Glossary

Access

The patient’s ability to obtain medical care. The ease of access is determined by such components as the availability of medical services and their acceptability to the patient, the location of health care facilities, transportation, hours of operation and cost of care. An individual’s ability to obtain appropriate health care services. Barriers to access can be financial (insufficient monetary resources), geographic (distance to providers), organizational (lack of available providers) and sociological (e.g., discrimination, language barriers). Efforts to improve access often focus on providing/improving health coverage.

Accountable Health Partnership

An Accountable Health Partnership is an organization of doctors and hospitals which provides care for people organized into large groups of purchasers.

Accountable Health Plan – AHP

AHPs can be IDSs, MCOs, Health Networks, partnerships or joint ventures between practitioners, providers or payers that would assume responsibility for delivering medical care and managing the funds required to pay for the services rendered. Physicians and other providers would either work for, contract with or own these health plans. When an IDS or hospital group or IPA operates one or more health insurance benefit products, or a managed care organization acquires a large scale medical delivery component, it qualifies as an Accountable Health System or Accountable Health Plan.

Accreditation

The process by which an organization recognizes a program of study or an institution as meeting predetermined standards. Two organizations that accredit managed care plans are the National Committee for Quality Assurance (NCQA) and the Joint Commission on Accreditation of Health Care Organizations (JCAHO).

Accrete

The addition of new recipients to a health plan; Medicare term.

Accrual

The amount of money that is set aside to cover expenses. The accrual is the plan’s best estimate of what those expenses are, and (for medical expenses) is based on a combination of data from the authorization system, the claims system, lag studies, and the plan’s prior history.

Actively-at-work

Describes insurer’s policy requirement indicating that coverage will not go into effect until the employee’s first day of work on or after the effective date of coverage. May also apply to dependents disabled on the effective date.

Activities of daily living – ADL’s, ADL

An individual’s daily habits such as bathing, dressing and eating. ADLs are often used as an assessment tool to determine an individual’s ability to function at home, or in a less restricted environment of care.

Activity-based Costing – ABC

Activity-based costing defines healthcare costs in terms of a healthcare organization’s processes or activities. The costs are then associated with significant activities or events. It relies on the following 3 step process: 1) Activity mapping, which involves mapping activities in an illustrated sequence; 2) Activity analysis, which involves defining and assigning a time value to activities; and , 3) bill of activities, which involves generating a cost for each main activity.

Actuarial

Refers to the statistical calculations used to determine the managed care company’s rates and premiums charged their customers based on projections of utilization and cost for a defined population.

Actuary

In insurance, a person trained in statistics, accounting and mathematics who determines policy rates, reserves, and dividends by deciding what assumptions should be made with respect to each of the risk factors involved (such as the frequency of occurrence of the peril, the average benefit that will be payable, the rate of investment earnings, if any, expenses, and persistency rates), and who endeavors to secure as valid statistics as possible on which to base his assumptions. Professionally trained individual, usually with experience or education in insurance, who conducts statistical studies such as determining insurance policy rates, dividend reserves and dividends, as well as conducts various other statistical studies. A capitated health provider would not accept or contract for capitated rates, or agree to a capitated contract without an actuarial determining the reasonableness of the rates.

Acute Care

A pattern of health care in which a patient is treated for an acute (immediate and severe) episode of illness, for the subsequent treatment of injuries related to an accident or other trauma, or during recovery from surgery. Acute care is usually given in a hospital by specialized personnel using complex and sophisticated technical equipment and materials. Unlike chronic care, acute care is often necessary for only a short time.

Adjudication

Processing claims according to contract.

Adjusted Admissions

Adjusted admissions are equivalent to the sum of inpatient admissions and an estimate of the volume of outpatient services. This is a measure of all patient care activity undertaken in a hospital, both inpatient and outpatient. This estimate is calculated by multiplying outpatient visits by the ratio of outpatient charges per visit to inpatient charges per admission.

Adjusted Average Per Capita Cost – AAPCC

The basis for HMO or CMP reimbursement under Medicare-risk contracts. The average monthly amount received per enrollee is currently calculated as 95 percent of the average costs to deliver medical care in the fee-for-service sector. HCFA’s best estimate of the amount of money care costs for Medicare recipients under fee-for-service Medicare in a given area. The AAPCC is made up of 122 different rate cells; 120 of them are factored for age, sex, Medicaid eligibility, institutional status, and whether a person has both part A and part B of Medicare. Actuarial projections of per capita Medicare spending for enrollees in fee-for-service Medicare. Separate AAPCCs are calculated – usually at the county level – for Part A services and Part B services for the aged, disabled, and people with ESRD. Medicare pays risk plans by applying adjustment factors to 95 percent of the Part A and Part B AAPCCs. The adjustment factors reflect differences in Medicare per capita fee-for-service spending related to age, sex, institutional status, Medicaid status, and employment status. A county-level estimate of the average cost incurred by Medicare for each beneficiary in the fee-for-service system. Adjustments are made so that the AAPCC represents the level of spending that would occur if each county contained the same mix of bene ficiaries. Medicare pays health plans 95 percent of the AAPCC, adjusted for the characteristics of the enrollees in each plan.

Adjusted Community Rate – ACR

Health plans and insurance companies estimate their ACRs annually and adjust subsequent year supplemental benefits or premiums to return any excess Medicare revenue above the ACR to enrollees. This are the estimated payment rates that health plans with Medicare risk contracts would have received for their Medicare enrollees if paid their private market premiums, adjusted for differences in benefit packages and service use.

Adjusted Community Rating – ACR

ACR is a rating by community influenced by certain group demographics. Estimated payment rates that health plans with Medicare risk contracts would have received for their Medicare enrollees if paid their private market premiums, adjusted for differences in benefit packages and service use. Health plans estimate their ACRs annually and adjust subsequent year supplemental benefits or premiums to return any excess Medicare revenue above the ACR to enrollees. See Adjusted Average Per Capita Cost, Medicare Risk Contract. See also Community Rating.

Adjusted Drug Benefit List

A small number of medications often prescribed to long-term patient. Also called a drug maintenance list. It can be modified from time to time by a health plan, HCFA or 3rd party administrator. See also Drug Formulary, Formulary.

Adjusted Payment Rate – APR

The Medicare capitated payment to risk-contract HMOs. For a given health plan, the APR is determined by adjusting county-level AAPCCs to reflect the relative risks of the plan’s enrollees.

Adjusted per Capita Cost – APCC

Medicare benefits estimation for a person in a given county using sex, age, institutional status, Medicaid disability, and end stage renal disease status as a basis.

Administrative Costs

Costs related to utilization review, insurance marketing, medical underwriting, agents’ commissions, premium collection, claims processing, insurer profit, quality assurance programs, and risk management. Administrative costs also refer to certain allowable costs on hospital HCFA cost reports, usually considered overhead. Rules exist which disallow certain expenses, such as marketing.

Administrative Services Only – ASO

A relationship between an insurance company or other management entity and a self-funded plan or group of providers in which the insurance company or management entity performs administrative services only, such as billing, practice management, marketing, etc., and does not assume any risk. The client bears the financial risk for the claims. Clients contracting for ASO can include health plans, hospitals, delivery networks, IPAs, etc. A provider system wishing to capitate may contract with a TPA for ASO for certain services for which the provider group does not want to bring in house. This is a form of outsourcing. See also TPA.

Administrative Services Organization – ASO

A contract between an insurance company and a self-funded plan where the insurance company performs administrative services only and the self-funded entity assumes all risk.

Admission Certification

A method of assuring that only those patients who need hospital care are admitted. Certification can be granted before admission (preadmission) or shortly after (concurrent). Length-of-stay for the patient’s diagnosed problem is usually assigned upon admission under a certification program.

Admissions Per 1,000

Number of patients admitted to a hospital or hospitals per 1,000 health plan members. An indicator calculated by taking the total number of inpatient and/or outpatient admissions from a specific group, e.g., employer group, HMO population at risk, for a specific period of time (usually one year), dividing it by the average number of covered members in that group during the same period, and multiplying the result by 1,000. This indicator can be calculated for behavioral health or any disease in the aggregate and by modality of treatment, e.g., inpatient, residential, and partial hospitalization, etc.

Adverse Event

An injury to a patient resulting from a medical intervention.

Adverse Selection

The problem of attracting members who are sicker than the general population, specifically, members who are sicker than was anticipated when developing the budget for medical costs. A tendency for utilization of health services in a population group to be higher than average or the tendency for a person who is in poor health to be enrolled in a health plan where he or she is below the average risk of the group. From an insurance perspective, adverse selection occurs when persons with poorer-than-average health status apply for, or continue, insurance coverage to a greater extent than do persons with average or better health expectations. Occurs when premium doesn’t cover cost. Some populations, perhaps due to age or health status, have a great potential for high utilization. Some population parameter such as age (e.g., a much greater number of 65-year-olds or older to young population) that increases the potential for higher utilization and often increases costs above those covered by a payers capitation rate. Among applicants for a given group or individual program, the tendency for those with an impaired health status, or who are prone to higher than average utilization of benefits, to be enrolled in disproportionate numbers and lower deductible plans.

Affiliated Provider

A health care provider or facility that is part of the HMO’s network usually having formal arrangements to provide services to the HMO member.

Affiliation

An agreement between two or more otherwise independent entities or individuals that defines how they will relate to one another. Agreements between hospitals may specify procedures for referring or transferring patients. Agreements between providers may include joint managed care contracting.

Age-at-Issuance Rating

A method for establishing health insurance premiums whereby an insurer’s premium is based on the age of individuals when they first purchased health insurance coverage. This is an older form of actuarial assessment.

Age-Attained Rating

Similar to the above, this method for establishing health insurance premiums whereby an insurer’s premium is based on the current age of the beneficiary. Age-attained-rated premiums increase in price as the purchasers grow older.

Age/Sex Factor

Underwriting measurement representing the medical risk costs of one population compared to another based on age and sex factors.

Age/Sex rates – ASR

Also called table rates, they are given group products’ set of rates where each grouping, by age and sex, has its own rates. Rates are used to calculate premiums for group billing and demographic changes are adjusted automatically in the group.

Agency for Health Care Policy and Research – AHCPR

The agency of the Public Health Service responsible for enhancing the quality, appropriateness and effectiveness of health care services.

Aggregate Margin

This is computed by subtracting the sum of expenses for all hospitals in the group from the sum of revenues and dividing by the sum of revenues. The aggregate margin compares revenues to expenses for a group of hospitals, rather than one single hospital.

Aggregate PPS Operating Margin/Aggregate Total Margin

This is computed by subtracting the sum of expenses for all hospitals in the group from the sum of revenues and dividing by the sum of revenues. A PPS operating margin or total margin that compare revenue to expenses for a group of hospitals, rather than a single hospital.

Aggregate Stop Loss

The form of excess risk coverage that provides protection for the employer against accumulation of claims exceeding a certain level. This is protection against abnormal frequency of claims in total, rather than abnormal severity of a single claim.

Aid to Families with Dependent Children – AFDC

The federal AFDC program provides cash welfare to: (1) needy children who have been deprived of parental support and (2) certain others in the household of such child. States administer the AFDC program with funding from both the federal government and state. The Personal Responsibility & Work Responsibility Act of 1996, enacted in August 1996, replaced AFDC with a new program called Temporary Assistance for Needy Families (TANF).

All Inclusive Visit Rate

Aggregate costs for any one patient visit based upon annual operating costs divided by patient visits per year. This rate incorporates costs for all services at the visit.

Allowable Charge

The maximum charge for which a third party will reimburse a provider for a given service. An allowable charge is not necessarily the same as either a reasonable, customary, maximum, actual, or prevailing charge.

Allowed Amount

Maximum dollar amount assigned for a procedure based on various pricing mechanisms. Also known as a maximum allowable

Allowed Charge

This is the amount Medicare approves for payment to a physician, but may not match the amount the physician gets paid by Medicare (due to co-pay or deductibles) and usually does not match what the physician charges patients. Medicare normally pays 80 percent of the approved charge and the beneficiary pays the remaining 20 percent. The allowed charge for a nonparticipating physician is 95 percent of that for a participating physician. Non-participating physicians may bill beneficiaries for an additional amount above the allowed charge. These rates are published by the HCFA intermediary in each state.

Alternate Delivery Systems

Health services provided in other than an inpatient, acute-care hospital or private practice. Examples within general health services include skilled and intermediary nursing facilities, hospice programs, and home health care. Alternate delivery systems are designed to provide needed services in a more cost-effective manner. Most of the services provided by community mental health centers fall into this category.

Ambulatory Care

Health services provided without the patient being admitted. Also called outpatient care. The services of ambulatory care centers, hospital outpatient departments, physicians’ offices and home health care services fall under this heading provided that the patient remains at the facility less than 24 hours. No overnight stay in a hospital is required.

Ancillary Services – Ancillary Charges

Supplemental services, including laboratory, radiology, physical therapy, and inhalation therapy, that are provided in conjunction with medical or hospital care.

Anniversary Date

The beginning of an employer group’s benefit year. The first day of effective coverage as contained in the policy Group Application and subsequent annual anniversaries of that date. An insured has the option to transfer from an indemnity plan (which may have maximum benefit levels) to an HMO.

ANSI

The American National Standards Institute. A national organization founded to develop voluntary business standards in the United States.

Antitrust

A legal term encompassing a variety of efforts on the part of government to assure that sellers do not conspire to restrain trade or fix prices for their goods or services in the market.

Any Willing Provider Laws

Laws that require managed care plans to contract with all health care providers that meet their terms and conditions.

AP or A/P

Account(s) Payable

Application Integrators

Software that transparently provides application-to-application functionality, primarily through data conversion and transmission, while eliminating the need for custom programming. Also referred to as application integration gateway, application interface gateway, integration engine, intelligent gateway. This type of software is key to developing networks of information systems, making client-specific information available in real time to all members of an IHDS.

Appropriateness

Appropriate health care is care for which the expected health benefit exceeds the expected negative consequences by a wide enough margin to justify treatment. This term is not to be confused with “usual and customary” or “approved” service.

Approval

A term used extensively in managed care and, to many, implies the primary process of “managing” managed care. Approval usually is used to describe treatments or procedures that have been certified by utilization review. Can also refer to the status of certain hospitals or doctors, as members of a plan. Can describe benefits or services which will be covered under a plan. Generally, approval is either granted by the managed care organization (MCO), third party administrator (TPA) or by the primary care physician (PCP), depending on the circumstances.

Approved Charge

Limits of expenses paid by Medicare in a given area of covered service. Charges approved by payment by private health plans. Items that are likely to reimbursed by the insurance company.

Approved Health Care Facility, Hospital

A facility or program authorized to provide health services and allowed by a given health plan to provide services stipulated in contract.

ASP

Application Service Provider: These third party groups distribute and manage software-based services and solutions for customers.

Assignment of Benefits

Method used when a claimant directs that payment be made directly to the health care provider by the health plan.

Assisted Living

Broad range of residential care services, but does not include nursing services. Normally lower in cost than nursing homes.

Audit of Provider Treatment or Charges

A qualitative or quantitative review of services rendered or proposed by a health provider. The review can be carried out in a number of ways: a comparison of patient records and claim form information, a patient questionnaire, a review of hospital and practitioner records, or a pre- or post-treatment clinical examination of a patient. Some audits may involve fee verification. Something we had better get used to being subjected to since this is usually first type or “first generation” managed care approach.

Autoassignment

A term used with Medicaid mandatory managed care enrollment plans. Medicaid recipients who do not specify their choice for a contracted plan within a specified time frame are assigned to a plan by the state.

Average Length of Stay – ALOS

Refers to the average length of stay per inpatient hospital visit. Figure is typically calculated for both commercial and Medicare patient populations.

Average Wholesale Price – AWP

Commonly used in pharmacy contracting, the AWP is generally determined through reference to a common source of information. Average cost of a non-discounted item to a pharmacy provider by wholesale providers. Drug manufacturers commonly publish suggested wholesale prices.

Avoidable Hospital Condition

Medical diagnosis for which hospitalization could have been avoided if ambulatory care had been provided in a timely and efficient manner.