Processing a claim through a series of edits to determine proper payment.

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 Centers for Medicare & Medicaid Services (CMMS) uses this formula to make monthly payments to risk and cost contractors.

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.

The number of patients placed (admitted) in a hospital or inpatient facility for an overnight stay per given time period.

A particular health plan, whether indemnity or managed care, is selected against 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 rather than an indemnity plan because the former does not have a deductible. Therefore, the HMO would have a greater proportion of less healthy enrollees, thereby driving up costs and increasing financial risk.

The maximum fee that a third party will reimburse a provider for a given service.

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.

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. Increasingly, alternative care providers are being contracted by managed care plans.

Additional health care services performed, such as lab work and x-rays

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 provider's capitation payment.

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.

A measurement used by managed care plans to indicate the total number of days of hospital care provided to a health plan member.

A person who is eligible to receive insurance benefits.

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.

To separately purchase services that are typically part of a managed care package. For example, an HMO may "carve out" the vision care benefit and select a specialized vendor to supply these services on a stand-alone basis.

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 managers are thought to reduce the costs associated with the care of such patients, while providing high-quality medical services.

The federal agency responsible for administering Medicare and overseeing states' management of Medicaid.

A screening method by which a health care provider reviews a procedure or hospital admission performed by a colleague to assess its necessity.

A cycle of monitoring, evaluation, action, and more monitoring that has the intended effect of continuously raising the level of quality delivered.

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.

A fee charged to HMO members to offset costs of paperwork and administration for each office visit or pharmacy prescription filled

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.

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.

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. Pharmaceutical 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.

A medical condition that presents a specific group of symptoms, clinical signs, and laboratory assessments.

The procedure of dismissing individuals or groups from their enrollment with a health carrier.

All treatment rendered in a specified time frame for a specific disease

A nursing home type setting that offers skilled, intermediate, or custodial care.

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 either a health care plan or the government to reimburse physicians and/or other health care providers on a fee-for-service basis.

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.

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. In most HMOs, if an enrollee visits a specialist without prior authorization from his or her designated primary care physican, the medical services delivered by the specialist will have to be paid in full by the patient.

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.

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 copayment for each office visit to cover the paperwork handled by the HMO. 

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.

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.

Physicians, hospitals, and other health care providers who contract to provide health services to persons covered by a particular health plan.

Health care emphasizing priorities for prevention, early detection, and early treatment of conditions, generally including routine physical examination, immunization, and well-person care

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.

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.

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.

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 plan enrollees are receiving the best care possible. The level of care is measured against preestablished standards, some of which are mandated by state and federal law.

A continuous process that identifies problems, examines solutions to those problems, and regularly monitors the solutions implemented for improvement.

A desired state of excellence in the provision of health care. Though quality is a subjective attribute, various characteristics usually associated with the health care delivery process are thought to be determinants of quality.

A recommendation by a physician or managed care plan for a patient to be evaluated or treated by a different physician or specialist. It can also refer to the actual paperwork or process that authorizes treatment by a provider other than the primary care physician.

A financial arrangement or contract between a health plan and a provider organization through which both parties share the financial risk. 

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.

Insuring with a third party against a risk that the plan cannot financially manage.

A separate, freestanding medical facility specializing in outpatient or same-day surgical procedures. Surgicenters drastically reduce the costs associated with hospitalizations for routine surgical procedures because extended inpatient care is not required for specific disorders.

Tertiary care is administered at a highly specialized medical center. It is associated with the utilization of high-cost technology resources.

Large research & teaching hospitals usually found in major cities, utilized for cardiac cases, highly specialized care, etc.

Evaluation of the necessity, appropriateness, and efficiency of the use of health care services, procedures, and facilities. In a hospital, this includes review of the appropriateness of admissions, services ordered and provided, length of a stay, and discharge practices, both on a concurrent and retrospective basis. Utilization review can be done by a peer review group, or a public agency.  UR is a method of tracking, reviewing and rendering opinions regarding care provided to patients. Usually UR involves the use of protocols, benchmarks or data with which to compare specific cases to an aggregate set of cases. Those cases falling outside the protocols or range of data are reviewed individually. Managed care organizations will sometimes refuse to reimburse or pay for services which do not meet their own sets of UR standards. UR involves the review of patient records and patient bills primarily but may also include telephone conversations with providers. The practices of pre-certification, re-certification, retrospective review and concurrent review all describe UR methods. UR is one of the primary tools utilized by IDS, MCO and health plans to control over-utilization, reduce costs and manage care.

A form sometimes used by a specialty provider's office when they have not received referral authorization from a PCP office. The form requires signature from the patient acknowledging responsibility of payment for services if a referral is not received by specialty care office.

A method used in risk-sharing arrangements in which the health plan holds onto a percentage of the provider's reimbursement and uses it to cover any medical costs the providers may incur beyond the medical expense budget. If the risk entities meet their budget, the withhold is returned to the provider.