Amount provider actually bills a patient, which may differ from the allowable charge.

Average or maximum amount the third party payer will reimburse providers for the service.

A system by which hospital outpatient procedures are classified into groups of services that are similar clinically and require similar amounts of resources. A payment rate is established for each APC, which is paid by Medicare under the Outpatient Prospective Payment System (OPPS). Depending on the services provided, hospitals may be paid for more than one APC for an encounter.

A surgical procedure for which a patient is admitted, treated and discharged the same day; also referred to as outpatient surgery.

Ambulatory Surgery Centers (ASC) are either hospital-based or freestanding entities which operate exclusively for the purpose of furnishing outpatient surgical procedures.

Payment made to an ambulatory surgery center (ASC) for facility-related costs. A fixed payment rate for procedures designated to be ASC procedures. ASC procedures are classified into nine payment groups. A fixed payment rate is designated for each group. The ASC facility payment in each group is a single rate adjusted for geographic variation. This prospectively determined rate covers the cost of standard overhead items (nursing care, supplies, equipment, and use of facility). It does not include physicians' fees and some other medical items and services (such as prostheses).

Sum of all lengths of stay in a set of cases divided by the number of cases. The national average number of days patients within a given diagnosis related group (DRG) are hospitalized.

Average number of days patients are hospitalized. Statistic is calculated by dividing the total number of hospital bed days in a certain period by the admissions or discharges during the same period.

As it applies to managed care, authorization is the approval of care, such as hospitalization. Preauthorization may be required before admission takes place or before care is given by non-HMO providers.

The BBA is a federal law that includes many changes to the structure of and payment systems for Medicare and Medicaid. These changes amend several sections of the Social Security Act as well as establish the State Children's Health Insurance Program.

A person who is eligible to receive insurance benefits.

Adjustment of payment rates when policies change so that total spending under the new rules is the same as it would have been under the previous payment rules.

A per-member monthly payment to a provider that covers contracted services and is paid in advance of the services' delivery. In essence, a provider agrees to provide specified services to HMO 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.

Set of categories of patients (type and volume) treated by a healthcare organization and representing the complexity of the organization's case load.

Type of prospective payment method in which the third party reimburses the provider a fixed, pre-established payment for each case.

Formerly Health Care Financing Administration (HCFA). The federal agency responsible for administering Medicare and overseeing states' management of Medicaid.

Price assigned to a unit of medical or health service, such as a visit to a physician or a day in a hospital. The charge for a service may be unrelated to the actual cost of providing the service. See also Fee.

Information submitted by a provider or covered person to establish that medical services were provided, from which processing for payment to the provider or patient is made.

Set standards to be met by all clinical laboratories, regardless of location, size, or type of laboratory. These standards are based on the complexity of tests performed by the laboratory. Regulations define four levels of testing complexity: waived, moderate complexity, high complexity, and physician-performed microscopic procedures. CMS requires all laboratories to register in order to perform testing at any or all of these levels.

The CFR is a codification of the general and permanent rules published in the Federal Register by the executive departments and agencies of the federal government.

The percentage of the costs of medical services paid by the patient. This is a characteristic of indemnity insurance plans and PPO plans. The coinsurance usually is about 20% of the cost of medical services after the deductible is paid.

Preexisting condition that, because of its presence with a specific diagnosis, causes an increase in length of stay by at least one day in approximately 75 percent of the cases (as in complication and comorbidity [CC]).

Managing a coding or billing department according to the laws, regulations, and guidelines that govern it.

Condition that arises during the hospital stay that prolongs the length of stay at least one day in approximately 75 percent of the cases (as in complication and comorbidity ([CC]).

Requires an employer to offer employees and their dependents the opportunity to continue their group health coverage under the employer’s plan upon the occurrence of certain events that otherwise would cause them to lose their employment-related health plan coverage. COBRA imposes a host of rules governing the obligations and duties of both employers and qualified beneficiaries involved in coverage-continuation situations. Specific rules under COBRA, for example, address such issues as the length of the required coverage period, notification requirements for employers and plan administrators, procedures for electing continuation coverage, premiums the employer may require beneficiaries to pay, and the circumstances under which an employer may terminate COBRA coverage short of the full continuation period.

Type of fee-for-service reimbursement in which the third party payer has negotiated a reduced (discounted) fee for its covered insured. See also Discounted fee-for-service.

National dollar multiplier, which sets the allowance for the relative values; a constant.

Method of integrating benefits payments from all health insurance sources to ensure that payments do not exceed 100 percent of the covered healthcare expenses.

A nominal fee charged to patients to offset costs of paperwork and administration for an office visit or pharmacy prescription.

Statistical geographic entity consisting of the county or counties associated with at least one core (urbanized area or urban cluster) of at least 10,000 population, plus adjacent counties having a high degree of social and economic integration with the core as measured through commuting ties with the counties containing the core. Metropolitan and metropolitan statistical areas are two components of CBSAs.

Usually indicated by a ratio, the cost-effectiveness of a procedure relates the cost of that procedure to the health benefits resulting from its use. In health terms, it is often expressed as the cost per year per life saved or as the cost per quality-adjusted life-year saved.

A type of economic analysis in which the costs and benefits of alternative healthcare therapies or strategies are compared. The statistic that commonly results from such an analysis is the incremental cost-effectiveness ratio (ICER), which is the difference in the mean costs of alternatives A and B, divided by the difference in their mean effects:

A type of economic analysis in which only the costs of alternative healthcare therapies or strategies are compared because the effects are assumed to be equal. (If the effects of A and B are equal, the better strategy is the cheaper of the two.)

Alteration that reflects a change in the consumer price index (CPI), which measures purchasing power between time periods. The CPI is based on a market basket of goods and services that a typical consumer buys.

Report required from providers on a n annual basis in order for the Medicare program to make a proper determination of amounts payable to providers under its provisions.

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.

Health condition, illness, injury, disease, or symptom for which the healthcare insurance company will pay.

A listing of descriptive terms and identifying codes for reporting medical services and procedures performed by physicians. CPT is maintained and published annually by the American Medical Association.

Type of retrospective fee-for-service payment method in which the third party payer pays for fees that are customary, prevailing, and reasonable.

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 $2500 deductible, and then pay up to 100% of money spent for covered services above this level.

A system by which hospital procedures are rated in terms of cost and taking into account the intensity of services delivered. A standard flat rate per procedure is derived from this scale, which is paid by Medicare under the Prospective Payment System (PPS), regardless of the cost to the hospital for providing that service.

In economic models, the time value of incurred costs or received benefits (effects). This is conventionally 3% or 5%, indicating the degree to which patients or payers would prefer to defer payments into the future, rather than incur them all in the present.

Under a Prospective Payment System, an adjustment is made to the payment to hospitals that serve a significantly disproportionate share of low-income patients. The DSH assignment is intended to compensate hospitals that treat large proportions of low-income and/or Medicaid patients of the cost to the hospital for providing that service.

DME is equipment that can withstand repeated use, is primarily used to serve a medical purpose, is not generally useful to a person in the absence of an illness or injury, and is appropriate for use in the home.

A tool for conducting cost-effectiveness analysis or cost-minimization analysis that uses a decision-analytic structure borrowed from the discipline of financial analysis. The tool consists of a "tree" with branches that represent possible events, the probabilities of those events, and the outcomes (usually effects or costs) of those events.

The EMTALA, also known as the “anti-dumping” law, requires hospitals that treat Medicare patients to screen all patients seeking emergency care to determine if the patient does in fact have a medical emergency and to provide whatever treatment is needed within the hospital’s capability to stabilize the patient’s emergency condition. Unstabilized patients may not be transferred to another facility unless certain criteria are met, including a doctor’s written certification that the benefits of the transfer outweigh the risks.

ESRD is the stage of renal impairment that appears irreversible and permanent, and requires a regular course of dialysis or kidney transplantation to maintain life. Medicare covers services furnished to beneficiaries with end-stage renal disease, including those under age 65, who require dialysis or kidney transplantation.

One or more healthcare services given by a provider during a specific period of relatively continuous care in relation to a particular health or medical problem or situation. In home health, the episode of care is all home care services and non-routine medical supplies delivered to a patient during a 60-day period. In the home health prospective payment system (HHPPS), the episode of care is the unit of payment.

Hybrid managed care organization that is sponsored by self-insured (self-funded) employers or associations and exhibits characteristics of both health maintenance organizations and preferred provider organizations.

Notification by the insurer that explains the benefits that were paid and/or rejected.

Legislation passed during the Civil War that prohibits contractors from making a false claim to a governmental program; used to reinforce healthcare fraud and abuse.

Price assigned to a unit of medical or health service, such as a visit to a physician or a day in a hospital. A fee for a service may be unrelated to the actual cost of providing the service. See also Charge.

Traditional provider reimbursement, in which the physician is paid according to the service performed. This is the reimbursement system used by conventional indemnity insurers.

A comprehensive listing of fees used by a health care plan to reimburse physicians and/or other providers on a fee-for-service basis.

A private insurance organization under contract with the federal government to administer the receipt and processing of Part A claims for the Medicare program.

Most HMOs rely on the primary care physician, or "gatekeeper," to screen patients seeking medical care and effectively eliminate costly and sometimes needless referral to specialists for diagnosis and management. The gatekeeper is responsible for the administration of the patient's treatment, and this person must coordinate and authorize all medical services, laboratory studies, specialty referrals, and hospitalizations. In most HMOs, if an enrollee visits a specialist without prior authorization from his or her designated primary care physician, the medical services delivered by the specialist must be paid in full by the patient.

Index based on relative difference in the cost of a market basket of goods across geographical areas. A separate GPCI exists for each element of the relative value unit (RVU), which includes physician work, practice expenses, and malpractice. GPCIs are a means to adjust the RVUs, which are national averages, to reflect local costs of service.

Statistically adjusted value of all cases of a given diagnosis related group (DRG), allowing for the outliers, transfer cases, and negative outlier cases that would normally skew the data. The GMLOS is used to compute hospital reimbursement for transfer cases.

Method of payment in which the third party payer makes one consolidated payment to cover the services of multiple providers who are treating a single episode of care.

Computer program that uses specific data elements to assign patients, clients, or residents to groups, categories, or classes.

Forms developed by CMS to be used by health care providers to bill insurers.

HHS is the U.S. government’s principal agency for “protecting the health of all Americans and providing essential human services” through a variety of programs such as Medicare, Medicaid, Head Start, and Meals on Wheels.

A system of coding for physician services and procedures that includes CPT, codes for ambulance services, physical therapy, dental services, drugs, and other covered services.

The study of how resources are allocated within (and to) the healthcare system. Two common tools for resource-allocation decisions are cost-minimization analysis and cost-effectiveness analysis.

The health insurance reform law known as HIPAA established a coordination of health care fraud and abuse activities known as the Fraud and Abuse Control Program and the Medicare Integrity Program. The law requires the government to issue written advisory opinions in order to assist providers in understanding the requirements of the fraud and abuse laws, which are frequently criticized as vague and overly broad. The act also expands coverage of the fraud and abuse laws beyond the Medicare and Medicaid programs to include not only all federal health plans but also certain offenses to private health plans as well. The insurance portability part of the act addresses the problem of retaining the same health insurance coverage as workers move from job to job.

A form of health insurance in which members prepay a premium for health services, which generally include inpatient and ambulatory care. For the patient, it means reduced out-of-pockets 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.
 
The following are some types of HMOs.

• Staff Model
  The staff model HMO is the purest form of managed care. All providers are at a centralized site, in which all clinical and perhaps inpatient services and pharmacy services are offered. The HMO holds the tightest management reins in this setting, because none of the physicians practice on an independent fee-for-service basis. Physicians are employees of the HMO in this setting, as they are not in a private or group practice.
• 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 the fee-for-service patients. Physicians belonging to the IPA guarantee that the care provided to each patient for whom they are responsible will not exceed the capitated amount. This is accomplished by allowing the HMO to withhold a portion of payments (usually about 20%). If, at the end of the year, the physician's cost for treatment falls under the capitated amount, the physician receives the entire "withhold fund." If the opposite is true, the HMO can retain part of the "withhold fund" at their discretion. Essentially, the physician is put "at risk" for controlling the cost of treatment.
• Group Model
  In this model, the HMO contracts with a physician group, which is paid a fixed amount per patient to provide specific services. The administration of the group practice then decides how the HMO payments are distributed to each member physician. This type of HMO is usually located in a hospital or clinic setting and may include a pharmacy. These physicians usually do not have any fee-for-service patients.
• Hybrid Model
  A combination of at least two managed care organizational modes that is melded in a single health plan. Since its features do not uniformly fit only one type of model, it is called a hybrid.
• Network Model
  A network of group practices under the administration of one HMO.
• Point-of-Service Model
  Sometimes referred to as an "open-ended" HMO, the point-of-service model is one in which the patient can receive care either by physicians contracting with the HMO or by those not contracting. 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 providers through the broader coverage offered for contracted care.

Criterion to assess whether technologies would be inadequately paid under the inpatient prospective payment system (IPPS). The sum

An HHA is a public or private agency or organization, or part of an agency or organization, that meets the requirements for participation in Medicare, that provides services to a beneficiary at this or her place of residence, on his or her physician’s orders.

Classifications (groups) for the home health prospective payment system (HHPS) derived from the data elements in the Outcome Assessment Information Set (OASIS). The HHRG is a six-character alphanumeric code that represents a severity level in three domains.

The reimbursement system created by the Balanced Budget Act of 1997 for hospital outpatient services rendered to Medicare beneficiaries; maintained by the Centers for Medicare and Medicaid Services (CMS).