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Glossary of Healthcare Terms


Administrative Services Only
An agreement between an insurer and a self-insured organization under which the insurer, for a fee, provides all the administrative services for the organization's health plan.  These services might include, for example, enrollment, billing, eligibility, claims processing, and all other paperwork in relation to the health care plan.

Allowable Charge
The maximum amount a third party will reimburse for a given service.

Ambulatory Care
Healthcare services provided on an outpatient basis.  No overnight stay in a hospital is required.  The services of ambulatory care centers, hospital outpatient departments, physician office and home healthcare services fall under this heading.

Average Length of Stay (ALOS)
A numerical calculation made by health care facilities for inpatient care.  For this calculation, the total number of days all patients are in a hospital for a specific period of time is divided by the total number of patients admitted to or discharged from the facility during that period.  Average lengths of stay statistics are used for budgeting and other purposes.

Balance Billing
Charging a patient the amount that a health care provider's charges exceed the amount covered by insurance or other third-party payer.  In effect, the patient is a co-insurer of the excess charges unless the provider has agreed to accept the amount of the coverage as full payment.

Bed Days
Measured as bed days per 1,000 people.  Bed days measure the number of days people stay in a hospital as compared with other plans or national standards.  It is one measure of cost-effectiveness.

The identification of best practices in your own or another industry that exemplify superior performance.

Blue Cross
Nonprofit, health insurance plans for hospital care that was initially formed by hospitals.  Regulated by statutes of various states, Blue Cross insurance plans are autonomous and vary from place to place in coverage, cost policies, and procedures.  As far back as the 1930s, Blue Cross plans began negotiating price discounts with hospitals in return for volume business.  Some Blue Cross plans have joined with Blue Shield plans so both hospital and physician care are covered.

Blue Shield
Nonprofit, health insurance plans for physician care that was initially formed by physicians.  Regulated by statutes of various states, Blue Shield insurance plans are autonomous and vary from place to place in coverage, cost, policies, and procedures.  Early in their development, Blue Shield plans began to negotiate price discounts with physicians in return for volume business.  Some Blue Shield plans have joined with Blue Cross plans so both hospital and physician care is covered.

Board Certification
The process by which a medical specialty Board certifies that a health professional is competent to practice as a specialist in the designated field.  The physician or other health professional must meet the requirements set by the Board for his or her specialty, such as working in the field for a certain period of time, performing a certain number procedures, and taking an examination.  Hospitals or other health care providers sometimes require board certification as a precondition for holding certain positions or performing certain procedures.

Case Management
A function in the delivery of health care services that insures that patients get effective, efficient, and timely care.  Included are assessment of the needs of the patient, assurance of access to and coordination of services, monitoring delivery of the services, and providing reassessment to ensure that the services provided are appropriate to the needs and desires of the patient.

Centers of Excellence
Health care facilities specially equipped for and specializing in difficult, complex, and expensive tertiary care procedures such as kidney or other organ transplants, cataract surgery, or coronary artery by-pass surgery.

The Consolidated Omnibus Budget Reconciliation Act of 1985, commonly known as COBRA, requires group health plans with 20 or more employees to offer continued health coverage for you and your dependents for 18 months after you leave your job.  Longer durations of continuance are available under certain circumstances.  If you opt to continue coverage, you must pay the entire premium, plus a two percent administration charge.

That percentage of the cost of care that an insured has to pay under the terms of some health care plans. (Related: Copayment and Deductible)

Community Rating
A system for determining the amount of the premium to be paid under a health care plan.  The premium is based not on the characteristics of individual insured or groups but on the average cost of health care over a geographic area.  (Related: Experience Rating and Medical Underwriting)

Coordination of Benefits
A claims handling procedure used by health care insurers to make certain that when a person who makes a claim has duplicate coverage, not more than 100 percent of the cost of the care rendered is paid.

The flat dollar amount that an insured has to pay under the terms of some health care plans regardless of the actual charges for the care given.  Thus an insured may be obligated to pay $10 for each visit to a physician, the health care plan being responsible for the difference between the actual cost of the visit and the copayment by the patient.  (Related: Coinsurance and Deductible)

Cost Sharing
A cost containment technique embodied in health care plans that requires the covered individual to bear some portion of the cost of health care beyond the premium payment.  The cost sharing usually takes the form of coinsurance, copayment, deductibles, or balance bills.  These cost-sharing measures are intended to prevent covered individuals from seeking unneeded care, thus containing costs.

Cost Shifting
A practice employed by some health care providers of charging persons who are insured or otherwise able to pay amounts beyond the normal costs of the care provided.  These extra charges are to cover losses from treating others under plans that do not pay the full costs of care or who are uninsured and unable to pay any or all of the costs of their care.

The process by which a hospital or other health care facility grants permission to health professionals to practice in the facility.  The process consists of a thorough investigation into the background of each individual including such things as education, licenses, prior practice, and prior disciplinary sanctions.  Once credentialed, an individual may continue to exercise his or her privileges until they are relinquished, revoked by the facility, or privileges are refused at recredentialing, which takes place at regular intervals.  In any proceeding to credential, recredential, or revoke privileges, the procedure must afford substantive and procedural due process.

Critical/Clinical Pathway
A health care management tool that suggests the best way to treat a disease or use a health care procedure.  Critical pathways are designed to reduce variations in health care treatments.

A flat amount that an insured must pay before the insurer has to pay anything for health care charges under a health care plan.  Such a deductible can be for each service rendered, item furnished, or for a period of time, usually a year.  (Related: Coinsurance and Copayment)

Diagnosis-Related Groups (DRGs)
A Medicare concept by which patients are grouped into categories with respect to specific diagnostic, therapeutic, and demographic criteria for the purpose of making uniform prospective payments to health care providers for specific illnesses or conditions.

Eligible Individual
A term used to describe a person who is eligible for benefits under a health care plan.

Employee Retirement Income Security Act of 1974 (ERISA)
A federal statute (29 U.S.C. x 1001 et seq) whose purpose is to set standards for the funding, vesting and administration of private pension plans and for other employee benefits such as health care, including plan termination insurance. In the areas of its coverage, the statute preempts state laws.

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

Experience Rating
A system of determining the amount of the premium to be paid under a health care plan.  The premium is based on the particular characteristics of the group involved, for example, the employees of a particular employer.  Thus factors such as sex, age, and prior usages of health care services of the group may be considered in fixing premiums. (Related: Community Rating, Medical Indemnity)

Fee-for-Service (FFS)
The traditional method by which health care professionals and institutions have been compensated.  When a medical item or service is received, a fixed amount is billed and paid for in cash or by health care insurance.

First Dollar Coverage
Health care coverage that has no deductible provisions; thus the coverage starts with the first dollar of expense.

A list of selected pharmaceuticals and their appropriate dosages felt to be the most useful and cost effective for patient care.  Organizations often develop a formulary under the aegis of a pharmacy and therapeutics committee.  In HMO's, physicians are often required to prescribe from the formulary.

In the context of health care, a person who determines what medical care an individual should receive.  Usually this person is a primary care physician who initially evaluates a patient and provides such care determined to be necessary and within the physician's skills.  If the physician determines it is necessary, he or she refers the patient for further care, for example, to a medical specialist, or admits the patient to a hospital or other health care facility.

H.C.F.A. - U.S. Healthcare Financing Administration
A part of the U.S. Department of Health and Human Services responsible for Medicare and the federal component of Medicaid.

A core of performance measures designed by participating managed health plans and employers to respond to employers' needs to understand the value of their health care and to hold plans accountable for performance.  HEDIS is offered under the sponsorship of the National Committee for Quality Assurance and stands for Health Plan Employer Data and Information Set.

Health Maintenance Organization (HMO)
An entity for providing comprehensive health care that is based on managed care principles.  HMOs take many forms and are constantly permuting.  Normally the most restrictive form of managed care.

Home Care
The term "home care" refers broadly to personal as well as skilled health services provided in the home, such as the broad range of services provided by a Visiting Nurse Service.  This includes the range of services provided respite caregivers, homemakers, companions, home health aides, nursing and therapy personnel, and medical social workers.

A facility for terminally ill individuals that, under a physician's general supervision, provides (1) nursing care, (2) physical or occupational therapy, (3) medical social services, and (4) counseling.

A patient care arrangement in which a designated physician admits patients to the hospital and this physician is responsible for coordinating all diagnostic treatments and processes as needed during that patient's hospital stay.

Indemnity Insurance
The traditional form of health insurance.  Under a policy for such insurance, the physician submits a bill and the patient forwards it to his or her insurer for payment to the doctor or the patient pays the doctor and receives reimbursement from the insurer on submission of the received bill.

Length of Stay (LOS)
The number of days between an individual's admission to a health care facility as an inpatient and the individual's discharge from the facility, counting the day of admission and not the day of discharge. (Related: Average Length of Stay)

Lifetime Limit
A cap on the benefits paid under a policy.  Many policies have a lifetime limit of $1 million, which means that the insurer agrees to cover up to $1 million in covered services over the life of the policy.

Long-Term Care (LTC)
Care for people who have a chronic disease and need care that is not necessarily medical.  Long-term care services were primarily for the elderly, but now refer to care for those with chronic diseases and disabilities.  LTC covers the whole range of services from home care to nursing home care, from social supports to medical care.

Major Medical
A form of health care insurance protecting against the costs of long-term or catastrophic injury or illness.  There is usually a large deductible, copayment, coinsurance or a combination of the three.

Managed Care
In its broadest sense, a health care system in which a third party intervenes in the doctor-patient relationship to prevent over-utilization of medical resources by monitoring access to, and the quality and frequency of, medical care.  Its purpose primarily is to contain medical costs.  Managed care encompasses HMOs, PPOs, and other third-party administrative groups.

A federally-mandated health care program enacted in 1965 for impoverished persons in need of medical care, administered by the states and funded both by the federal government and the states.  The statute enumerates general guidelines to be followed, and each state has developed its own program.

Medical Underwriting
A process used by insurance companies to rate the risk of insuring a person or a group applying for health insurance.  The degree of risk is used to fix the premium or to deny coverage altogether and is based on such factors as pre-existing condition of health, prior use of medical services, age, sex, physical condition, and personal habits. (Related: Experience Rating, Community Rating)

Medically Necessary
Describes services required to prevent harm to the patient or an adverse affect on the patient's quality of life.  The term is usually used to determine whether or not a procedure or service is covered by insurance.

A federally-mandated health care program enacted in 1965 as an amendment to the Social Security Act, for those over 65 years of age and the disabled, and administered by the federal government.  Medicare, Part A covers the costs of hospitalization and short-term nursing care and is compulsory and automatically provided for those who qualify.  Part A is paid for from federal taxes.  Medicare, Part B, called Supplementary Medical Insurance, is voluntary, covers a major portion of the costs of care by physicians and some other non-hospital services, and requires a monthly premium.  Once a person signs up for Part B, premiums are automatically deducted from Social Security payments if payments are sufficient to cover the premiums.

Medicare Supplemental Health Insurance Policy
As defined in 42 U.S.C. x 1395ss(g), a policy or other health benefit, offered by a private entity to Medicare recipients, that provides reimbursement for expenses incurred for services and items for which payment may be made but which are not reimbursable by reason of deductibles, coinsurance amounts, or other limitations.

National Committee for Quality Assurance (NCQA)
A voluntary, private organization representing those involved with managed care plans.  It conducts research, develops quality assurance standards, accredits managed care organizations, and disseminates information about improvement through seminars, speakers and publications.

National Practitioner Data Bank (NPDB)
An information source in the Department of Health and Human Services containing data about physicians and other health practitioners provided for by the Health Care Quality Improvement Act of 1986.  Specified adverse actions against physicians, dentists, and other health care practitioners, such as loss or settlement of a medical malpractice suit, suspension of hospital privileges, or punitive action by a state licensing authority, must be reported to this national computerized system.  The information in the data bank is available to state licensure bodies, professional societies, credentialing groups of hospitals and other health facilities, and others.  The purpose is to protect hospitals, other health care facilities, and their patients from unethical conduct and incompetent medical care, particularly from practitioners who cross state lines.

Non-Participating Physician
A physician who does not sign a participation agreement and, therefore, is not obligated to accept assignment on all Medicare claims.

Not-for-Profit Hospitals
Hospitals organized under state not-for-profit corporation statutes that generally restrict the purpose of the hospital organization to be charitable.  As a charitable organization, any profit earned by the hospital must be reinvested in the hospital and cannot be distributed to any private individual, except as salaries to hospital employees.  One of the major advantages of not-for-profit status is that the hospital is eligible for exemption from taxation.

Open Enrollment Period
A period of time, usually occurring annually, specified in a group health care contract or by law, during which enrollees of health care plans can change from one plan to another.

Out of Area
Refers to places in which the plan will not pay for services. Out of area can be both geographic as well as a reference to services outside a specific group of providers.

Out-of-Area Coverage
Benefits for health care provided outside the normal service area of the health plan to which a person seeking medical attention belongs.  Such benefits are usually paid for by the plan in emergency circumstances when the health plan participant is away from his or her normal place of residence.

Out-of-Network Items and Services
Items and services provided to an individual enrolled under a health plan by a health care provider who is not a member of a provider network of the plan.

Out-of-Pocket Expenses
The costs of health care that an individual must pay for directly.  Included are such things as deductibles, coinsurance, copayments, and items and services not included in the health care coverage or which exceed the limits of the coverage.

Out-of-Pocket Limit
An amount specified in a health care plan that is the maximum amount of out-of-pocket expenses for which the covered individual is responsible.  After the maximum is reached, the insurer pays for the covered charges in full, up to the coverage maximum, if any.  Such health plan provisions are, in effect, limits on cost-sharing.

The result of a medical program or a particular treatment in terms of the success or failure of the program or treatment.  Outcomes might be viewed in such terms as death, cure, partial recovery, full recovery, etc.

Outpatient Services
Medical and other services provided by a hospital or other qualified facility.  Services include physical therapy services, diagnostic x-rays, and laboratory tests.

Participating Provider
A healthcare provider who participates through a contractual arrangement with a healthcare service contractor, HMO, PPO, IPA, or other managed care organization.

Also called "third-party payer," the person or entity that pays a provider for an individual's health care.  Traditionally, the payer has been a commercial insurance company, but governments, self-insured companies, non-profit organizations, etc. can also be payers.

Peer Review
A review by members of the profession (peers) regarding the quality of care provided to a patient, including documentation of care, diagnostic steps used, conclusions reached, therapy given, appropriateness of utilization, and reasonableness of charges claims.

Physician Extender
Highly skilled health practitioners who work under the general supervision of a licensed physician to provide patient care services.  They can perform responsibilities delegated to them by a physician in the diagnostic and therapeutic management of patients.   Examples are Physician Assistants (PA) and Certified Registered Nurse Practitioners (CRNP).

Point of Service (POS) Plan
Patients can choose which provider to use at the time a health care service is needed.  They can choose to be treated by the HMO provider or select a provider outside the HMO. Less restrictive Plan.

The ability for an individual to transfer from one health insurer to another health insurer with regard to pre-existing conditions or other risk factors.

PPO - Preferred Provider Organization
A financing arrangement in which the network or panel of providers agree to furnish services and be paid on a negotiated fee schedule.  Enrollees are given incentives (ex: no co-payment) to use providers within the PPO, but they may also seek covered services from outside the PPO network for a higher charge.

The PPO contracts with a group of providers (physicians, hospitals, clinics) who agree to provide healthcare at negotiated rates that are lower than their usual billed charges.  The PPO then contracts with an insurer, employer, union, or third party administrator, who will encourage employees and dependents to use the services of the PPO providers. Thus, the negotiated services are used with a medical benefit plan to lower overall medical costs.

Practice Guideline
In effect, a standard of care for a particular diagnosis, treatment or other medical care for physicians and other health care practitioners set by a governmental body, a body of physicians, or by other entities.  Practice guidelines are also called Clinical Practice Guidelines, Practice Parameters and Practice Pattern Guidelines. The purpose of a guideline is to give the provider a standard of diagnosis, treatment or other care of patients which, if followed, will improve the quality of care, contain costs, and avoid malpractice claims.

Pre-admission Certification (PAC)
Review and approval for necessity and appropriateness of the care proposed for a patient prior to the patient's admission to a hospital or other health care facility.  Under health plans where PAC is required, pre-admission certification is a prerequisite for payment.

Pre-Existing Condition
An illness or other adverse health condition that exists and is known of prior to the issuance of health insurance.  The pre-existing condition is usually exempted from the coverage of the policy, the premium is raised because of it, or coverage of it is denied for a specified period of time.

The amount paid for insurance coverage for a specified time.  The premium for health insurance is usually paid for by the insured or by an employer.

Primary Care
The initial, non-specified care an individual receives from a physician, physician assistant or nurse practitioner.  Providers practicing in the fields of Family Medicine, Internal Medicine or Pediatrics may provide primary care.

Private Hospitals
Hospitals owned by private individuals or entities.  Private hospitals are subject to the obligations imposed on state action by the United States Constitution.

A term used to describe a hospital, physician, or group of physicians.

Public Hospitals
Hospitals created and controlled by the state, county, or municipal authorities.  The members of the governing board are usually elected or appointed by elected officials.

Quality Assurance
Activities and programs intended to assure the quality of care in a defined medical setting.  Such programs include peer or utilization review components to identify and remedy deficiencies in quality.  The program must have a mechanism for assessing its effectiveness and may measure care against pre-established standards.

SNFs - Skilled Nursing Facilities
Institutions primarily engaged in providing skilled nursing care and related services for residents who require medical or nursing care.

A health professional, such as a physician, who has special training and perhaps certification in a particular area of medical care services, such as obstetrics, cardiology, radiology, or surgery, and who restricts his or her medical practice to that area.

Tertiary Care
The most specialized, complex and costly level of medical care involving severely ill patients.  Tertiary care is frequently provided in a facility specializing in such care.

Third Party Administrator (TPA)
An administrative organization other than the employee benefit plan or health care provider that collects premiums, pays claims and/or provides administrative services.

Separately charging for components of medical services or procedures that are usually charged for by a single amount.  Billing for each component separately usually results in a higher overall cost.

Usual and Customary Charge
The amount a health plan will recognize for payment for a particular medical procedure.  It is typically based on what is considered "reasonable" for that procedure in your service area.

Utilization Management (UM)
The management of medical services or items by a physician, or other health care provider or facility, to insure quality of care, proper use of such services and items, and cost containment.  The term would include all aspects of peer review, including pre-admission review, concurrent review and retrospective review, second opinions, physician and other staff training, bill auditing, and discharge planning.

UR - Utilization Review
The review of services delivered by a healthcare provider or institution to determine whether those services were medically appropriate and cost effective.