonella Infections, Unspecified
________________________________________
The U.S. National Center for Health Statistics published a set of clinical modifications to ICD-9, known as ICD-9-CM. It is fully compatible with ICD-9, but it contains an extra level of detail where needed. In addition, ICD-9-CM contains a volume III on medical procedures.

What is Medical Coding?

Every Healthcare Provider that delivers a Service receives money for these services by filing a claim with patient’s Health Insurance Carrier. This is also referred as an encounter. An encounter is defined as “a face to face contact between a healthcare professional and a eligible beneficiary.”

Codes exist for all types of encounters, services, tests, treatments, and procedures provided in a Medical office, clinic or hospital. Even patient complaints such as headaches, upset Stomach, etc have codes which consist of a set of numbers and a combination of set of numbers. The Combination of these codes tells the payer what was wrong with patient and what service was performed. This makes it easier to handle these claims and identify the provider on a predetermined basis.


Reason for the Visit /Encounter – Diagnosis Code
Service rendered - Procedure Code
Coding Systems:

The two major coding systems are

1. International Classification of Diseases – Clinical Modification – 9th Revision (ICD-9-CM)
2. Current Procedural Terminology (CPT)

CPT and ICD-9-CM are not the only coding systems. Here are few more coding systems that are used to code a variety of coding information:
1. CDT-3 codes
2. ABC codes
3. SNOMED codes
4. NDC codes
5. Home Healthcare (saba) codes
6. DRG systems.

What are the problems faced by US providers or physicians?

Constantly US physicians face the problems of insurance coding & payment reimbursement on their insurance claims. Optimizing reimbursement is like trying to piece together a puzzle with a lot of pieces. Not only is there a lot of complexity, but change is continuously occurring. There are a number of important factors, few are outlined below.

1. Providers are using invalid, obsolete or deleted codes while submitting claims to respective insurance carriers.
2. The code and fees may be okay, but providers may be losing charge information, missing super bill fees or billing insurance carriers wrongly or irregularly.
3. The practice is not well-informed about current coding and billing issues.
4. The practice doesn't have and/or doesn't follow written policies and procedures which support the billing, coding and collections processes.
5. Not participating in Medicare may allow providers to bill higher fees to patients, but this may not be in the best interests of their practices.
6. Poor understanding of how insurance carriers work and ineffective strategies and systems for dealing with them.
7. The practice is not using forms and documents which are current.

In general, the basic tools needed by health care providers for optimizing reimbursement are:
1. A thorough understanding of the billing process and related terminology.
2. Procedure coding and diagnostic expertise.
3. A well-designed super bill.
4. A fee schedule based on relative values.
5. Current and accurate forms and documents.
6. Current reference materials (such as code books).
7. Written policies and procedures covering billing guidelines.

A brief study on working of Medical billers?

Medical billers and coders usually work forty regular office hours from Monday through Friday on a desk in the billing office or billing department of the professional healthcare office. They must know the different methods of billing patients, understand various collection methods, ethical and legal implications have a good working knowledge of medical terminology, anatomy, medical billing and claims form completion, and coding.

They also must understand database management, spreadsheets, electronic mail, and possess state-of-the-art word processing and accounting skills, be proficient in bookkeeping, and be able to type at a speed of at least 45 words-per-minute.

The work area of medical billers and coders usually is in a separate area away from the patients and public eye. However, even though they are not involved in the actual process of doctors and healthcare professionals providing medical care they need to possess excellent customer service skills when it comes to making contact with clients, insurance companies, and often patients. Medical billers must know how to explain charges, deal with criticism, give and receive feedback, be assertive, and communicate effectively without becoming confused as the person is asking questions. Patients can quickly become frustrated when trying to deal with healthcare providers and bills over the phone.

While an increasing amount of patient care is being funded through HMO (Health Managed Organizations) related insurance, where the patient makes a small co-payment at the time of service and the doctor bills the managed care company for the balance, a number of patients still need to make arrangements to pay for their medical services over a period of time. Part of the medical biller and coder's job is to contact some of these patients from time to time regarding a past due bill. Incoming calls from patients who have questions regarding a bill are also directed to the medical biller's office. The way s/he communicates over the phone can make or break business relationships.

Other specialties closely related to the medical billing profession are:

• Medical Coders/Coding Specialists
• Patient Account Representatives
• Electronic Claims Processors
• Billing Coordinators
• Reimbursement Specialists
• Claims Assistant Professionals
• Medical Claims Analysts
• Medical Claims Processors
• Medical Claims Reviewers
• Medical Collectors

What is a Claim?

A claim is a request made to the insurance company, by the billing office on behalf of the insured person or the physician, for reimbursement of services rendered by the physician. A claim is sent out on standardized forms that contain information regarding the patient, his insurance coverage, the physician, the diagnosis and the treatment. A claim is either mailed or electronically transmitted to an insurance company.

In a small family practice or suburban clinic this task may be simple and assigned to the medical assistant or nurse but in bigger practices and clinics this is the medical biller's job! When a physician treats a patient, the doctor’s office must file an insurance claim to get paid. This claim is usually filed on paper and sent by mail. These paper claims are notoriously slow, often taking 60-90 days or more for the doctor to get paid.

Now, these claims can be processed electronically, saving healthcare provider’s time and money. With electronic claims processing, payment time is drastically reduced to just 7 to 21 days on average. This dramatic improvement in cash flow is exactly why medical billing is in such demand. Physicians are constantly seeking remedies to their medical billing difficulties.

Why Physicians go for Medical Billing Companies to do billing?

America has more than 3000 insurance companies, each with a number of plans. This posed a problem to the physicians. Every insurance company required the medical claims filed to them according to their own rules and formats. Also, when physicians sent out claims to these insurance companies the explanation of the diagnosis and the treatment, necessary to every claim, were voluminous and time consuming.

The forms and codes developed by Center for Medicare and Medicaid Services (CMS – formerly known as HealthCare Financing Administration HCFA) reduced the volume of the information to be transferred to the insurance companies but the volume was still considerable and required skill and time. The medical treatment performed still had to be encoded. These codes, with the patients’ demographic information, still had to be entered into specific medical billing software’s. This process was again time consuming and the extra personnel and infrastructure meant extra costs. They could not handle the volume and turned to specialist billing offices for assistance.

It was easier for a physician to source their non-medical, accounting work to a billing office so that he could concentrate on his practice. Thus the medical billing office became an intermediary between the physician and the insurance companies.

The billing office collects information relevant to the patients’ treatment from the physicians’ office. Using these codes and forms, the billing office bills the insurance companies and patients on behalf of the physicians. Until recently, medical billing was usually done by typing out and mailing claims to various insurance companies. Now the objective of the medical billing industry is to offer fast, efficient, and error-free claims processing using computers to log and transmit claims to the insurance companies.

MEDICAL BILLING – AN INTRODUCTION

What Is Medical Billing?

Medical billing is better described as full medical practice management and a doctor's key to getting paid. Full medical practice management," meaning that billing office handle all the bookkeeping and accounting functions for their doctor-clients, including patient statements, recording payments, preparing financial reports, and even consulting the physicians on issues such as how to negotiate contracts with the growing number of managed care companies such as HMOs and PPOs that are trying to reign in doctors' fees.

Medical billing involves preparation of medical bills on behalf of the doctor for the treatments performed on the patients. The work also involves sending the medical bills to the respective insurance company with whom the patient is a beneficiary. The billing department also collects the money from the insurance company on behalf of the doctors. The insurance company pays for the treatments billed by the billing office.

The Medical Billing industry is a subsidiary of the Health care industry. Medical Billing is the financial-data management of a physician or a group of physicians’ practices. This means maintaining all of the physician’s non-medical records and keeping track of and collecting all money due to him.

Understanding Health Insurance Terms

Coinsurance
The amount patient / insured is required to pay for medical care in a fee-for-service plan, after deductible have been met. The coinsurance rate is usually expressed as a percentage. For example, if the insurance company pays 80 percent of the claim, patient / insured pay 20 percent.

Coordination of Benefits
A system to eliminate duplication of benefits, when an individual is covered under more than one group plans. Benefits under the two plans usually are limited to no more than 100 percent of the claim.

Co-payment
Another way of sharing medical costs. Individual pay a flat fee every time he receives medical service. (for example, $5 for every visit to the doctor). The insurance company pays the rest.

Covered Expenses
Most insurance plans, whether they are fee-for-service, HMOs, or PPOs, do not pay for all services. Some may not pay for prescription drugs. Others may not pay for mental health care. Covered services are those medical procedures the insurer agrees to pay for. They are listed in the policy.

Customary Fee
Most insurance plans will pay only what they call a reasonable and customary fee for a particular service. If patient’s doctor charges $1,000 for a hernia repair while most doctors in that area charge only $600, patient will be billed for the $400 difference. This is in addition to the deductible and coinsurance which patient is expected to pay.

Deductible
The amount of money insured must pay each year to cover medical care expenses before insurance policy starts paying.

Exclusions
Specific conditions or circumstances for which the policy will not provide benefits.

HMO (Health Maintenance Organization)
Prepaid health plans. Insured pay a monthly premium and the HMO covers doctors' visits, hospital stays, emergency care, surgery, checkups, lab tests, x-rays, and therapy. Insured must use the doctors and hospitals designated by the HMO.

Managed Care
Ways to manage costs, use, and quality of the health care system. All HMOs and PPOs, and many fee-for-service plans, have managed care.

Maximum Out-of-Pocket Expenses
The most money insured will be required pay a year for deductibles and coinsurance. It is a stated dollar amount set by the insurance company, in addition to regular premiums.

PPO (Preferred Provider Organization)
A combination of traditional fee-for-service and HMO. When patient use the doctors and hospitals that are part of the PPO, he can have a larger part of medical bills covered. Patient can use other doctors, but at a higher cost.

Pre-existing Condition
A health problem that existed before the date insurance became effective.

Premium
The amount which insured or his employer pays in exchange for insurance coverage.

Primary Care Doctor
Usually patient’s first contact for health care. This is often a family physician or internist, but some women use their gynecologist. A primary care doctor monitors health and diagnoses and treats minor health problems, and refers the patient to specialists if another level of care is needed. In many plans, care by specialists is only paid for if the patient is referred by primary care doctor. An HMO or a POS plan will provide a list of doctors from which patient will choose primary care doctor (usually a family physician, internists, obstetrician-gynecologist, or pediatrician). This could mean patient might have to choose a new primary care doctor if his current one does not belong to the plan. PPOs allow members to use primary care doctors outside the PPO network (at a higher cost). Indemnity plans allow any doctor to be used.

Provider
Any person (doctor, nurse, dentist) or institution (hospital or clinic) that provides medical care.

Third-Party Payer
Any payer for health care services other than the patient / insured. This can be an insurance company, an HMO, a PPO, or the Federal Government.

Long-Term Care Insurance

Long-term care insurance is designed to cover the costs of nursing home care, which can be several thousand dollars each month. Long-term care is usually not covered by health insurance except in a very limited way. Medicare covers very few long-term care expenses. There are many plans and they vary in costs and services covered, each with its own limits

Hospital Indemnity Insurance

This insurance offers limited coverage. It pays a fixed amount for each day, up to a maximum number of days. An individual may use it for medical or other expenses. Usually, the amount the individual receive will be less than the cost of a hospital stay.

Some hospital indemnity policies will pay the specified daily amount even if patient has other health insurance. Others may coordinate benefits, so that the money patient /insured receive is not equal / more than 100 percent of the hospital bill.

Workmen’s Compensation Insurance

This insurance policy protects the insured party from legal liabilities against injury or death of any of his employees who is a "workman" as defined by the Workmen's Compensation Act.

This insurance policy is necessary for every employer since it indemnifies him against his legal liability as an "employer" towards accidental or fatal injuries sustained by his work men during work.

On extra payment of premium, medical, surgical and hospitalization expenses including transportation costs are also covered.
Liabilities that may arise owing to diseases mentioned in Section III (C) of Workmen's Compensation Act during the course of employment are also covered

Disability Insurance

Disability insurance replaces incomes which individual lose if he has a long-term illness or injury and cannot work. This is an important type of coverage for working-age people to consider. Disability insurance does not cover the cost of rehabilitation if an individual is injured.



Some employers offer group disability insurance and this may be one of the benefits where individual work. Or the individual might be eligible for some government-sponsored programs that provide disability benefits. Many different kinds of individual policies are also available.

Medicaid

The Medicaid Program provides medical assistance for certain individuals and families with low incomes and resources. Medicaid eligibility is limited to individuals who fall into specific categories. Although the Federal government establishes general guidelines for the program, the Medicaid program requirements are actually established by each State

Medicaid eligibility is limited to individuals who fall into specified categories. The federal statute identifies over 25 different eligibility categories for which federal funds are available. These categories can be classified in to five broad coverage groups:
• Children;
• Pregnant Women;
• Adults in Families with Dependent children;
• individuals with disabilities;
• and individuals 65 or over

Medicare

Medicare is the federal (national) health insurance program for Americans age 65 and older and for certain disabled Americans. If individual is eligible for Social Security or Railroad Retirement benefits and are age 65, he and his spouse automatically qualify for Medicare.

Medicare has two parts: hospital insurance, known as Part A, and supplementary medical insurance, known as Part B, which provides payments for doctors and related services and supplies ordered by the doctor. If individual is eligible for Medicare, Part A is free, but insured must pay a premium for Part B.


Medicare will pay for many of insured health care expenses, but not all of them. In particular, Medicare does not cover most nursing home care, long-term care services in the home, or prescription drugs. There are also special rules on when Medicare pays patient’s bills that apply if patient have employer group health insurance coverage through his own job or the employment of a spouse.

Medicare usually operates on a fee-for-service basis.
Some people who are covered by Medicare buy private insurance, called "Medigap" policies, to pay the medical bills that Medicare doesn't cover. Some Medigap policies cover Medicare's deductibles; most pay the coinsurance amount. Some also pay for health services not covered by Medicare. There are 10 standard plans from which individual can choose (some States may have fewer than 10.) If an individual buy a Medigap policy, he should make sure that he does not purchase more than one.

Types of Insurance

Types of Insurance

Medicare

Medicaid

Disability Insurance

Workmen’s Compensation Insurance

Hospital Indemnity Insurance

Long-Term Care Insurance

PPO PLAN

PPO PLAN

PPOs give policyholders a financial incentive — reasonable co-payments (also called co-pays) — to stay within the group's network of practitioners.

PPO advantages:
• The standard co-payment is $10 for a routine office visit during regular hours.
• Individual may go to any specialist without permission, as long as the doctor participates in the network.

PPO disadvantages:
• If individual see an out-of-network doctor, he may have to pay the entire bill himself, and then submit it for reimbursement.
• Individual may have to pay a deductible if he chooses to go outside the network, or pay the difference between what network doctors vs. out-of-network doctor’s charge.

POS Plan

POS Plan ( POINT OF SERVICE PLAN )

POS plans are more flexible than HMOs, but they also require patient to select a PCP.

POS advantages:
• Depending on patient insurance company's rules, he may choose to visit a doctor outside the network and still receive coverage — but the amount covered will be substantially less than if patient went to a physician within the network.
• These plans tend to offer more preventive care and well-being services, such as workshops on smoking cessation and discounts to health clubs.



POS disadvantages:
• Individual must choose a PCP.
• While individual may choose to see a physician outside the network, if he did not receive permission from PCP, individual is likely to wind up submitting the bills himself and receiving only a nominal reimbursement — if any.

HMO Plans

HMOs are the least expensive, but also the least flexible of all the health insurance plans. They are geared more toward members of a group seeking health insurance.

HMO advantages: • They offer their customers low co-payments, minimal paperwork, and coverage for many preventive-care and health-improvement programs.

HMO disadvantages:• Individual must choose a primary care physician, also known as a PCP.

• HMOs require that individual see only network doctors or they won't pay.
• Individual must get a referral from your PCP to see a specialist.

FFS, Also Called Traditional Indemnity

FFS coverage offers flexibility in exchange for higher out-of-pocket expenses, more paperwork, and higher premiums.

FFS advantages:
• Individual may choose your own doctors and hospitals.
• Individual may visit any specialist without getting permission from a primary care physician.

FFS disadvantages:
• There's typically a deductible (anywhere from $500 to $1,500) before the insurance company starts paying claims, and then doctors are reimbursed about 80 percent of the bill while patient pick up the remaining 20 percent.
• FFS plans pay only for "reasonable and customary" medical expenses. If patient’s doctor charges more than the average for the area, patient will have to pay the difference.

Features of different Insurance Plans

Whether insured is opting for traditional indemnity fee-for-service plans (FFS)

Health maintenance organizations (HMOs)

Point of service plans (POS)

Preferred provider organizations (PPO).

Each plan has its own features to consider before making a choice.

What Types of Insurance Plans Are There?

What Types of Insurance Plans Are There?

Managed Care: An Explanation
You will hear the term "managed care" quite a lot in the United States. It is a way for insurers to help control costs. Managed care influences how much health care an individual use. Almost all plans have some sort of managed care program to help control costs. For example, if an individual need to go to the hospital, one form of managed care requires that he receive approval from his insurance company before he is admitted to make sure that the hospitalization is needed. If he goes to the hospital without this approval, he may not be covered for the hospital bill.
Fee-for-Service Plans
This is the traditional kind of health care policy. Insurance companies pay fees for the services provided to the insured people covered by the policy. This type of health insurance offers the most choices of doctors and hospitals. An individual can choose any doctor he wishes and change doctors any time. He can go to any hospital in any part of the country.
With fee-for-service, the insurer only pays for part of doctor and hospital bills. Individual’s pay a monthly fee, called a premium.
A certain amount of money each year, known as the deductible, is paid for by the individual before the insurance payments begin. In a typical plan, the deductible might be $250 for each person in a family, with a family deductible of $500 when at least two people in the family have reached the individual deductible. The deductible requirement applies each year of the policy. Also, not all health expenses have count toward the deductible. Only those covered by the policy do. Individual need to check the insurance policy to find out which ones are covered.
After individual has paid deductible amount for the year, he would share the bill with the insurance company. For example, individual might pay 20 percent while the insurer pays 80 percent. Individual’s portion is called "coinsurance".
To receive payment for fee-for-service claims, individual may have to fill out forms and send them to insurer. Sometimes doctor's office will do this for Insured. Individual also need to keep receipts for drugs and other medical costs and is responsible for keeping track of his own medical expenses.
There are limits as to how much an insurance company will pay for a claim if both individual and his spouse file for it under two different group insurance plans. A coordination of benefit clause usually limits benefits under two plans to no more than 100 percent of the claim.
Most fee-for-service plans have a "cap," the most individual will have to pay for medical bills in any one year. He reaches the cap when out-of-pocket expenses (for deductible and coinsurance) total a certain amount. It may be as low as $1,000 or as high as $5,000. The insurance company then pays the full amount in excess of the cap for the items listed in policy. The cap does not include what individual pay for monthly premium.
Some services are limited or not covered at all. Insured need to check on preventive health care coverage such as immunizations and well-child care.
There are two kinds of fee-for-service coverage: basic and major medical. Basic protection pays toward the costs of a hospital room and care while patient is in the hospital. It covers some hospital services and supplies, such as x-rays and prescribed medicine. Basic coverage also pays toward the cost of surgery, whether it is performed in or out of the hospital, and for some doctor visits. Major medical insurance takes over where insured basic coverage leaves off. It covers the cost of long, high-cost illnesses or injuries.
Some policies combine basic and major medical coverage into one plan. This is sometimes called a "Comprehensive Plan." Insured need to check whether his policy covers both kinds of protection.

Health Maintenance Organizations (HMOs)
Health maintenance organizations are prepaid health plans. As an HMO member, insured pay a monthly premium. In exchange, the HMO provides comprehensive care for the insured & his family, including doctors' visits, hospital stays, emergency care, surgery, laboratory (lab) tests, x-rays, and therapy.
The HMO arranges for this care either directly in its own group practice and/or through doctors and other health care professionals under contract. Usually, patient choices of doctors and hospitals are limited to those that have agreements with the HMO to provide care. However, exceptions are made in emergencies or when medically necessary.
There may be a small co-payment for each office visit, such as $5 for a doctor's visit or $25 for hospital emergency room treatment. Individual total medical costs will likely be lower and more predictable in an HMO than with fee-for-service insurance.
Because HMOs receive a fixed fee for your covered medical care, it is in their interest to make sure patient get basic health care for problems before they become serious. HMOs typically provide preventive care, such as office visits, immunizations, well-baby checkups, mammograms, and physicals. The range of services covered varies in HMOs, so it is important to compare available plans. Some services, such as outpatient mental health care, often are provided only on a limited basis.
Many people like HMOs because they do not require claim forms for office visits or hospital stays. Instead, members present a card, like a credit card, at the doctor's office or hospital. However, in an HMO individual may have to wait longer for an appointment than he would with a fee-for-service plan.
In some HMOs, doctors are salaried and they all have offices in an HMO building at one or more locations in individual’s community as part of a prepaid group practice. In others, independent groups of doctors contract with the HMO to take care of patients. These are called individual practice associations (IPAs) and they are made up of private physicians in private offices who agree to care for HMO members. Individual select a doctor from a list of participating physicians that make up the IPA network. If an individual is thinking of switching into an IPA-type of HMO, he needs to check whether doctor participates in the plan.
In almost all HMOs, individuals are either assigned or choose one doctor to serve as patient’s primary care doctor. This doctor monitors health and provides most of patient’s medical care, referring to specialists and other health care professionals as needed. Patient usually cannot see a specialist without a referral from primary care doctor who is expected to manage the care received by the patient. This is one way that HMOs can limit patient’s choice.

Point-of-Service Plans (POS)
Many HMOs offer an indemnity-type option known as a POS plan. The primary care doctors in a POS plan usually make referrals to other providers in the plan. But in a POS plan, members can refer themselves outside the plan and still get some coverage.
If the doctor makes a referral out of the network, the plan pays all or most of the bill. If patient refer themselves to a provider outside the network and the service is covered by the plan then patient will have to pay coinsurance.

Preferred Provider Organizations (PPOs)
The preferred provider organization is a combination of traditional fee-for-service and an HMO. Like an HMO, there are a limited number of doctors and hospitals to choose from. When patient use those providers (sometimes called "preferred" providers, other times called "network" providers), most of his medical bills are covered.
When patient go to doctors in the PPO, he present a card and do not have to fill out forms. Usually there is a small co-payment for each visit. For some services, patient may have to pay a deductible and coinsurance.
As with an HMO, a PPO requires that patient choose a primary care doctor to monitor his health care. Most PPOs cover preventive care. This usually includes visits to the doctor, well-baby care, immunizations, and mammograms.
In a PPO, patient can use doctors who are not part of the plan and still receive some coverage. At these times, patient will pay a larger portion of the bill himself (and also fill out the claims forms). Some people like this option because even if their doctor is not a part of the network, it means they do not have to change doctors to join a PPO.