MANAGED CARE GLOSSARY
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A B C D E F G H I J L M N O P Q R S T U V W
Access: A patient’s ability to obtain medical care determined by factors such as the availability of medical services, their acceptability to the patient, the location of health care facilities, transportation, hours of operation, and cost of care.
Accreditation: Accreditation programs give an official authorization or approval to an organization against a set of industry-derived standards.
Accrete: A term used by Medicare to describe the process of adding new enrollee to a health plan.
Accrual: Money set aside to cover expected expenses. The accrual is an estimate of medical expenses based on data from the authorization and claims systems and history.
Actual Acquisition Cost: The pharmacist’s net payment made to purchase a drug product, after taking into account such items as purchasing allowances, discounts, and rebates.
Actual Use Effectiveness: The effectiveness of a product in real-life situations. Actual uses effectiveness considers compliance rates, physical condition of the patient, and the side effects associated with the product’s use.
Actuary: A person in the insurance field who decides insurance policy rates and reserves dividends as well as conducts various other statistical studies.
Adjudication: Processing a claim through a series of edits to determine proper payment.
Adjusted Average per Capita Cost: The estimated average cost of Medicare benefits for an individual in a particular county. It is based on the following population factors: age, sex, institutional status, Medicaid status, and disability status. The Health Care Financing Administration uses this formula to make monthly payments to risk and cost contractors.
Adjusted Community Rating: Also called prospective rating, adjusted community rating is set by group demographics and prior experience in the region.
Administrative Services Only (ASO): An agency that delivers administrative services to an employer group. This type of arrangement usually requires the employer to be at risk for the cost of health care services provided.
Adverse Selection: A particular health plan, whether indemnity or managed care, is selected by the enrollee, and thus an inequitable proportion of enrollees requiring more medical services are found in that plan. Example: Low enrollee out-of-pocket costs might lure those individuals requiring more health services into an HMO.
Allowable Charge: The maximum fee that a third party will reimburse a provider for a given service.
Allowable Costs: Items or elements of an institution’s costs that are reimbursable under a payment formula. Allowable costs may exclude, for example, uncovered services, luxury accommodations, costs that are not reasonable, and expenditures that are unnecessary.
Alternate Care: Medical care received in lieu of inpatient hospitalization. Examples include outpatient surgery, home health care, and psychiatric day treatment.
Alternative Medicine: Outside the realm of traditional medical practice, alternative medicine can include such therapies as acupuncture, holistic medicine, homeopathy, massage therapy, herbal therapy, hypnosis, naturopathy, etc.
Ancillary Care: Additional health care services performed, such as lab work and x-rays.
At Risk: Term used to designate financial liability in compensation/reimbursement arrangements. A provider may be “at risk” for additional costs, for example, if the expense of caring for a particular panel of patients exceeds the providers capitation payment.
Average Cost (or Benefit): The total cost (or benefit) divided by the total units of output.
Authorization: As it applies to managed care, authorization is the approval of care, such as hospitalization. Preauthorization may be required before admission takes place or care is given by non-HMO providers.
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Balanced Budget Act of 1997: Enacted legislation that has wide-ranging implications for health care. Principally, the Balanced Budget Act formally allows provider-sponsored organizations to participate in the Medicare program, changes the way in which health plans are paid for Medicare enrollees, alters greatly what types of home health services the Medicare program will pay for and how they will be reimbursed, and provides funding to states for the Children’s Health Insurance Program.
Bed Days: A measurement used by managed care plans to indicate the total number of days of hospital care provided to a health plan member.
Behavioral Health Care: Treatment of mental health and/or substance abuse disorders, with comprehensive systems of care.
Benefit Bank: A flexible spending arrangement under which a reimbursement account is established. Reimbursements are made from the account, and the employee is entitled to any remaining amounts at the end of the year.
Benefit Levels: The extent or degree of service a person is entitled to receive based on his or her contract with a health plan or insurer.
Benefit Package: Services an insurer, government agency, health plan, or employer offers under the terms of a contract.
Business Coalition: A group of employers who use their pooled resources and leverage to study health benefits and, in some cases, purchase health benefit packages.
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Cafeteria Plan: A corporate benefits plan under which employees are permitted to choose among two or more options that consist of cash and certain qualified benefits. Cafeteria plans are also called flexible benefit plans or flex plans.
Capitation: A per-member, monthly payment to a provider that covers contracted services and is paid in advance of its delivery. In essence, a provider agrees to provide specified services to plan members for this fixed, predetermined payment for a specified length of time (usually a year), regardless of how many times the member uses the service. The rate can be fixed for all members or it can be adjusted for the age and sex of the member, based on actuarial projections of medical utilization.
Carve Out: To separately purchase services that are typically part of a managed care package. For example, an HMO may “carve out” mental health and substance abuse services and select a specialized vendor to supply these services on a stand-alone basis.
Case Management: The process whereby a health care professional supervises the administration of medical or ancillary services to a patient, typically one who has a catastrophic disorder or who is receiving mental health services.
Case Manager: An experienced professional (usually a nurse, physician, or social worker) who handles catastrophic or high-cost cases as a member of a utilization management team.
Catastrophic Health Insurance: Insurance beyond basic and major medical coverage for severe and prolonged illness that poses the threat of financial ruin.
Certificate of Coverage: A description of the benefits included in a carrier’s plan. The certificate of coverage is required by state law and represents the coverage provided under the contract issued to the employer.
Certification: Certification is the official authorization for use of services.
Channeling: Use of incentives and plan design to encourage members to utilize network providers.
Chemical Dependency Services: Services and supplies used in the diagnosis and treatment of alcoholism, chemical dependency, and drug dependencies, as defined and classified by the U.S. Department of Health and Human Services.
Chemical Equivalents: Those multiple-source drug products containing essentially identical amounts of the same active ingredients, in equivalent dosage forms, and that meet existing physical/chemical standards.
Claim: Information submitted by a provider or covered person to establish that medical services were provided to a covered person, from which processing for payment to the provider or covered person is made.
Clinical Outcome: The state of a patient’s health after receiving medical care.
Coding Systems – ICD-9 System: A diagnosis and procedure coding system for hospital care, which is the basis of reimbursement.
Coding Systems – CPT-4 System: Used to identify physician services, such as injections and surgeries, for purposes of reimbursement.
Coding Systems – NDC Coding System: System used by insurers to pay outpatient pharmaceutical claims.
Coding Systems – HCPCS System: A Medicare system for identifying a host of services, including injectable drugs, used in physicians’ offices.
Co-insurance: The percentage of the costs of medical services paid by the patient. This is a characteristic of indemnity insurance, POS, and PPO plans. The co-insurance is usually about 20% of the cost of medical services after the deductible is paid.
Concurrent Review: A screening method by which a health care provider reviews a procedure or hospital admission performed by a colleague to assess its necessity.
Consolidated Omnibus Budget Reconciliation Act (COBRA): A law that requires employers to offer continued health insurance coverage to employees who have had their health insurance coverage terminated because of a change in employment.
Continuous Quality Improvement (see also Total Quality Management): A cycle of monitoring, evaluation, action, and more monitoring that has the intended effect of continuously raising the level of quality delivered.
Continuum of Care: A range of clinical services provided during a single inpatient hospitalization or for multiple conditions over a lifetime. It provides a basis for evaluating quality, cost, and utilization over the long term.
Copayment: A fee charged to HMO members to offset costs of paperwork and administration for each office visit or pharmacy prescription filled.
Cost-Based Reimbursement: A method of paying hospitals for actual costs incurred by the patient. Those costs must conform to explicit principles that are defined by third-party payers.
Cost Contract: An agreement between HCFA and a health plan in which the plan receives an interim capitated amount derived from an estimated annual budget, which may be periodically adjusted during the course of the contract to reflect actual cost experience. The plan’s expenses are audited at the end of the contract to determine the final rate the plan should have been paid.
Cost Effectiveness: Usually considered as a ratio, the cost effectiveness of a drug or procedure, for example, relates the cost of that drug or procedure to the health benefits resulting from it. In health terms, it is often expressed as the cost per year per life saved.
Cost Sharing: Financing arrangement whereby the member of a health plan must pay some of the costs to receive care.
Cost Shifting: The redistribution of payment sources. Typically, cost shifting occurs when a discount on provider services is obtained by one payer, and the providers increase costs to another payer to make up the difference.
Covered Person: An individual who meets a health plan’s eligibility requirements and for whom premium payments are paid for specified benefits of the contract between the insurance carrier and a contract holder.
Credentialing: Examination of a physician’s or other health care provider’s credentials to determine whether he or she should be entitled to clinical privileges at a hospital or to a contract with an MCO.
Credentialing Verification Organization: An external organization that contracts with a health plan to handle all provider credentialing requirements. These organizations may also be subject to accreditation requisites, according to state regulations.
Current Procedural Terminology (CPT): A five-digit code that accompanies a list of medical services performed by physicians and other providers.
Customary Charge: The typical amount charged by a provider for a particular service. Payers typically pay the provider a percentage of this amount.
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Decision Tree: The fundamental analytic tool for decision analysis, displaying the temporal and logical sequence of a clinical decision problem. It has three structural components: the alternative actions that are available to the decision maker; the probabilistic events that follow from and affect these actions, such as clinical information obtained or the clinical consequences revealed; and the outcomes for the patient that are associated with each possible scenario of actions and consequences.
Deductible: A fixed amount of health care dollars of which a person must pay 100% before his or her health benefits begin. Most indemnity plans feature a $200 to $500 deductible, and then pay up to 100% of money spent for covered services above this level.
Demand Curve: A demand curve is derived from utility maximization by a rational and informed consumer. Then the demand curve can be interpreted as revealing the marginal benefit of the units of consumption measured in dollars. The demand curve can be used to evaluate the effects of supply-side rationing inducted by prospective payment and by rationing in managed care.
Demand Management: In its most basic form, the appropriate use of decision and self-management support systems that enable health care consumers to make the best use of medical care. Demand management is information-based in that it recognizes that decision making is often influenced by factors other than information, such as personal experience, societal pressures, and cultural norms.
Diagnosis-Related Groups (DRG): A program in which hospital procedures are rated in terms of cost and intensity of services delivered. A standard rate per procedure is derived from this scale, which is paid by Medicare for their beneficiaries, regardless of the cost to the hospital to provide that service.
Direct Contracting: A contractual relationship between a health care provider and an employer, in which services are provided on a predefined price schedule in exchange for the purchase of services in defined volume. Direct contracting creates a direct relationship between the provider and the employer.
Disallowance: A denial by a health care payer for portions of the claimed amount. Examples could include coordination of benefits, services that are not covered, or amounts over the fee maximum.
Disease Episode: The time period in which a person has a specific disease or disorder (see also Episode of Care).
Disease Management: A philosophy toward the treatment of the patient with an illness (usually chronic in nature) seeking to prevent recurrence of symptoms, maintain high quality of life, and prevent future need for medical resources by using an integrated, comprehensive approach to health care. Continuous quality improvement, practice guidelines, and case management all play key roles in this effort, which (in theory) will result in decreased health care costs as well.
Drug Regimen Review (DRR): A frequent evaluation of the medications being taken by a patient in intermediate- or long-term care facilities. Typically performed by a pharmacist, DRR is especially useful in avoiding adverse drug reactions and drug interactions in patients taking multiple medications.
Duplication of Benefits: Overlapping or identical health coverage of an insured person under two or more plans, usually the result of contracts with different health organizations, insurance companies, or prepayment plans.
Durable Medical Equipment: Equipment that can be repeatedly used, is primarily and customarily used to serve a medical purpose, generally is not useful to a person in the absence of illness or injury, and is appropriate for use at home. Examples include hospital beds, wheelchairs, and oxygen equipment.
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Economic Clinical Trials: Studies, usually conducted by pharmaceutical manufacturers, that evaluate drugs based on economic endpoints.
Electronic Data Interchange (EDI): The electronic exchange (through computers) of information between two or more organizations. In the health care setting, EDI has made enormous gains in the transmission of claims information.
Employee Assistance Plan (EAP): A department designated to assist employees, their family members, and employers in finding solutions for workplace and personal problems. Services may include assistance for family/marital concerns, legal or financial problems, elder care, child care, substance abuse, emotional issues, and other daily living concerns.
Employee Retirement Income Security Act of 1974 (ERISA): A law that mandates reporting and disclosure requirements for group life and health plans.
Episode of Care: All treatment rendered in a specified time frame for a specific disease.
Exclusive Provider Organization (EPO): A form of PPO in which patients must visit a caregiver who is on its panel of providers. If an outside provider is visited, the EPO will offer limited or no coverage for the office or hospital visit.
Extension of Benefits: A component of some insurance policies that allows medical coverage to continue past the termination date of the policy for employees not actively at work.
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Federal Employees Health Benefits Program (FEHBP): The health benefits program for federal employees that is administered through the U.S. Office of Personnel Management.
Federally Qualified HMO: An HMO that meets certain standards mandated by the Public Health Service Act. Two of these standards include prepaid care for a fixed amount per month or year and community rating.
Fee for Service: Traditional provider reimbursement in which the physician is paid according to the service performed. This is the reimbursement system used by conventional indemnity insurers.
First-Dollar Coverage: A feature of an insurance plan in which there is no deductible, and therefore the plan’s sponsor pays a proportion or all of the covered services provided to a patient as soon as he or she enrolls.
Formulary: The panel of drugs chosen by a hospital, MCO, or other health plan that is used to treat patients. Drugs outside of the formulary are only used in rare, specific circumstances.
Foundation Model: A type of integrated health care system whereby the hospital or health care organization creates a new nonprofit organization, which purchases the tangible and intangible assets of physicians, usually in a group practice. The foundation then manages, contracts for, and pays the hospital and physician group. The physician professional corporation has its own governance, management structure, and control over its clinical decision making.
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Gag Clause: A statement in a MCO provider contract that prohibits the provider from revealing financial compensation relationships with the health plan and possibly from criticizing the MCO under threat of removal from the provider network. Such clauses have generally been abandoned by MCOs or are now prohibited by state law.
Gatekeeper: Most HMOs rely on the primary care physician, or “gatekeeper,” to screen patients seeking medical care and effectively eliminate costly and sometimes needless referrals to specialists for diagnosis and management. The gatekeeper is responsible for the administration of the patient’s treatment, and must coordinate and authorize all medical services, laboratory studies, specialty referrals, and hospitalizations.
Generic Drug: A chemically equivalent copy designed from a brand-name drug whose patent has expired. Typically less expensive and sold under the common name for the drug, not the brand name.
Generic Substitution: In cases in which the patent on a specific pharmaceutical product expires and drug manufacturers produce generic versions of the original branded product, the generic version of the drug (which is theorized to be the exact same product manufactured by a different firm) is dispensed even though the original product is prescribed.
Global payment: A method of compensation in which a hospital, for example, receives one negotiated payment for all care rendered to a patient undergoing a particular surgical procedure. Therefore, the hospital is at risk for all expenses incurred beyond the global payment.
Group: A body of subscribers eligible for group insurance by virtue of some common identifying attribute, such as common employment by an employer, or a membership in a union, association, or other organization.
Group Practice Without Walls: Physicians are organized to share common administrative costs in a corporate structure, but they still maintain separate practices and revenue streams. Group practices without walls can be single or multispecialty and are often formed by physicians in an attempt to gain the security that goes along with teaming up with other physicians in a very competitive environment.
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HCFA 1500: A form developed by the Health Care Financing Administration to be used by health care providers to bill health carriers.
Health Alliances: Purchasing pools that are responsible for negotiating health insurance for employers and employees. Alliances use their leverage as large health care purchasers to negotiate contracts.
Health Care Financing Administration (HCFA): The federal agency responsible for administering Medicare and overseeing states’ management of Medicaid.
HCFA Common Procedural Coding System (HCPCS): A listing of services, procedures, and supplies offered by physicians and other providers. The HCPCS includes CPT (Current Procedural Terminology) codes and national and local alpha-numeric codes. They include physician services not included in CPT as well as non-physician services, such as ambulance, physical therapy, and durable medical equipment.
Health Insurance Portability and Accountability Act (HIPAA) of 1996: Also known as the Kennedy-Kassebaum Act, HIPAA intends to provide better portability of employer-sponsored insurance from one job to another, thus preventing “job lock,” or the need to stay in the same position because of its health care benefits. The Act also outlaws excluding people from obtaining health insurance because of preexisting conditions and offers tax deductions to those who are self-employed to help pay for their health benefits. It is widely viewed as a first step in the federal initiative to significantly reduce the number of uninsured people in this country.
Health Maintenance Organization (HMO): A form of health insurance in which its members prepay a premium for health services, which generally includes inpatient and ambulatory care. For the patient, it means reduced out-of-pocket costs (i.e., no deductible), no paperwork (i.e., insurance forms), and only a small co-payment for each office visit to cover the paperwork handled by the HMO.
HMO, Staff-Model: The purest form of managed care. All of the physicians are in a centralized site in which all clinical and perhaps inpatient and pharmacy services are offered. The HMO holds the tightest management reins in this setting because none of the physicians traditionally practice on an independent, fee-for-service basis.
HMO, Individual Practice Association-Model (IPA): The IPA contracts with independent physicians who work in their own private practices and see fee-for-service patients as well as HMO enrollees. They are paid by capitation for the HMO patients and by conventional means for their fee-for-service patients. Physicians belonging to the IPA guarantee that the care needed by each patient for which they are responsible will fall under a certain amount of money. They guarantee this by allowing the HMO to withhold an amount of their payments (e.g., usually about 20% per year). If, by the end of the year, a physician’s cost for treatment falls under this set amount, then the physician receives his entire “withhold fund.” If the opposite is true, the HMO can then withhold any part of this amount, at its discretion, from the fund. Essentially, the physician is put “at risk” for keeping down the treatment cost. This is the key to the HMO’s financial viability.
HMO, Group-Model: In the group-model HMO, the HMO contracts with a physician group, which is paid a fixed amount per patient to provide specific services. Popularized by Kaiser Permanente, one of the pioneers of the HMO movement, the administration of the group practice then decides how the HMO payments are distributed to each member physician.
HMO, Hybrid-Model: A combination of at least two managed care organizational models that is melded into a single health plan. Since its features do not uniformly fit only one type of model, it is called a hybrid – for example, a combination network and staff model HMO.
HMO, Network-Model: A network of group practices that are under the administration of one HMO.
HMO, Point-of-Service-Model (POS): Sometimes referred to as an “open-ended” HMO, the POS model is one in which the patient can receive care from physicians who do or do not contract with the HMO. Physicians not contracting with the HMO but who see an HMO patient are paid according to the services performed. The patient is incentivized to utilize contracted network providers through the comprehensive coverage offerings.
HMO Act of 1973: Federal law that required employers with more than 24 employees to offer an alternative to conventional indemnity health insurance in the form of a federally qualified HMO. The main intention of the Act was to encourage HMO development.
Health Plan Employer Data and Information Set (HEDIS): A set of performance measures designed to help health care purchasers understand the value of health care purchases and measure the performance of multiple health plans.
Homeopath: A practitioner who follows the philosophy that “like cures like.” Homeopaths try to match a person’s personality, habits, and symptoms with a remedy. The remedy is usually a highly diluted substance that is believed to create the same symptoms that an illness has created in the consumer. Some homeopaths are physicians or other health practitioners who are licensed to practice their profession; others might be unlicensed “laypeople.”
Hospice: A facility that provides supportive care for the terminally ill.
Hospital Alliance: A group of hospitals that have joined together to improve competitive positions and reduce costs by sharing common services and developing group purchasing programs.
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Incurred but not Reported (IBNR) Expenses: A financial accounting of all services that have been performed, but as a result of a short period of time, they have not yet been invoiced or recorded.
Indemnity Insurance: Traditional fee-for-service coverage in which providers are paid according to the service performed.
Integrated Health Care Systems: Health care financing and delivery organizations created to provide a “continuum of care,” ensuring that patients get the right care at the right time from the right provider. This continuum of care from primary care provider to specialist and ancillary provider under one corporate roof guarantees that patients get the appropriate care, thus saving money and increasing quality of care.
International Classification of Diseases, 9th Edition (Clinical Modification) (ICD-9CM): A listing of diagnoses and identifying codes used by physicians for reporting codes used by physicians for reporting diagnoses of health plan enrollees. The coding and terminology provide a uniform language that can accurately designate primary and secondary diagnoses and provide for reliable, consistent communication on claim forms.
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Jackson Hole Group: A nonprofit advocacy organization of health care analysts led by Drs. Paul Ellwood and Alain Enthoven that studies and lobbies for health care reform issues.
Joint Commission on Accreditation of Healthcare Organizations (JCAHO): A private, nonprofit organization that evaluates and accredits health care organizations that provide inpatient mental health care, ambulatory care, home care, and long-term care services.
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Legend Drug: A drug that, by law, can be obtained only by prescription and bears the label, “Caution: Federal law prohibits dispensing without a prescription.”
Length of Stay: The number of consecutive days a patient is hospitalized.
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Mail Order Pharmacy: A method of dispensing medication directly to the patient through the mail. Mail order drug distributors can purchase drugs in larger volumes than retail or wholesale outlets.
Managed Health Care: The sector of health insurance in which health care providers are not independent businesses run by, for example, the private practitioner, but by administrative firms that manage the allocation of health care benefits. In contrast with conventional indemnity insurers, who do not govern the provision of medical services and simply pay for them, managed care firms have a significant say in how services are administered so that they may better control health care costs. HMOs and PPOs are examples of MCOs.
Managed Competition: One type of health care reform that would correct the inequalities of the health delivery system through increased competition. Health plans would compete on the basis of cost and other factors; health care purchasers would have information at their disposal that would allow them to compare competing health plans across several dimensions of performance.
Managed Fee-for-Service: A plan in which the cost of covered services is paid by the insurer after services have been used. Various managed care tools, such as precertification, second surgical opinion, and utilization review are used to control inappropriate utilization.
Mandated Benefits: Health benefits that health care plans are required by state or federal law to provide to members.
Medicaid: An entitlement program run by both the state and federal government for the provision of health care insurance to patients younger than 65 years of age who cannot afford to pay private health insurance. The federal government matches the states’ contribution on a certain minimal level of available coverage. The states may institute additional services, but at their own expense.
Medicaid Prudent Pharmaceutical Purchasing Act (MPPPA): Enacted as part of the Omnibus Budget Reconciliation Act of 1990, MPPPA provides that Medicaid must receive the best discounted price of any institutional purchaser of pharmaceuticals.
Medical Loss Ratio: A financial term that defines the percentage of every dollar of revenue that goes either toward directly paying for health benefits or paying for administrative services, overhead, promotion, etc. For instance, a health plan with a medical loss ratio of 89% pays $0.89 of every dollar it receives directly for health care services.
Medical Savings Accounts (MSA): A method of paying for health insurance, made available through a pilot program mandated by the Health Insurance Portability and Accountability Act of 1996. The MSA allows a person to place money in an interest-bearing account that can be used to purchase health insurance policies and to pay co-pays, deductibles, etc. Anything remaining in the account at the end of the year is carried over to the next year, allowing the account to grow.
Medicare: An entitlement program run by the Health Care Financing Administration of the federal government through which people aged 65 years or older receive health care insurance. Medicare part A covers hospitalization and is a compulsory benefit. Medicare part B covers outpatient services and is a voluntary service.
Medicare+Choice: The federal program promulgated through the Balanced Budget Act of 1997 that offers Medicare recipients a wider variety of health plan options than previously, including preferred provider organizations and provider-sponsored organizations.
Medigap: Insurance provided by carriers to supplement the monies reimbursed by Medicare for medical services. Since Medicare pays physicians for services according to their own fee schedule, regardless of what the physician charges, the individual may be required to pay the difference between Medicare’s reimbursable charge and the physician’s fee. Medigap insurance is meant to fill this gap in reimbursement.
Member: A participant in a health plan who makes up part of the plan’s enrollment population.
Morbidity: The incidence and severity of sickness in a defined population.
Multioption Plan: A health plan design that offers employees the option to choose from one of several coverage types, including an HMO, a PPO, and a major indemnity plan.
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National Drug Code (NDC): A national listing of drugs.
Negotiated Discount: A method of reimbursement for managed care providers that stipulates specific percentages by which charges may be reduced if included in the provider’s contract or agreement.
National Commission for Quality Assurance (NCQA): A national nonprofit organization that accredits HMOs based on access, quality of care, etc.
Negotiated Fee Schedule: The most controversial form of reimbursement. The basis of the PPO network; doctors and hospitals agree to treat PPO patients at a lower rate than non-PPO patients.
Net Loss Ratio: The result of total claims liability and all expenses divided by premiums. This represents the carrier’s loss ratio after accounting for all expenses.
Network: A defined group of providers, typically linked through contractual arrangements, which supply a full range of primary and acute health care services. A “closed” network is one in which beneficiaries are not allowed to access non-network providers whereas an “open” network allows access to other providers at some cost to the beneficiary.
Nonparticipating Provider: A health care provider who has not contracted with the carrier or health plan to be a participating provider of health care.
Nonprofit Plan: A term applied to a prepaid health plan under which no part of the net earnings may lawfully accrue to the benefit of any private shareholder or individual. Synonymous with “not-for-profit” plan.
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Open Access: Open-access arrangements allow members to see participating providers, usually specialists, without referral from the health plan’s gatekeeper. These types of arrangements are most often found in IPA-model HMOs.
Open Enrollment: A period during which an MCO allows persons not previously enrolled to apply for plan membership.
Outcomes Management: A clinical outcome is the result of medical or surgical intervention or nonintervention. Improved clinical outcomes may increase patient and payer satisfaction while holding down costs. It is thought that through a database of outcomes experience, caregivers will know better which treatment modalities result in consistently better outcomes for patients. Outcomes management will, as a natural consequence, lead to medical protocols.
Outcomes Research: Studies that evaluate the effect of a given product, procedure, or medical technology on health or costs.
Outlier: One who does not fall within the norm; typically used in utilization. A provider who uses either too many services or too few services (for example, anyone whose utilization differs two standard deviations from the mean on a bell curve is termed an outlier).
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Partial Hospital Services: A mental health or substance abuse program operated by a hospital which provides clinical services as an alternative or follow-up to inpatient care.’
Patients’ Bill of Rights: Referring to federal or state proposals (or signed legislation) that typically mandates that health plans offer expanded external appeals policies, faster appeals decisions than offered in the past, greater access to specialists than was previously available in many managed care plans, and other specific consumer protections.
Peer Review Organization: A group founded by the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) to review quality of care and appropriateness of admissions for Medicare and Medicaid beneficiaries.
Per Member per Month (PMPM): A unit of measurement related to each enrollee for each month.
Pharmacy and Therapeutics (P&T) Committee: A group of physicians, pharmacists, and other health care providers from different specialties, who advise a managed care plan regarding safe and effective use of medications.
Pharmacy Benefit Management Company (PBM): An organization dedicated to providing prescription benefits to enrollees of managed care plans that utilizes existing community pharmacies. The PBM contracts as a provider group with the managed care organization.
Physiatrist: A physician who specializes in physical medicine and rehabilitation, and who evaluates the physical functioning of an individual and oversees the individual’s rehabilitation program.
Physician Contingency Reserve: the “at-risk” portion of a claim that is deducted and withheld by the health plan before payment is made to a participating physician as an incentive for appropriate utilization and quality of care. This amount – for example. 20% of the claim – remains within the plan and is credited to the doctor’s account. The contingency reserve can be used in instances where the plan needs additional funds to pay for claims. The withheld amount may be returned to the physician in varying levels which are determined based on analysis of his or her performance or productivity compared against his or her peers.
Physician-Hospital Organization (PHO): A type of integrated health care system that, in its simplest form, is an organization that collectively commits both physicians and the hospital to payer contracts. In its most effective form, the PHO must commit the entire physician and hospital panel, without an opt-out, to the PHO organization.
Practice Guidelines: Also called practice parameters or medical protocols, physicians may be required to follow these in order to obtain the best clinical outcome. The guideline provides the caregiver with specific treatment options or steps when faced with a particular set of clinical symptoms, signs, or laboratory data.
Preadmission Certification: The practice of reviewing claims for hospital admission before the patient actually enters the hospital. This cost-control mechanism is intended to eliminate unnecessary hospital expenses by denying medically unnecessary admissions.
Preexisting Condition: Any medical condition that has been diagnosed or treated within a specified period before the member’s effective date of coverage under the group contract.
Preferred Providers: Physicians, hospitals, and other health care providers who contract to provide health services to persons covered by a particular health plan.
Preferred Provider Health Care Act of 1985: A federal law easing restrictions on PPOs and allowing subscribers to use health care providers outside of the PPO.
Preferred Provider Organization (PPO): PPOs are managed care organizations that offer integrated delivery systems (i.e., networks of providers) that are available through a vast array of health plans and are readily accountable to purchasers for cost, quality, access, and services associated with their networks. They use provider selection standards, utilization management, and quality assessment techniques to complement negotiated fee reductions as an effective strategy for long-term cost savings. Under a PPO benefit plan, covered individuals retain the freedom of choice of providers but are given financial incentives to use the preferred provider network.
Prepaid Group Practice: A multispecialty association of physicians and other health professionals who contract to provide a wide range of preventive, diagnostic, and treatment services on a continuing basis for enrollees.
Preventive Care: Health care emphasizing priorities for prevention, early detection, and early treatment of conditions, generally including routine physical examination, immunization, and well-person care.
Primary Care Network: A group of primary care physicians who have joined together to share the risk of providing care to their patients, who are members of a given health plan.
Primary Care Physician (PCP): Sometimes referred to as a “gatekeeper,” the primary care physician is usually the first doctor a patient sees for an illness. The physician then treats the patient directly, refers the patient to a specialist (secondary care), or admits the patient to a hospital. Often, the primary care physician is a family doctor or internist.
Professional Review Organization (PRO): An organization that reviews the activities and records of a health care provider, institution, or group. The reviewer is generally a physician if a physician is the subject of the review; a group of administrators, physicians, and allied health care personnel if a hospital is the subject of the review; etc. The PRO can be state-sponsored or independent.
Profiling: Profiling is an analytical tool that uses epidemiologic methods to compare practice patterns of providers on the dimensions of cost, service use, or quality of care. The provider’s pattern of practice is expressed as a rate, aggregated over time, for a defined population of patients.
Prospective Payment: A payment that is received before care is actually needed. It gives the provider organization a financial incentive to utilize fewer resources, as they get to keep the difference between what is prepaid and what is actually used.
Provider: Any supplier of health care services, i.e., physician, pharmacist, case management firm, etc.
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Quality-Adjusted Life-Year: This unit of measure is one way to quantify health outcomes resulting from some type of intervention. The number of quality-adjusted life-years is the number of years at full health that would be valued equivalently to the number of years of life experienced in a less-desirable health state. For example, if a year of life confined to bed is considered one-half as desirable as a year spent in full health, then 10 years of survival confined to bed would be counted as five quality-adjusted life-years.
Quality Assurance (QA): Quality assurance or quality assessment is the activity that monitors the level of care being provided by physicians, medical institutions, or any health care vendor in order to ensure that health care plan enrollees are receiving the best care possible.
Quality-of-Life Measures: An assessment of the patient’s perceptions of how they deal with their disease or everyday life when suffering from a particular condition. Although it is subjective, it has been in the health care literature for at least 25 years.
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Rating: The method that is used to determine the cost of premiums for the members of a managed health care or indemnity insurance plan.
Rating - Community: Rating method in which actuarial statistics are used with regard to a total population to determine a uniform premium.
Experience Rating: Rating method in which actuarial statistics are used with regard to a specific group’s medical experience (e.g., age, sex, etc.) to determine the premium. For example, if an employer with 10 workers has three with diabetes, that employer’s health insurance premiums would be higher than an employer with 10 healthy workers.
Referral: A recommendation by a physician or managed care plan for a patient to be evaluated or treated by a different physician or specialist.
Report Card on Health Care: A tool used by employers, the government, employer coalitions, and consumers to compare and understand the actual performance of health plans. Report cards provide health plan performance data, such as health care quality and utilization, consumer satisfaction, administrative efficiencies, financial stability, and cost control.
Reserves: Withholding a certain percentage of premiums to provide a fund for committed but undelivered health care, uncertainties, contingencies, over-utilization of referrals, catastrophes, and other situations.
Resource-Based Relative Value Scale (RBRVS): The new RBRVS became effective in January, 1992; it is a financing mechanism that reimburses health care providers on a classification system that measures training and skill required to perform a given health care service. This classification system is used to correct Medicare’s inequitable tendency to overcompensate for services, such as surgery and diagnostic tests and to underpay for primary care services.
Retrospective Review: A manner of judging medical necessity and appropriate billing practices for services that have already been rendered.
Risk Analysis: The process of evaluating expected medical costs for a prospective group and determining what product, benefit level, and price best meet the needs of the group and the carrier.
Risk Contract: An agreement between HCFA and an HMO or competitive medical plan requiring the HMO to furnish, at a minimum, all Medicare covered services to Medicare-eligible enrollees for an annually determined, fixed monthly payment rate from the government and a monthly premium paid by the enrollee. The HMO is then liable for services regardless of their extent, expense, or level.
Risk Pool: A defined patient population and geographic location from which revenue and expenses are determined. A risk pool seeks to define expected claim liabilities of a given defined account as well as required funding to support the claim liability.
Risk Sharing: An arrangement in which the health care system assumes total responsibility for all health care services related to a specific diagnosis-related group or disease process for a fixed dollar amount or bin which the system receives capitation for a specific number of members and in turn provides health care services.
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Screening: The method by which MCOs limit access to unnecessary health care. Most HMOs require a phone call to the physician before an office visit can be arranged. Gatekeepers and concurrent review are other methods of screening patients.
Self-Funding: Also known as self-insurance, self-funding is a health care plan funded entirely by employers who do not purchase insurance. Self-funded plans may be self-administered, or the employer may contract with an outside administrator for an administrative-services-only arrangement.
Single-Payer System: A financing arrangement whereby money is funneled to the government, which assumes responsibility for the financing and administration of the health care system. These systems can be regional, statewide, or nation-wide. The most popular example of the single-payer system is Canada.
Skilled Nursing Facility (SNF): Typically an institution for convalescence or a nursing home, the skilled nursing facility provides a high level of specialized care for long-term or acute illness. It is an alternative to extended hospital stays or difficult home care.
Standard Benefit Package: A set of specific health benefits offered by delivery systems.
Step Therapy: A prescription protocol used by HMOs and PPOs to utilize the most cost-effective drug therapy for selective diagnoses. If the patient does not respond satisfactorily, progressively more advanced therapy is prescribed as needed.
Stop-Loss: Insuring with a third party against a risk that the plan cannot financially manage. For example, a health plan can self-insure hospitalization costs or it can insure hospitalization costs with one or more insurance companies.
Supply-Side Management: Health care supply-side management strategies utilized to control health care costs and improve the overall quality of care have traditionally focused on the providers of health care techniques such as capitation, case management, claims review, concurrent review, cost sharing, deductibles, drug use evaluation, fee schedule, formularies, profiling, therapeutic substitution, utilization review, and withhold funds.
Systems Management: This concept looks at the entire system of care and integrates all services. It considers early intervention, appropriate referral, the analysis of intervention itself, report cards, with special emphasis on the outcomes of interventions and results of clinical support mechanisms. All of these things, bundled together as a concept, is systems management.
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Telemedicine: The provision of consultant services by off-site physicians to health care professionals on the scene by means of closed-circuit television; the ability of health care providers to examine patients, not in person, but by means of a computer screen.
Tertiary Care: Tertiary care is administered at a highly specialized medical center. It is associated with the utilization of high-cost technology resources.
Therapeutic Substitution: A drug that is believed to be therapeutically equivalent (i.e., will achieve the same outcome) to the exact drug prescribed by a physician.
Third-Party Administrator (TPA): An organization that is outside of the insuring organization that handles the administrative duties and sometimes utilization review. Third-party administrators are used by organizations that fund the health benefits but do not find it cost effective to administrate the plan themselves.
Total Quality Management: Total quality management is a philosophy of management in which, through a continuous loop of monitoring, evaluating, and correcting, businesses increase and maintain the highest quality output possible.
Triage: A term that originated on the battlefield, triage is the evaluation of patient conditions for urgency and seriousness, and establishment of a priority list for multiple patients. In the setting of managed care, triage is often performed after office hours on the telephone by a nurse or other health professional to screen patients for emergency treatment.
Tricare: The military’s integrated health care delivery system. The Tricare system includes the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS). Tricare gives the regional military treatment facilities control of health care delivery costs and purchasing. The Tricare system splits U.S. military bases into 12 designated regions. One major military health care facility within each of the regions is designated as the “lead agent,” which is responsible for organizing and maintaining an integrated delivery network, including civilian providers.
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Unbundling: The act of separating a medical procedure or operation into its many components, resulting in payment for each component rather than a lower global price for the entire procedure.
Underwriter: Usually refers to a company that receives premiums and accepts responsibility to fulfill the health insurance policy contract. Can also apply to an insurance company employee who decides whether or not the carrier should assume a risk or the agent who sells the policy.
Upcoding: The intentional or accidental act of changing a procedure code, such as a CPT code digit, to reflect a higher intensity of care and thus a higher payment.
Urgent Care Center: A medical facility where ambulatory patients can be treated on a walk-in basis, without an appointment, and receive immediate, non-emergency care.
Usual, Customary, and Reasonable (UCR): Fee-for-service payment to physicians based on the usual and customary fee for the same service in the area where the practice is located or on some other judgment of reasonableness.
Utilization Review: Performed by the health plan to discover if a particular physician-provider is spending as much of the health plan’s money on treatment, or any specific portion thereof (e.g., specialty referral, drug prescribing, hospitalization, radiologic or laboratory services), as his or her peers. This study helps determine if a physician will obtain any of the money in the withhold fund at the end of the health plan’s fiscal year.
Utilization Review Accreditation Commission (URAC): A Washington-based, nonprofit corporation formed in 1990 dedicated to improving the quality of utilization review in the health care industry by providing a method of evaluation and accreditation of utilization review programs and PPOs.
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Value-Added Services: These services, such as handling complicated paperwork and reimbursement forms, are offered by pharmaceutical manufacturers or drug wholesalers to enhance their competitive edge.
Variation: In utilization review, an instance in which information on a patient’s record does not conform to a screen criterion. The information in question may or may not subsequently be justified by audit committee review.
Vertical Integration: A provider strategy, usually accomplished through partnerships, joint ventures, and contractual agreements, whereby providers establish a local or regional health care delivery network serving a geographically-defined population. This system provides a seamless, full range of services and delivery settings for patients.
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Waiver: An agreement attached to an insurance policy that exempts certain disabilities or injuries from coverage normally covered by the policy.
Withhold Fund: The portion of the monthly capitation payment to physicians withheld by the MCO until the end of the year or other time period to create an incentive for efficient care. If the physician exceeds utilization norms for other members of his group or geographic region, he or she loses the fund.
The above glossary was derived from Medicom International, 1999.