Glossary

Administrative Services Only (ASO): A self-funded plan contracts with an insurance company for services such as claims processing, stop-loss coverage, etc.
Admissions/1000: The number of hospital admissions per thousand plan enrollees.

Adverse Selection: Describes a plan with a disproportionate percentage of enrollees who are more likely to file claims and use services because of existing higher health risk conditions.

Age/Sex Rating: A method of structuring capitation payments based on enrollee/membership age and sex.

Alliance: As originally described in the proposed American Health Security Act of 1993, one or more regional health alliances would be established in each state to provide health care for all residents in that geographic region. Current usage refers to smaller alliances with voluntary participation.

Alternative Delivery System (ADS): A method of providing health care benefits that departs from traditional indemnity methods.

Ambulatory Patient Groupings (APGs): Similar to DRGs, assigns ambulatory patients into case types to provide a pricing mechanism for outpatient services.

Anniversary: The beginning of a subscriber group's benefit year. A subscriber group with a year coinciding with the calendar year would be said to have a January 1st anniversary.

Any Willing Provider (AWP): State laws requiring a managed care network to accept any physician or non-physician provider who meets the network's usual selection criteria, is willing to be reimbursed at the managed care organization's rates and agrees to the managed care organization's utilization guidelines.

Attrition Rate: Disenrollment expressed as a percentage of total membership. A PPO with 50,000 members experiencing a two percent monthly attrition rate would need to gain 1,000 members per month in order to retain its 50,000-member level.

Average Length of Stay (ALOS): Refers to the number of hospital days per admissions (total days/total admissions). May also be called length of stay (LOS) and estimated length of stay (ELOS).

Basic Health Services: Benefits that all federally qualified health insurance plans must offer.

Benefit Package: A collection of specific services or benefits that the health insurance plan is obligated to provide under terms of its contracts with subscriber groups or individuals.

Benefit Year: A 12-month period that a group uses to administer its employee fringe benefits program. A majority of subscribers use a January through December benefit year. A benefit year, however may not match the fiscal year used by a group.

Bundled Billing: The setting of an inclusive package price or global fee for all the medical services required for a specific procedure (usually includes both professional and institutional services), for example, maternity care or coronary artery bypass graft.

Business Coalition: Several employers in a community form a cooperative to purchase health care at a lower cost for their employees.

Capitation: The per capita payment for providing a specific menu of health services to a defined population over a set period of time. The provider usually receives, in advance, a negotiated monthly payment from the HMO. This payment is the same regardless of the amount of service rendered by the group.

Captured Care: Percentage of a practice's care provided under managed care contracts and capitation.

Care Management Committee (CMC): LVPHO committee designed to monitor Quality Improvement, Cost Containment, Utilization Review, Clinical Pathways and Primary Care Coordination for clients of Valley Preferred.

Carve-Out: Services separately designed and contracted to an exclusive, independent provider by a managed care plan.

Case Management: Coordination of patient care to insure appropriate care and to reduce costs of providing service.

Cash Indemnity Benefits: Sums that are paid to insure for covered services and that require submission of a filed claim. Insureds may assign such payments directly to providers of services (hospitals, physicians, etc.). Payments may or may not fully reimburse insureds for costs incurred.

Catchment Area: The geographic area from which a managed care organization draws its patients.

Census: A statistical listing of enrollees by age, sex, number of dependents, etc.

Centers for Medicare & Medicaid Services (CMS): The CMS administers the Medicare program and works in partnership with the States to administer Medicaid, the State Children's Health Insurance Program (SCHIP), and health insurance portability standards. CMS is responsble for the administrative simplification standards from the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and quality standards in health care facilities through its survey and certification activity.

Cherry Picking: Refers to insurance plan practice of enrolling only healthy individuals while not accepting individuals with existing health problems.

Clinic Without Walls: A business entity legally combining independent physicians or medical practices in order to create centralized management and decision-making structures and to share administrative, billing, and purchasing costs. The result is an organization with multiple sites. The physicians and medical practices retain their independence by maintaining their private offices and practice styles.

Clinical Service Organization: Created by academic medical centers to integrate the activities of the medical school, faculty practice plan and hospital to negotiate with managed care plans.

Coinsurance: The portion of the cost for care received and for which an individual is financially responsible. Usually this is determined by a fixed percentage, as in major medical coverage. Often coinsurance applies after a specified deductible has been met.

Community Rating: A method for determining health insurance premiums based on actual or anticipated costs in a specific geographic location as opposed to an experience rating that looks at individual characteristics of the insureds.

Complete Care Organization (CCO): Hospitals and providers working cooperatively to provide care within a community.

Composite Rate: A uniform premium applicable to all eligibles in a subscriber group regardless of number of claimed dependents. This rate is common among labor unions and large employer groups and usually does not require any contribution by the union member or employee.

Consortium Research on Indicators of System Performance (CRISP): This is a group of 23 integrated delivery systems using a common set of performance indicators.

Consumer Driven Health Plan (CDHP): A continuum of health plans with varying degrees of employer and employee participant responsibility which engage consumers in their health care by giving them control of routine health decisions and dollars, along with the tools to make wise and informed decisions about their care.

Continuous Quality Improvement (CQI): See Total Quality Management (TQM).

Contract Mix: The distribution of enrollees according to contracts classified by dependency categories, for example, the number or percentage of singles doubles or families. Contract mix is used to determine average contract size.

Conversion Privilege: This gives an individual insured under a group plan the right to convert from a group health policy to an individual policy in the event the individual policy in the event the individual leaves the group.

Coordination of Benefits (COB): COB occurs when two or more insurers, insuring the same person for the same or similar group health insurance benefits, limit the total benefits to an amount not exceeding the total allowable amount. COB was developed to prevent over insurance or duplicate coverage.

Days per Thousand: Utilization measure of hospital days incurred annually for each thousand covered lives. Decapitation: Inadequate capitation.

Deductible: The part of an individual’s health care expenses that the patient must pay before coverage from the insurer begins.

Diagnosis Related Groups (DRGs): Classification system developed at Yale University using 383 major diagnostic categories based on the ICD-9 codes. This procedure assigns patients into case types. DRGs were originally designed to facilitate the utilization review process but they are also used to analyze patient case mix in hospitals and determine hospital reimbursement policy.

Discounted Fee-For-Service: Physician’s services are provided as fee-for-service but at a negotiated rate less than his/her usual fee.

Disease Management: The systematic approach to identify, assess, educate and measure outcomes of patients with targeted chronic diseases, to promote self management and to control disabling conditions.

Drug Formulary: List of medications covered by a plan and dispensed through participating pharmacies.

Dual Choice: A health benefit offered by an employment group permitting eligibles of the group permitting eligibles of the group a voluntary choice of health plans.

Employer Mandate: State law requiring employers to pay a share of their employees’ health coverage. Encounter: One visit to a provider. If more than one evaluation or treatment takes place at that visit, it is still usually considered one encounter.

Emerging Healthcare Organizations (EHO): Hospitals, physicians and/or payers that are merging, integrating or affiliating in response to changes in the healthcare environment. Endorsement: Official change in the provisions of coverage issued by the insurer and attached to the policy or certificate.

Enrollment: The process of converting subscriber group eligibles into members or the aggregate count of enrollees as of a given time.

ERISA: The Employee Retirement Income Security Act was enacted in 1974 and sets federal requirements for pension and employee benefit plans to include employer health plans.

Exclusive Provider Organization (EPO): While similar to a PPO in that an EPO allows the patient to go outside the network for care, if he/she does so in an EPO, they are required to pay the entire cost of care. An EPO differs from an HMO in that EPO physicians do not receive capitation but instead are reimbursed only for actual services provided. (Fee-for-service)

Experience Rating: A method to determine an premium structure based on the actual utilization of individual subscriber groups. This is not a permissible rating method under federal qualification requirements. Age, sex and utilization experience are the principal determinants in rate setting using this method.

Faculty Practice Plan: A form of group practice organized around a medical school. The faculty associated with the plan provide patient care as part of the teaching and research responsibilities of the medical school. The practice plans is responsible for billing, collections, contract negotiation and redistribution of income.

Fee-For-Service (FFS): The patient is charged according to a fee schedule set for each service and/or procedure to be provided and the patient’s total bill will vary by the number of services/procedures actually received. The patient is billed at the time of service.

Flexible Spending Account (FSA): There are two types of FSAs. A Health Care FSA (HCFSA) which pays for the uncovered or unreimbursed portions of qualified medical costs. A Dependent Care FSA (DCFSA) which allows you to pay eligible expenses for dependent care with pre-tax dollars. All employee contributions to FSAs are made from pre-tax earnings, thereby increasing disposable income.

Greater Lehigh Valley Independent Practice Association (GLVIPA): The physician shareholders of the LVPHO. The Association was organized to enable its physician members to deliver comprehensive health care services in the most beneficial and cost-effective way.

Group Contract: An agreement between the insurance carrier and a subscribing group specifying rates, performance covenants, relationships among parties, schedule of benefits, and other conditions. The term is generally limited to a 12-month period and may be renewed after that.

Group Practice Without Walls (GPWW): Fully integrated Medical Group practicing in multiple locations. Physicians are employees of the Medical Group, but practice in separate, independently run offices. Central office can offer array of administrative support services such as billing, collections and non-physician support. Physicians are charged a general corporate overhead plus any itemized administrative cost their practice might generate. Technically, all practice income goes to the Medical Group, however, each physician generally is paid on an individual productivity less charges assessed for services obtained from central office. GPWW is potentially a confederation, not a bona fide "group practice."

Health Plan Employer Data and Information Set (HEDIS): A pilot project begun in 1991 to standardize health plan performance measures of quality, access, patient satisfaction, utilization and finance.

Health Plan Purchasing Cooperative (HPPC): May also be called a coalition. Under managed competition plans proposed during the 1993 healthcare reform discussions, it was suggested individuals would purchase coverage from Accountable Health Plans through the HPPC. Employers with over a specific number of employees (undetermined, perhaps 1000), would be required to offer coverage through the HPPC or the employer could lose their tax deduction on employee health benefits. It has been proposed these would be state chartered and there would only be one in a defined region.

Health Professions Shortage Areas (HPSA): Federal designation for areas with shortages of healthcare providers.

Health Reimbursement Arrangement (HRA): An arrangement where the employer reimburses an employee for health expenses not covered by the group health insurance plan -- deductible or co-insurance amounts.

Health Risk Assessment (HRA): An assessment that can identify solutions to a broad range of problems related to health risk.

Health Savings Account (HSA): A variation of the individual retirement account that would establish a tax-deferred savings account for an individual to cover the cost of health care services, combined with a low-cost, high deductible health insurance policy (required).

Incurred But Not Reported (IBNR): An amount of money to be accrued as an accounts payable for medical expenses incurred (or) for which the plan or provider is responsible but has not yet been billed. These are often referrals from a medical group to be paid under its capitation.

Indemnity Carrier: Usually an insurance company or benevolent association that offers selected overages within a framework of fee schedules, limitations, and exclusions as negotiated with subscriber groups. Insureds are reimbursed after carriers review and process filed claims.

Individual Practice Association/Organizations (IPA/IPO): This is a network of licensed providers practicing in their own offices and participating in a managed care plan. The providers charge agreed-upon rates to enrolled patients and bill the IPA on a fee-for service basis.

Institute of Medicine (IOM): Chartered in 1970 by National Academy of Science to enlist distinguished members of appropriate professions in the examination of policy matters pertaining to the health of the public. Advisor to federal government on issues of medical care, research and education.

Integrated Delivery System (IDS): Strategic alliances between hospitals and physicians who assume shared risk though common ownership, governance, revenue/capital, planning and/or management through a number of vehicles (MSO, Foundation, PHO, joint venture, hospital division, etc.). Fueled by managed care, integrated systems shift the focus of care from hospitals to health care systems, from specialist to primary care emphasis.

Integrated Provider Network (IPN): Comprised of primary and secondary hospitals and providers within a city or other geographic area.

Joint Commission for the Accreditation of Healthcare Organizations (JCAHO): This not-for-profit organization accredits hospitals, outpatient facilities and other institutions.

Lehigh Valley Physician Group (LVPG): A multi-specialty physician group practice managed by LVHN with multiple office locations. Includes specialists in family practice, internal medicine, pediatrics, psychiatry, surgery, obstetrics and gynecology.

Lehigh Valley Physician Hospital Organization, Inc. (LVPHO): A health care delivery organization formed by the Greater Lehigh Valley Independent Practice Association and Lehigh Valley Health Network. LVPHO manages the Valley Preferred provider network (PPO).

Managed Care: Use of a planned and coordinated approach to providing healthcare with the goal of quality care at a lower cost. Usually emphasizes preventive care and often associated with an HMO.

Managed Care Organization (MCO): Refers to any type of organizational entity providing managed care such as an HMO, PPO, EPO, etc.

Managed Competition: A theory originally proposed in 1993 by the Jackson Hole Group that suggested the individual employee receive a fixed sum from his/her employer and the individual employee chooses the health plan they prefer. If the plan they choose costs more than the employer's fixed sum, the employee is responsible for the difference. The individual employee would have a tax incentive to select the lower priced options because they would only be able to deduct the amount of the lowest cost option. The proposal's proponents believe this would encourage individual consumers of healthcare to be more price conscious and they also believe this will cause healthcare insurers to hold down the cost of their plans to make them more competitive. Because insurance under this proposed system is not tied to the employer, employees would not lose coverage when they change jobs. Under this proposed system there is no provision to set premiums that appropriately cover the risk of an individual patient or specific patient population. Since originally introduced, the term has come to be used also for purchasers contracting with an integrated system to provide comprehensive services to their enrollees.

Management Services Organization (MSO): A legally separate entity that provides practice management services to a hospital, physicians or PHO. The MSO may own the facilities and employ the non-physician staff used to deliver care.

Market Area: The targeted geographic area or areas in which the principal market potential is located.

Market Share: That part of the market potential that a health nsurance plan or medical group has captured; usually market share is expressed as a percentage of the market potential.

Maximum Allowable Charge: The amount set by an insurance company as the highest amount that can be charged for a particular medical service.

Medical Associates of the Lehigh Valley (MATLV): An independent multi-physician group practice made up of general internists and family practioners with multiple office locations.

Medical Cost Ratio (MCR): Compares the cost of providing service to the amount paid for the service.

Medical Loss Ratio: Cost of care provided as a percentage of premium revenues (or) the total cost of medical services as a percentage of premium revenues. Health plans often refer to the loss ratio as the cost of all healthcare versus the premium.

Medicare Supplement: Voluntary, private insurance coverage purchased by Medicare enrollees to cover cost of services not provided by Medicare.

Morbidity Rate: Actuarial term showing likelihood of medical expenses occurring.

National Health Board: Under the proposed American Health Security Act of 1993, this board would be responsible for setting national standards and overseeing the health system to be administered by the states.

National Committee on Quality Assurance (NCQA): A not-for-profit organization performing accreditation review of managed care plans.

Omnibus Reconciliation Act: Federal tax and budget conciliation acts affecting Medicare reimbursement and other areas.

Open Enrollment Period: The period of time stipulated in a group contract in which eligibles of the group can choose a health plan alternative for the coming benefit year.

Open Panel: Private physicians contract with a plan to provide care in their own offices.

Outcomes Based Approach to Health Care: Quantitative measurement of the impact on routinely delivered care on patients' lives; to establish a more accurate and reliable basis for clinical decision making by providers and patients; to evaluate the effectiveness of care and to identify opportunities for improving process of care and reducing costs.

Outliers: A patient who varies significantly from other patients in the same DRG (such as a longer or shorter length of stay, death, leaving against medical advice, etc.).

Outcomes Measurement: Formal process for measuring the effectiveness of medical treatment and patient satisfaction with treatment results.

Out-of-Area Benefits: The scope of emergency benefits (and related limitations) available to members while temporarily outside their defined service areas.

Out-of-Area Services: Services received by enrollees when the member is outside the plan's established geographic area of service as defined in the contract and service agreement. Usually these services are not covered unless a delay would adversely affect the individual's health status.

Peer Review: Evaluation of a physician's performance by other physician's performance by other physicians, usually within the same geographic area and medical specialty.

Penetration: The percentage of business that a health insurance plan is able to capture in a particular subscriber group or in the market area as a whole. For example, signing up 10 enrollees or members out of 100 eligibles yields a 10 percent penetration.

Per Diem: Total payment rate per day regardless of actual charges.

Per Member Per Month (PMPM): Refers to the cost or revenue from each plan's member for one month.

Per Thousand Members Per Year (PTMPY): A common indicator of hospital utilization.

Physician/Hospital Organization (PHO): An organizational entity that is formed between hospitals and physicians that allows for cooperative activity while allowing a level of independence to the participating parties. This organizational structure is usually formed to pursue managed care contracts.

Physician Payment Review Commission (PPRC): Created by Congress in 1986 to recommend changes in current reimbursement procedures and polio ties for physicians receiving payments from Medicare. The commission prepares an annual report to Congress.

Point-of-Service (POS): This product offers a transition product incorporating features of both HMOs and PPOs. Beneficiaries have the option to go outside the network for an additional cost.

Pooling: Combining risk.

Preferred Provider Organization (PPO): A group of physicians and/or hospitals who contract with an employer to provide services to their employees. In a PPO the patient may go to the physician of his/her choice, even if that physician does not participate in the PPO, but the patient receives care at a lower benefit level.

Prescription Benefit Managers (PBMs): Monitor prescription claims and track what drugs and the volume prescribed by the plan's participating physicians.

Primary Care Physician (PCP): Provides treatment of routine injuries and illnesses and focuses on preventative care. Serves as gate keeper for managed care. The American Academy of Family Practice defines primary care as "care from doctors trained to handle health concerns not limited by problem origin, organ systems, gender or diagnosis."

Primary Care Network: The structure for these networks will vary considerably depending on the specific network. It may range from a loose association of physicians in a geographic area with a limited sharing of overhead, patient referral, call, etc. to a more structured association with commonly owned satellite clinics, etc.

Prior Authorization: Procedure used in managed care to control utilization of services by prospective reviewing and approval.

Protected Health Information (PHI): PHI under HIPAA means individually identifiable health information. Identifiable refers not only to data that is explicitly linked to a particular individual (that's identified information). It also includes health information with data items which reasonably could be expected to allow individual identification.

Providers: Those institutions and individuals who are licensed to provide health care services (for facilities, physicians, pharmacists, etc.).

Quality Assurance Program: An internal peer review process that audits the quality of care delivered. The program should include an educational mechanism to identify and prevent discrepancies in care.

Rating Bands: Limits set on the difference between the lowest and highest premium rates to be charged to different employer groups that have different case characteristics such as age, industry and location.

Regional Health Care System (RHCS): An integrated system including a hospital, physician other providers within part of or region offering a full range of services.

Reserves: Restricted cash investments or highly liquid investments or highly liquid investments intended to protect the plan against insolvency or bankruptcy.

Resource-Based Relative Value Scale (RBRVS): This relative value scale was developed for HCFA for Medicare reimbursement. Relative values are assigned to CPT-4 codes on the basis of the resources needed to perform the service.

Risk: The chance or possibility of loss.

Risk Pool: Funds are set aside to cover over-utilization or to encourage limits on utilization or to encourage limits on utilization. More commonly seen in primary care than with specialists.

Saturation: A condition that occurs when a health insurance plan achieves its maximum penetration either in a subscriber group or in the marketplace itself.

Service Area: The territory within certain boundaries that is designated for providing service to members.

Single-Payer System: Financing mechanism in which government acts as the only insurer and sets reimbursement rates for providers.

Skilled Nursing Facility (SNF): May be a freestanding facility or part of a hospital that has been certified by Medicare to admit patients requiring subacute care and rehabilitation.

Small Subscriber Group Aggregate: A combination of small businesses, professional associations, or other entities formed for the purpose of being considered a single, large subscriber group.

Standard Class Rate: Used to calculate monthly premium rates using a base revenue requirement per member or per employee multiplied by group demographic information.

Stop-Loss: The purchase of insurance coverage from a third party in the event of unexpected financial loss to the plan or provider, may be individual or aggregate and usually both. In the event of a catastrophic claim. Stop-loss limits the exposure for both the insurer and the purchaser.

Subrogation: Requires the insured individual to assign any rights to recover damages to the insurer (not allowed by law in some states).

Subscriber: An employer, union, or association that contracts with a health insurance company for its prepaid health care plan, which is offered to eligible enrollees.

Supplemental Health Services: Benefits that exceed their basic health service requirements.

Tax Equity and Fiscal Responsibility Act (TEFRA): One of its provisions prohibits employers and health plans from requiring workers 65-69 to use Medicare instead of the employers health plan.

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

Total Quality Management (TQM): Also called continuous quality improvement and uses the concepts originally developed by W. Edward Deming to study a practice's systems to identify and improve sources of error, waste or redundancy. Uses input and feedback from all levels of staff and patients to understand and improve current processes.

Unbundling: Billing separately for the components of a service previously included in a single fee.

Utilization: The frequency with which a benefit is used.

Utilization Management: A process that measures use of available resources (including professional staff, facilities, and services) to determine medical necessity, cost-effectiveness, and conformity to criteria for optimal use.

Valley Preferred: A preferred provider organization (PPO) wholly owned by the Lehigh Valley Physician Hospital Organization (a health care delivery organization formed by Lehigh Valley Hospital and the Greater Lehigh Valley Independent Practice Association). Valley Preferred is a community partnership of doctors and hospitals dedicated to linking employers and individuals with quality health coverage and providing valuable clinical, knowledge, practices and services proven to result in enhanced personal health.

Frequently Asked Questions

Glossary

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