Committee composed of representatives form the National Center for Health Statistics (NCHS) and the Centers for Medicare and Medicaid Services (CMS) that is responsible for maintaining the United States' clinical modification version of the International Classification of Diseases, 9th revision (ICD-9-CM) code sets.

Traditional, fee-for-service healthcare plan in which the policyholder pays a monthly premium and a percentage of the usual, customary, and reasonable healthcare costs, and the patient can select the provider.

To account for the indirect costs a hospital incurs in connection with interns and residents in approved graduate medical education programs, an annual lump sum additional payment is made based on the federal portion of the DRG-adjusted prospective payment rates.

A patient admitted to a hospital and receiving services under the direction of a physician for at least 24 hours.

Health care financing and delivery organizations created to provide a "continuum of care," ensuring that patients get the right care at the right time by the right provider. This continuum of care from primary care provider to specialist and ancillary provider under one corporate umbrella guarantees that patients get cared for appropriately, thus saving money and increasing the quality of care.

An ICF/MR is an institution with the primary purpose of providing health or rehabilitative services for individuals with mental retardation or related conditions. The recipients must be receiving active treatment for the facility to qualify as an ICF as defined by Medicaid. ICF services are not covered under Medicare.

A list of codes used by physicians and hospitals for reporting medical diagnoses and procedures.

Sum of facilities' relative proportion of wages and salaries, employee benefits, professional fees, postal services, other labor-intensive services, and the labor related share of capital costs from the appropriate market basket. Labor-related share is typically 70 to 75 percent of healthcare facilities' costs. Adjusted annually and published in the Federal Register.

Number of days a patient remains in a healthcare organization. The statistic is the number of calendar days from admission to discharge including the day of admission, but not the day of discharge. This statistic may have an impact on prospective reimbursement.

Reimbursement and medical necessity policies established by regional fiscal intermediaries. New format for Local Medical Review Policies (LMRPs). LCDs and LMRPs vary from state to state.

LTC policies cover health services for persons who are chronically ill, disabled, or mentally retarded. Patients must require assistance with a specified number of daily activities, such as eating, bathing, and dressing. Long-term care hospitals currently are excluded from the prospective payment system and must meet average patient length-of-stay requirements.

Highest level in hierarchical structure of the federal inpatient prospective payment system (IPPS). The twenty-five MDCs are primarily based on body system involvement, such as MDC No. 06, Diseases and Disorders of the Digestive System. However, a few categories are based on disease etiology, for example, Human Immunodeficiency Virus Infections.

An organized system of healthcare delivery designed to control costs and quality by such means as mandatory drug formulary lists, preadmission screening, case management, etc. Participating providers (physicians, dentists, pharmacists, etc.) generally agree to accept discounted payment and to abide by the plan's cost and quality control measures.

Relative measure that averages the costs of a mix of goods and services.

A kind of economic model in which a Markov node is included. Markov nodes are shorthand for a decision-analytic model in which the set of possible events repeats itself again and again over time.

An entitlement program provided jointly through state and federal government for the provision of health care to patients who cannot afford to pay for private health insurance.

A service or treatment that is appropriate and consistent with diagnosis and which, in accordance with accepted standards of practice in the medical community, could not have been omitted without adversely affecting the patient's condition or the quality of medical care rendered.

An entitlement program administered by CMS that provides health care primarily to people aged 65 years or older. Medicare Part A covers hospitalization and is a compulsory benefit. Medicare Part B covers outpatient and physician services, and a beneficiary may or may not elect coverage at their discretion.

Optional managed care plan for Medicare beneficiaries who are entitled to Part A, are enrolled in Part B, and live in an area with a plan. Types of plans available include health maintenance organization, point-of-service plan, preferred provider organization, and provider-sponsored organization (formerly Medicare+Choice).

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

Most significant legislative change to the Medicare Program since its creation; the law created the outpatient prescription drug benefit and provided expanded coverage choices and improved benefits.

Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA) 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 the Balanced Budget Act of 1997 (BBA) and the Medicare, Medicaid and SCHIP Balanced Budget Refinement Act of 1999 (BBRA)

Medicare drug benefit created by the Medicare Modernization Act of 2003 (MMA) that offers outpatient drug coverage to beneficiaries for an additional premium.

Type of private insurance policy available for Medicare beneficiaries to supplement Medicare Part A and or Part B coverage.

Core-based statistical area associated with at least one urbanized area that has a population of at least 50,000. The MSA comprises the central county or counties containing the core, plus adjacent outlying counties. See also Core-based statistical area CBSA.

The incidence and severity of sickness in a defined class of people.

The death rate at each age, calculated from prior experience.

A set of coding regulations to prevent fraud and abuse in physician and hospital outpatient coding; specifically addresses unbundling and mutually exclusive procedures.

National medical necessity and reimbursement regulations.

Facilities' operating costs not related to labor (typically 25 to 30 percent). See also Labor-related share.

The Department of Health and Human Services’ OIG provides oversight of fraud and abuse issues and is the enforcement arm for the Medicare/Medicaid programs.

The high-level results of a healthcare strategy or therapy. For example, an outcome of a disease-management program for asthma might be fewer emergency department visits.

Cases in prospective payment systems with unusually long lengths of stay or exceptionally high costs; day outlier or cost outlier, respectively.

A patient who receives health care services without being admitted to a hospital.

Exception to the Medicare prospective payment systems (PPSs) for a high-cost service. The exception minimizes the negative financial impact of the lump-sum payment of the PPSs. Pass-throughs are not included in the PPSs and are passed through to cost-based (retrospective) payment mechanisms. In the hospital outpatient prospective payment system (HOPPS), the Centers Medicare and Medicaid Services (CMS) created exceptions for some expensive drugs, pharmaceuticals, biologicals, and devices. Rather than being bundled or packaged, these exceptions to the CMS's HOPPS are "passed-through" the HOPPS to other payment mechanisms (payment status indicators F, G, H, and J). The inpatient prospective payment system (IPPS) passes through the costs of medical education and organ acquisition and some capital costs.

A PRO reviews inpatient hospital care provided to Medicare beneficiaries to ensure that the care is medically necessary, reasonable, provided in the appropriate setting, and meets professionally recognized standards of health care. PROs are authorized to make payment determinations.

Type of prospective payment method in which the third party payer reimburses the provider a fixed rate for each day a covered member is hospitalized.

Amount of money paid monthly for each individual enrolled in a capitation-based health insurance plan.

Statement by a physician regarding the medical necessity of a provided medical service or procedure.

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.

Any medical condition that has been diagnosed or treated within a specified period before a member's effective date of coverage under a group contract.

PPOs are fee-for-service, coordinated care plans with incentives to use network providers under contract or arrangement to deliver benefit packages approved by CMS. PPOs act as intermediaries between the beneficiary and the insurance company, employer, or union welfare fund.

Amount of money that policyholder or certificate holder must periodically pay a healthcare insurance plan in return for healthcare coverage.

Software module in Medicare claims processing systems, specific to certain benefits, used in pricing claims and calculating payment rates and payments, most often under prospective payment systems

Reason established after study to be chiefly responsible for occasioning the admission of the patient to the hospital for care.

A type of economic analysis borrowed from the discipline of accounting, in which the stream of future expenses and revenues are compared with upfront costs. These analyses are common in capital-equipment purchase decisions made by hospitals.

A prospective payment is a payment that is determined before care is actually given. 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.

Type of episode-of-care reimbursement in which the third party payer establishes the payment rates for healthcare services in advance for a specific time period.

A reimbursement structure under Medicare that pays hospitals a fixed per-case rate based on the diagnosis related group (DRG) assignment.

Physician, clinic, hospital, nursing home, or other healthcare entity (second party) rendering the care.

A PSO is a public or private entity established and operated by a health care provider, or a network of affiliated health care providers, that shares substantial financial risk with respect to the provision of those services and has at least a majority financial interest in the entity. PSOs must meet federal standards for quality and solvency, comply with Medicare contractor requirements, and deliver a substantial portion of coordinated care through the affiliated network of providers.

An acronym for, "quality-adjusted life year". QALYs are a measure of both the quality and quantity of life. For example, a life with a quality (utility; see next definition) of 1.0 for 5 years yields 5 QALYs. So does a life with a quality of 0.5 for 10 years.

Medicare contractor that is responsible for carrying a specified scope of work during a three-year period; monitors and assists healthcare facilities with quality, payment, treatment denial, and health information technology issues.

Unit of measure designed to permit comparison of the amount of resources required to perform various provider services by assigning weights to such factors as personnel time, level of skill, and sophistication of equipment required to render service. In the resource-based relative value scale (RBRVS), the RVU reflects national averages and is the sum of the physician work, practice expenses, and malpractice. RVUs are adjusted to local costs through the geographic practice cost indexes (GPCIs).

Assigned weight that reflects the relative resource consumption associating with a payment classification or group. Higher payments are associated with higher relative weights.

Classification for resources used in nursing homes. Patients are classified into one of forty-four possible RUGs based on resident information collected in the minimum data set (MDS). The RUG subsequently classifies residents into seven payment categories.

The RBRVS system for physician reimbursement was implemented by Medicare January 1, 1992. It is a financing mechanism that reimburses health care providers based on a classification system that measures resources required to perform a given health care service.

Revenue codes are used by hospitals to bill for each cost center for which there is a separate charge. All payer types require the use of revenue codes to delineate total costs.

Method of insurance in which the employer or other association itself administers the health insurance benefits for its employees or their dependents, thereby assuming the risks for the costs of healthcare for the group.

Type of fee-for-service reimbursement in which the patients or their guarantors pay for a specific amount for each service received.

A SNF is a facility primarily engaged in providing skilled nursing care and related services to inpatients requiring medical or nursing care, or rehabilitation services for the rehabilitation of injured, disabled, or sick persons.

The SSA is the federal law that sets forth the Medicare (Title XVIII) and Medicaid (Title XIX) programs.

Hospital that, by reason of factors such as isolated location, weather conditions, travel conditions, or absence of other hospitals (as determined by the Secretary of the Department of Health and Human Services [DHHS]), is the sole source of patient hospital services reasonably available to individuals in a geographical area who are entitled to benefits.

Individuals or institutions affected by a (healthcare) policy or practice. Healthcare stakeholders commonly include payers (insurers), providers (health plans, hospitals, physician groups, etc.), patients and producers (medical device manufacturers, pharmaceutical companies, biotechnology companies, etc.).

National base payment amount in the prospective payment system for long-term care hospitals (PPS or LTC). This amount multiplied with the relative weight of the long-term care diagnosis related group (LTC-DRG) to calculate the unadjusted payment. Published annually in the Federal Register.

A state-federal partnership created by the Balanced Budget Act of 1997 that provides health insurance to children of families whose income level is too high to qualify for Medicaid but too low to purchase healthcare insurance.

Specific amount, in a certain time frame such as one year, beyond which all covered healthcare services for that policyholder or dependent are paid at 100 percent by the healthcare insurance plan.

TEFRA governs Medicare payment to non-PPS hospitals, including rehabilitation facilities and long-term care hospitals. Under TEFRA, payments for inpatient operating costs are based on the provider’s inpatient costs compared to a payment ceiling, determined in part by the base year 1982, for facilities in existence at that time; for hospitals that began operating after that date, the base is the second cost reporting period. Hospitals that do not exceed their base year costs in subsequent years are rewarded with an incentive payment.

A public or private organization that pays for or underwrites coverage for health care expenses.

The amount of time covered by an economic analysis.

A mechanism that allows for additional payment for "new technology" under the Medicare Outpatient Prospective Payment System (OPPS). These payments are for medical products that were not included in the 1996 CMS cost study from which APCs were derived and are in addition to the related APC payment. For medical devices, transitional pass-through payment is based on hospital charges adjusted by a hospital-specific cost-to-charge ratio eveloped by CMS for this purpose. Separate payment will eventually be phased out as CMS incorporates costs for new technology into the overall APC payment.

The healthcare program for active duty and retired members of one of the seven uniformed services administered by the Department of Defense; formerly known as Civilian Health and Medical Program of the Uniformed Services (CHAMPUS).

The act of separating a medical procedure into its many components resulting in payment for each component rather than a lower global price for the entire procedure.

The intentional or accidental act of changing a procedure code, such as a CPT code digit, to reflect a higher intensity of care, thus generating higher payment.

Systems that base reimbursement for a particular service on at least two of the following factors:

1. Actual charges,
2. A usual amount based on submitted charge profiles for each individual physician, or
3. A customary amount based on a profile of actual charges for all physicians in a specific geographic area.

The formal measure of the "quality" of life in a particular health state; the scale typically ranges from 0 (death) to 1 (perfect health). Common ways to measure utility are the time-trade off, visual analog scale, and standard gamble.

The use of healthcare resources, for example, the numbers of physician visits or hospitals days are measures of utilization. This is a popular measure for economic data, because standardized unit costs can be associated with visits or days to derive standardized total costs.

The process of determining whether a patient's medical care is necessary according to established guidelines and regulations. Cost containment measure that assesses the appropriateness of the setting for the healthcare service in the continuum of care and the level of service.

Ration that represents the relationship between the average wages in a healthcare setting's geographic area and the national average for that healthcare setting. Wage indexes are adjusted annually and published in the Federal Register.

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