Health Care ABCs

The language of health care is unique, diverse and complex. The following glossary includes commonly used health care terms and acronyms. While it is not possible to list all terms that the board member may need to define, this list provides a fairly comprehensive list of hospital and health care terms and acronyms in the following areas: financial management, health insurance, organizational relationships, Joint Commission accreditation, medical and clinical, and government regulation. It is essential that board members be familiar with health care language.

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Acronyms


Academic Medical Center
A group of related institutions including a teaching hospital or hospitals, a medical school and its affiliated faculty practice plan, and other health professional schools.

Access
The patient’s ability to obtain health services. Measures of access include the location of health facilities and their hours of operation, travel time and distance to health facilities, availability of medical services, including scheduled appointments with health professionals and cost of care.

Accountable Health Plan (AHP)
A plan that would offer a nationally defined package of specified benefits and provide consumers with a report card on the quality and services offered by the plan.

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

Accounting Perspectives (Evaluation)
Perspectives underlying decisions on which categories of goods and services to include as costs or benefits in an analysis.

Accounts Receivable
Assets arising from the provision of services or the sale of goods to patients on credit.

Accreditation
The process whereby a health care organization is evaluated and determined to meet the quality-of-care standards established by an accrediting body (e.g. The Joint Commission and the National Committee for Quality Assurance).

Accreditation Survey
The process used to evaluate whether a health services organization meets specified standards for accreditation.

Accrual
A technique for determining medical costs for enrollees over a set period so that money can be set aside in a claims reserve to be used for medical costs incurred during that period. Revenues recognized as services are rendered independent of when payment is received.

Accrual Accounting
A descriptive accounting method that recognizes revenues as services are rendered, independent of the time when cash is actually received.

ACHE
American College of Healthcare Executives. A professional organization for hospital executives.

Acquisition
The purchase of all or substantially all the assets of a corporation (such as a hospital) by cash, other compensation, asset exchange, or gift of majority voting control.

Acquisition Costs
Varied marketing costs within health plans primarily related to the acquisition of subscriber contracts.

Activities of Daily Living (ADL)
A measure of independent-living ability based on capacity of an individual to bathe, dress, use the toiled, eat, and move across a small room without assistance and used to determine the need for nursing home and other care.

Activity-Based Costing (ABC)
Activity-based costing defines costs in terms of an organization's processes or activities and determines costs associated with significant activities or events. ABC relies on the following three step process: Activity mapping, which involves mapping activities in an illustrated sequence; Activity analysis, which involves defining and assigning a time value to activities; and Bill of activities, which involves generating a cost for each main activity.

Activity-Based Management (ABM)
Activity-based Management supports operations by focusing on the causes of
costs and how costs can be reduced. It assesses cost drivers that directly affect the cost of a product or service, and uses performance measures to evaluate the financial or nonfinancial benefit an activity provides. By identifying each cost driver and assessing the value the element adds to the health care enterprise, ABM provides a basis for selecting areas that can be changed to reduce costs.

Actual Charge
One of the factors determining a physician’s payment for a service under Medicare; equivalent to the billed or submitted charge.

Actuarial Analysis
A means of measuring the statistical probability of the risk of events occurring, such as illness, injury, disability, hospitalization, or death.

Actuary
An accredited insurance mathematician trained in the science of loss contingencies, investments, insurance accounting, premiums, managed care risks, and service utilization who calculates premium rates, reserves, and dividends.

Acute Care
Generally refers to inpatient hospital care of a short duration (typically less than 30 days) as opposed to ambulatory care or long-term care for the chronically ill.

Adjusted Admissions
A measure of all patient care activity undertaken in a hospital, both inpatient and outpatient. Adjusted admissions are equivalent to the sum of inpatient admissions and an estimate of the volume of outpatient services. 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)
(1) 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 End Stage Renal Disease. 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. (2) A county-level estimate of the average cost incurred by Medicare for each beneficiary in fee for service. Adjustments are made so that the AAPCC represents the level of spending that would occur if each county contained the same mix of beneficiaries. Medicare pays health plans 95 percent of the AAPCC, adjusted for the characteristics of the enrollees in each plan. See Medicare Risk Contract, U.S. Per Capita Cost.

Adjusted Community Rate (ACR)
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.

Adjusted Community Rate (ACR) Proposal
A process by which a health plan with a Medicare risk contract estimates the cost of providing services to its Medicare enrollees based on costs and revenues from its commercial business. Health plans estimate their ACRs annually and adjust the subsequent year's supplemental benefits or premiums offered so that they do not receive a higher rate of return on Medicare enrollees than they do on their commercial business. See Adjusted Average Per Capita Cost, Medicare Risk Contract.

Adjusted Payment Rate (APR)
The Medicare capitated payment to risk-contract HMOs. For a given plan, the APR is determined by adjusting county-level AAPCCs to reflect the relative risks of the plan's enrollees. See Adjusted Average Per Capita Cost.

Adjusted Patient Day (APD)
An accounting method for modifying the definition of inpatient days to include outpatient revenues.

Administrative Costs
The costs assumed by a health care organization, insurer, or managed care plan for managing health services, including claim processing, billing, marketing, member services, provider relations, and other overhead expenses.

Admission
Formal acceptance by hospital or other inpatient health care facility of a patient who is to be provided with room, board, and continuous nursing service in the hospital or facility where patients remain at least overnight.

Administrative Services Only (ASO)
Applies to larger employers who self-insure health coverage for their employees. The employer usually contracts with a third party to provide administrative services, such as claims processing and claims communications.

Admitting Privileges
The authorization given to a provider by a health care organization’s governing board to admit patients into its hospital or health care facility to provide patient care. Privileges are based on the provider’s license, education, training, and experience.

Adult Day Care/Adult Day Health Care (ADHC)
Programs providing social, recreational, or other activities specifically for elderly people who cannot be left alone or do not wish to be left alone during the day while their family members work. It combines day care with certain health care services.

Advanced Directive
Written instruction recognized under state law relating to the provision of health care when an individual is incapacitated. Advanced directives take two forms: living wills and durable power of attorney for health care.

Adverse Drug Reaction
A negative physical reaction or complication caused by the use of medication(s).

Adverse Selection
Adverse selection occurs when a larger proportion of persons with poorer health status enroll in specific plans or insurance options, while a larger proportion of persons with better health status enroll in other plans or insurance options. Plans with a subpopulation with higher than average costs are adversely selected. Plans with a subpopulation with lower than average costs are favorably selected.

Affiliation
An agreement, usually formal, between two or more otherwise independent hospitals, programs or providers describing their relationship to each other.

Against Medical Advice (AMA)
The self-discharge of a patient who leaves a health care facility against the advice of his or her physician or the medical staff.

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.

Age-Attained Rating
A 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 as the purchaser grows older.

Agency for Health Care Policy and Research (AHCPR)
Created by the Omnibus Budget Reconciliation Act of 1989 as a component of the U.S. Public Health Service. AHCPR is responsible for research on quality, appropriateness, effectiveness and cost of health care, and for using this data to promote improvement in clinical practice and the organization, financing and delivery of health care.

Aggregate Margin
A margin that compares revenues to expenses for a group of hospitals, rather than a single hospital. It 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. (See also PPS Inpatient Margin, PPS Operating, Margin, and Total Margin.)

Aggregate PPS Operating Margin/Aggregate Total Margin
A PPS operating margin or total margin that compares revenue to expenses for a group of hospitals, rather than a single hospital. It 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. (See also PPS Operating Margin and Total Margin.)

AHA
American Hospital Association. A national professional trade association for hospitals.

Aid to Families with Dependent Children (AFDC) program
A program established by the Social Security Act of 1935 and eliminated by welfare reform legislation in 1996. AFDC provided cash payments to needy children (and their caretakers) that lacked support because at least one parent was unavailable. Families had to meet income and resource criteria specified by the state to be eligible. AFDC has been replaced by a new block grant program, but AFDC standards are retained for use in Medicaid. See Temporary Assistance for Needy Families.

All-Payer System
A system by which all payers of health care bills - the government, private insurers, big companies and individuals - pay the same rates, set by the government, for the same medical service. This system does not allow for cost-shifting.

Alliance
A formal organization or association owned by shareholders or controlled by members that works on behalf of the common interests of its individual members in the provision of services and products and in the promotion of activities and ventures.

Alliances (a.k.a Health Insurance Purchasing Cooperatives)
Organizations consisting of large groups of purchasers of health care. The buying power of Alliances is expected to force competitive marketing among providers.

Allied Health Professionals
Professionally trained and certified non-physician health care providers, including nurse practitioners, certified registered nurse anesthetists, respiratory therapists, physicians’ assistants, and others.

Allowable Expenses
The necessary, customary and reasonable expenses than an insurer will cover.

Allowed Charge
The amount Medicare approves for payment to a physician. Typically, Medicare 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. Nonparticipating physicians may bill beneficiaries for an additional amount above the allowed charge. See Balance Billing, Participating Physician and Supplier Program.

Alternative Delivery System
Provision of health services in settings that are more cost-effective than an inpatient, acute-care hospital, such as skilled and intermediary nursing facilities, hospice programs, and in-home services.

AMA
American Medical Association. The largest national professional association for physicians.

Ambulatory
Describes a patient capable of moving about from place to place, not confined to a bed.

Ambulatory Care
Health services provided on an outpatient basis; usually implies that an overnight stay in a health care facility is not necessary.

Ambulatory Patient Classifications (APC)
A system for classifying outpatient services and procedures for purposes of payment. The APC system classifies some 7,000 services and procedures into about 300 procedure groups.

Ambulatory Surgical Center (ASC)
A freestanding facility, often certified by Medicare, that performs certain types of surgical procedures on an outpatient basis.

ANA
American Nurses Association. A professional organization for registered nurses.

Ancillary Services
All hospital services for a patient other than room, board and nursing services. Examples include x-ray, drug and laboratory tests.

Antitrust Laws
State and national laws that prohibit health care and other providers from price-fixing or developing monopolies that would prevent consumers from having choices in terms of costs and services.

Any Willing Provider
Any health care provider that complies with an insurer’s preferred provider terms and conditions may apply for and shall receive designation as a preferred provider.

APD
Adjusted patient day. An accounting method for modifying the definition of inpatient days to include outpatient revenues.

Appropriateness Review
A methodology in which individual cases are evaluated for clinical appropriateness and for medical necessity of surgical and diagnostic procedures. The review usually consists of comparing clinical data to medical criteria.

Arbitration
The process by which a contractual dispute is submitted to a mutually agreed-on impartial party for resolution. Many managed care plans have provisions for compulsory arbitration (in states where arbitration is allowed) in cases of disputes between providers and plans.

ASC-Approved Procedure
A procedure that has been approved by Medicare for payment in the Ambulatory Surgical Center (ASC). A procedure is approved if it can be performed safely in the outpatient setting, if it was performed in the inpatient setting at least 20 percent of the time when it was approved, and if it is performed in physicians' offices no more than 50 percent of the time.

Assessment
The regular collection, analysis and sharing of information about health conditions, risks, and resources in a community. The assessment function is needed to identify trends in illness, injury, and death, the factors which may cause these events, available health resources and their application, unmet needs, and community perceptions about health issues.

Assignment
A process under which Medicare pays its share of the allowed charge directly to the physician or supplier. Medicare will do this only if the physician accepts Medicare's allowed charge as payment in full (guarantees not to bill the balance). Medicare provides other incentives to physicians who accept assignment for all patients under the Participating Physician and Supplier Program. See Balance Billing, Nonparticipating Physicians, Participating Physician, Participating Physician and Supplier Program.

Assisted Living Facilities
Living arrangements for the elderly and disabled who need assistance with daily living activities such as dressing, bathing, and cooking.

Attending Physician
Physician legally responsible for the care provided a patient in a hospital or other health care program. Usually the physician is also responsible for the patient’s outpatient care.

Authorization
A utilization management technique used by managed care organizations to grant approval for the provision of care or services not performed by the primary care physician. Services requiring authorization vary greatly by health plan.

Auxilian
A member of a hospital’s auxiliary who may or may not serve as an in-service volunteer at the hospital.

Average Daily Census (ADC)
Average number of inpatients per day over a given time period.

Average Length of Stay (ALOS)
Total number of hospital bed days divided by the number of admissions or discharges during a specified period.

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Bad Debt
Charges for care provided to patients who are financially able to pay but refuse to do so.

Balance Billing
(1) Physician charges in excess of Medicare-allowed amounts, for which Medicare patients are responsible, subject to a limit. (2) In Medicare and private fee-for-service health insurance, the practice of billing patients in excess of the amount approved by the health plan. In Medicare, a balance bill cannot exceed 15 percent of the allowed charge for nonparticipating physicians. See Allowed Charge, Nonparticipating Physicians.

Baby Doe
A term used in both the law and the media to refer anonymously to infants whose extraordinary treatment has raised ethical questions.

Basic DRG Payment Rate
The payment rate a hospital will receive for a Medicare patient in a particular diagnosis-related group. The payment rate is calculated by adjusting the standardized amount to reflect wage rates in the hospital's geographic area (and cost of living differences unrelated to wages) and the costliness of the DRG. See also Standardized Amount, Diagnosis-Related Groups.

Bed Conversion
Reallocation of beds from one type of care (e.g., acute care) to another (long-term care).

Bed Days
The total number of days of hospital care (excluding the day of discharge) provided to the insured or plan member. Bed days, also called hospital days, discharge days, or patient days, are used to measure hospital utilization and are generally reported in “days per 1,000 plan members per year.”

Benchmarking
The process of continually measuring products, services, and practices against major competitors or industry leaders to create normative or comparative standards (benchmarks).

Beneficiary
Someone who is eligible for or receiving benefits under an insurance policy or plan. The term is commonly applied to people receiving benefits under the Medicare or Medicaid programs.

Beneficiary Liability
The amount beneficiaries must pay providers for Medicare-covered services. Liabilities include copayments and coinsurance amounts, deductibles, and balance billing amounts.

Benefit Package
Services covered by a health insurance plan and the financial terms of such coverage, including cost sharing and limitations on amounts of services. See Cost Sharing.

Best Practices
A term describing organizations’ superior performance in their operations, managerial, and/or clinical processes.

Billed Charges
A reimbursement method used mostly by traditional indemnity insurance companies wherein charges for health care services are billed on a fee-for-service basis. Fees are based on what the provider typically charges all patients for the particular service.

Biomedical Ethics
A term used to describe philosophical questions involving morals, values, and ethics in the provision of health care.

Birthing Rooms
Homelike hospital-based combination labor and delivery units in which new mothers and fathers can participate in the childbirth process.

Block Grants
A program funding approach wherein the federal government makes lump-sum grants to states, which are then responsible for determining beneficiary eligibility, managing the program, and contributing matching funds.

Blue Cross
Tax-exempt, not-for-profit organizations which provide health insurance for hospital care. Blue Cross was created during the Depression by the hospital industry to provide a stable source of revenues.

Board Certified
A term used to describe a physician who has passed an examination given by a medical specialty board and who has been certified as a specialist in that medical area.

Board Eligible
The term referring to the period when a physician may take a specialty board examination for certification after graduating from a board-approved medical school, completing an accredited training program, and practicing for a specified length of time.

Board of Health
The State Board of Health members whom are appointed by the Governor. The membership includes people who are experienced in matters of health and sanitation. Local boards of health are governing bodies of at least three persons who supervise all matters pertaining to the preservation of the life and health of the people within their jurisdiction. Each local board of health enforces public health statutes and rules, supervises the maintenance of all health and sanitary measures, enacts local rules and regulations, and provides for the control and prevention of any dangerous, contagious, or infectious disease.

Budget Neutrality
For the Medicare program, adjustment of payment rates when policies change so that total spending under the new rules is expected to be the same as it would have been under the previous payment rules.

Bundled Billing
The practice of charging an all-inclusive package price for all medical services associated with selected procedures (e.g., heart surgery or maternity care) to improve quality and help control costs.

Bundled Service
A “bundled service” combines closely-related specialty and ancillary services for an enrolled group or insured population by a group of associated providers.

Business Coalitions on Health
Voluntary organizations of mostly self-insured employers, employer associations, and other groups concerned about health care costs and active in developing cost-containment strategies.

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Capacity
The ability to perform the core public health functions of assessment, policy development, and assurance on a continuous, consistent basis, made possible by maintenance of the basic infrastructure of the public health system, including human, capital, and technology resources.

Capital
Owners’ equity in a business and often used to mean the total assets of a business, although sometimes used to describe working capital (i.e., cash) available for investment or acquisition of goods.

Capital Asset
Depreciable property of a fixed or permanent nature (e.g., buildings and equipment) that is not for sale in the regular course of business.

Capital Costs
Depreciation, interest, leases and rentals, taxes and insurance on tangible assets like physical plant and equipment.

Capital Expenditure Review
An internal or regulatory evaluation of a health care facility’s planned capital expenditures (e.g., buildings and equipment) to determine their necessity and appropriateness.

Capital Expense
An expenditure that benefits more than one accounting period, such as the cost to acquire long-term assets.

Capital Structure
The permanent long-term financing of an organization: the relative proportions of short-term debt, long-term debt, and owners’ equity.

Capital Structure (Leverage)
Measure of the extent to which debt financing is employed by a corporation; the mix of long-term debt and equity employed by a corporation for permanent, long-term financing needs.

Capitalize
To record an expenditure (e.g., R&D costs) that may benefit a future period as an asset rather than as an expense of the period of its occurrence.

Capitation
(1) Method of payment for health services in which a physician or hospital is paid a fixed amount for each person served regardless of the actual number or nature of services provided. (2) A method of paying health care providers or insurers in which a fixed amount is paid per enrollee to cover a defined set of services over a specified period, regardless of actual services provided. (See also Bundling, Fee for Service, Per Diem, and Rate Setting.) (3) A health insurance payment mechanism which pays a fixed amount per person to cover services. Capitation may be used by purchasers to pay health plans or by plans to pay providers. See Medicare Risk Contract, Medicare+Choice.

Caps
Maximum allowable limits placed on revenue or rates by federal or state government.

Cardiac Catheterization
A procedure used to diagnose disorders of the heart, lung, and great vessel.

Carrier
An insurance company or a health plan that has some financial risk or that manages health care benefits.

Carve-Out Coverage
Carve-out refers to an arrangement where some benefits (e.g., mental health) are removed from coverage provided by an insurance plan, but are provided through a contract with a separate set of providers. Also, carve-out may refer to a population subgroup for which separate health care arrangements are made.

Case Management
Monitoring and coordinating the delivery of health services for individual patients to enhance care and manage costs; often used for patients with specific diagnoses or who require high-cost or extensive health care services.

Case Manager
An experienced professional who works with patients, providers and insurers to coordinate all services deemed necessary to provide the patient with appropriate health care.

Case Mix
A measure of patient acuity reflecting different patients’ needs for hospital resources. This measure may be based on patients’ diagnoses, the severity of their illnesses, and their utilization of services. A high case-mix index refers to a patient population more ill than average.

Case-Mix Index (CMI)
The average DRG weight for all cases paid under PPS. The CMI is a measure of the relative costliness of the patients treated in each hospital or group of hospitals. See also DRG.

Case-Mix Severity
Level of illness or disability within a particular case-mix grouping.

Case Rate
A reimbursement model that established a flat admission rate for all the services associated with all care immediately before and after diagnosis of a condition.

Catastrophic Illness
Any acute or prolonged illness that is usually considered to be life threatening or may produce serious residual disability, entailing substantial expense over an extended period.

Catastrophic Insurance
(1) Insurance that protects the insured against all or a percentage of costs not covered by other insurance or prepayment plans or incurred under specified circumstances. (2) Insurance in excess of specified dollar or benefit amounts or limits.

Catchment Area
Geographic area defined and served by a hospital and delineated on the basis of such factors as population distribution, natural geographic boundaries, or transporting accessibility.

Census
Average number of inpatients who receive hospital care each day, including newborns.

Center of Excellence (COE)
A specialized product line (e.g., neurosciences, cardiac services, or orthopedics) developed by a provider to be a recognized high-quality, high-volume, cost-effective clinical program.

Centers for Disease Control and Prevention (CDC)
A division of the U.S. Public Health Service that takes the lead in analyzing and fighting infectious disease.

Centers for Medicare and Medicaid Services (CMS)
Federal agency (a division of Health and Human Services) that administers the Medicare and Medicaid programs and determines provider certification and reimbursement.

Certificate of Coverage
The legal description of listing the benefits, providers, and general rules and regulations of the health plan given to employees or beneficiaries.

Certificate of Need (CON)
A document for the purpose of cost control granted by a state to a hospital seeking permission to modify its facility, acquire major medical equipment, or offer a new or different health services on the basis of need.

Certified Health Plan
A managed health care plan, certified by the Health Services Commission and the Office of the Insurance Commissioner to provide coverage for the Uniform Benefits Package to state residents.

Charges
The amount billed by a hospital for services provided. A charge usually includes the costs plus an operating margin. Charges are the posted prices of provider services; however, many payers pay a discounted rate, negotiated rate, or government-set rate rather than actual charges.

Charity Care
Free or reduced fee care provided due to financial situation of patients.

Chemical Dependency
Alcohol or drug addiction. Services that fight these addictions are called chemical dependence services or substance abuse services.

Chemotherapy
Application of chemicals that have a specific and toxic effect upon a disease process.

Cherry Picking
The practice of insurance companies of accepting only those businesses, occupations, companies, or individuals with minimal health risks and avoiding businesses or people that are riskier.

Chief Executive Officer (CEO)
The person selected by the governing body to direct overall management of the hospital. The CEO acts on behalf of the board and is sometimes called administrator, executive director, president, or some similar title.

Chief Financial Officer (CFO)
The person designated by the CEO with the responsibility for the financial operations of the organization.

Chief of Staff
Member of a hospital medical staff who is elected, appointed, or employed by the hospital to be the medical and administrative head of the medical staff. Also known as President of the Medical Staff or Medical Director.

Chief Operating Officer (COO)
Executive administrator under the CEO who has responsibility for hospital operations.

Children’s Health Insurance Program (CHIP)
A program enacted within the Balanced Budges Act of 1997 providing federal matching funds to states to help expand health care coverage for children under Medicaid or new programs.

Chronic Care
Both medical care and services that are not directly medical related, such as cooking, giving medications, and bathing, for those with chronic illnesses.

Chronic Illness
A condition (e.g., diabetes, emphysema, chronic hypertension or rheumatoid arthritis) that will not improve substantially, lasts a lifetime, or recurs and may require long-term care.

Churning
The practice of a provider seeing a patient more often than is medically necessary, primarily to increase revenue through an increased number of services. Churning may also apply to any performance-based reimbursement system where there is a heavy emphasis on productivity (in other words, rewarding a provider for seeing a high volume of patients, whether through fee for service or through an appraisal system that pays a bonus for productivity).

Civilian Health and Medical Program of the Uniformed Services (CHAMPUS)
A health plan that serves the dependents of active-duty military personnel and retired military personnel and their dependents. Retired military personnel over age 65 use Medicare instead of CHAMPUS.

Claim
Information submitted in writing or electronically by providers to an insurer requesting payment for medical services provided to the beneficiary.

Claims-Made Coverage/Policy
A form of liability coverage for claims made (reported or filed) against an insured party during the policy period irrespective of when the event occurred that caused the claims to be made. Thus, claims made during a previous period in which the policyholder was insured under a claims-made policy would be covered, provided the coverage is continuous with the insurer.

Claims Review
The method by which an enrollee’s health care service claims are reviewed before reimbursement is made. Review involves a routine examination of a submitted claim to determine eligibility, coverage of services, and plan liability.

Clinical Department
In departmentalized hospitals, the medical staff organization is subdivided into major divisions such as medicine, surgery, obstetrics-gynecology, pediatrics, family medicine/primary care. Each clinical department has a chief or chair and is responsible for setting and monitoring standards of professional and personal conduct of physicians within those departments.

Clinical Pathway
A treatment regimen agreed to by a consensus of clinicians. Only essential elements – components that directly affect care – are part of the clinical pathway.

Clinical Privileges
The right to provide medical or surgical care services in the hospital, within well-defined limits, according to an individual’s professional license, education, training, experience, and current clinical competence. Hospital privileges must be delineated individually for each practitioner by the board based on a medical staff recommendation

Closed Formulary
A list restricting the number and type of drugs covered by a pharmacy benefits management program or managed care plan.

Closed Staff
A hospital’s medical staff that accepts no new applicants or a physician or physician group that exclusively provides under contract all the administrative and clinical services required for operation of a hospital department.

Code Creep
The practice of billing for more intensive services than were actually provided for which a higher payment is received.

Code of Federal Regulations
A codified collection of regulations issued be various departments, bureaus, and agencies of the federal government and promulgated in the Federal Register.

Coding
A mechanism for identifying and defining physician or hospital services. See Current Procedural Terminology (CPT) or DRG.

Coinsurance
Amount a health insurance policy requires the insured to pay for medical and hospital services, after payment of a deductible.

Commercial Carriers
For-profit, private insurance carriers (e.g. Aetna, Prudential) offering health and other types of coverage.

Community
The geographic, demographic, or socioeconomic designation of a health care organization’s service area.

Community Accountability
The responsibility of providers in a network to document to members their progress toward specific community health goals and their maintenance of specific clinical standards.

Community Benefits
Activities initiated by not-for-profit hospitals to benefit the hospital’s community. Community benefits are evolving standards defined by the Internal Revenue Service (IRS) to determine the tax-exempt status of not-for-profit health care organizations.

Community Care Network (CCN)
A set of providers that provide patients with an integrated continuum of care, organized on a community level. These networks are paid on a capitated basis.

Community Health Needs Assessment
Technique for developing a profile of community health that measures factors inside and outside the traditional medical service and public health definitions and practices. Needs assessments identify gaps in health care services; identify special targeted populations; identify health problems in the community; identify barriers to access to health care services and estimate projected future needs.

CommunityHealthCenter
A local, community-based ambulatory health care program, also known as a neighborhood health center, organized and funded by the U.S. Public Health Service to provide primary and preventive health services, particularly in areas with scarce health resources and/or special-needs populations. Some are sponsored by local hospitals and/or community foundations.

Community Rating
(1) A system of setting health insurance premiums based on the average cost of providing medical services to all people in a geographic area, without adjusting for an individual's medical history. (2) A method for establishing health insurance premiums whereby an insurer's premium is the same for everyone in a premium class within a specific geographic area. See Premium, Experience Rating. (3) A method of determining an insurance premium structure that reflects expected utilization by the population as a whole, rather than by specific groups.

Comorbidity
A preexisting patient condition that, linked to a principal diagnosis, causes an increase in length of stay by at least one day in approximately 75 percent of cases.

Competitive Bidding
A pricing method that elicits information on costs through a bidding process to establish payment rates that reflect the costs of an efficient health plan or health care provider.

Comprehensive Outpatient Rehabilitation Facility (CORF)
A hospital-based outpatient facility providing a full range of rehabilitative services.

Computerized Axial Tomography (CT or CAT)
Diagnostic equipment that produces cross-sectional images of the head and body.

Concurrent Review
Managed care technique in which a managed care firm continuously reviews the charts of hospitalized patients for length of stay and appropriate treatment.

Confidentiality
(1) Restriction of access to data and information to individuals who have a need, reason, and permission for such access. (2) An individual’s right, within the law, to personal and informational privacy, including his or her health care records.

Consolidated Omnibus Budget Reconciliation Act (COBRA)
A portion of this Act requires employers with more than 20 employees to extend group health insurance coverage for at least 18 months after employees leave their jobs. Employees must pay 102 percent of the premium. Another portion of the Act eases a Medicare recipient’s ability to disenroll from an HMO or CMP with a Medicare risk contract.

Consolidation
Unification of two or more corporations by dissolution of existing ones and creation of a single new corporation.

Consortium
A formal voluntary alliance of institutions for a specific purpose, functioning under a common set of bylaws or rules. Unless otherwise proscribed, each member controls its own assets.

Consumer Price Index (CPI)
Measure of inflation encompassing the cost of all consumer goods and services.

Consumer Price Index, Medical Care Component
Measure of inflation encompassing the cost of all purchased health care services.

Continuum of Care
Comprehensive set of services ranging from preventive and ambulatory services to acute care to long-term and rehabilitative services. By providing continuity of care, the continuum focuses on prevention and early intervention for those who have been identified as high risk and provides easy transition from service to service as needs change.

Continuing Care Retirement Communities (CCRC)
A residential setting for retirees offering a range of services from independent living to assisted living and sometimes nursing home care.

Continuing Education (CE)
Education beyond initial professional preparation that is relevant to the type of care delivered. Such education provides current knowledge relevant to an individual’s field of practice or service responsibilities and may be related to findings from performance-improvement activities.

Continuing Medical Education (CME)
Continuing education related to the current practices of physicians.

Continuous Quality Improvement (CQI)
An approach to organizational management that emphasizes meeting (and exceeding) consumer needs and expectations, use of scientific methods to continually improve work processes, and the empowerment of all employees to engage in continuous improvement of their work process.

Contract Management
Daily management of an organization under contract by another organization, wherein the managed organization retains legal responsibility and ownership of the facility’s assets and liabilities and the managing organization typically reports directly to the managed organization’s board or owners.

Contractual Adjustment
A bookkeeping adjustment to reflect uncollectible differences between established charges for services to insured persons and rates payable for those services under contracts with third-party payers.

Contractual Allowances
Negotiated discounts on hospital or other provider-established charges paid by third
party payers or the government.

Conversion
(1) A major change that a hospital undertakes, such as the conversion from not-for-profit or the conversion of an acute care facility to ambulatory care, and usually entailing a complete change of mission after a new line of business or service displaces a core activity. (2) A reference to the transfer of a plan member covered under a group contract (such as a contract with a larger employer) to coverage under an individual contract without evidence of medical insurability after termination of the group coverage.

Cooperative/CO-OP
(1) A type of health maintenance organization that is managed by the members of the health plan. (2) An insurance-purchasing arrangement in which businesses or other groups join together to gain the buying power of large employers or groups.

Coordination of Benefits (COB)
Agreement between health plans and insurers to avoid the same services being paid for more than once.

Copayment (copay)
Cost-sharing arrangement in which an insured person pays a specified charge for a specified service. The insured is usually responsible for payment at the time the health care is rendered. Typical copayments are fixed or variable flat amounts for physician office visits, prescriptions or hospital services.

Corporate Restructuring
The formation and use of one or more corporations in addition to the hospital corporation for the purpose of holding assets or carrying out other business activities. Restructuring generally involves either the formation of corporations legally independent of the hospital, or the hospital’s becoming a subsidiary of a new parent corporate structure.

Cost Accounting
An accounting system arriving at charges by health care providers based on actual costs for services rendered.

Cost-Benefit Analysis
A method comparing the costs of a project to the resulting benefits, usually expressed in monetary value.

CostCenter
A business or organizational unit of activity or responsibility that incurs expenses.

Cost Containment
Control or reduction of inefficiencies in the consumption, allocation, or production of health care services that contribute to higher than necessary costs. (Inefficiencies in consumption can occur when health services are inappropriately utilized; inefficiencies in allocation exist when health services could be delivered in less costly settings without loss of quality; and, inefficiencies in production exist when the costs of producing health services could be reduced by using a different combination of resources.)

Cost Finding
Determining how much it actually costs to provide a given service – usually requiring a cost-accounting system or a retrospective cost study.

Cost Sharing
A general term referring to payments made by health insurance enrollees for covered services. Examples of cost sharing include deductibles, coinsurance, and copayments. See Balance Billing, Coinsurance, Copayment, Deductible.

Cost Shifting
Phenomenon occurring in the U.S. health care system in which providers are inadequately reimbursed for their costs and subsequently raise their prices to other payers in an effort to regroup costs. Low reimbursement rates from government health care programs often cause providers to raise prices for medical care to private insurance carriers or self-pay patients.

Cost-to-Charge Ratio
A cost-finding measure derived from applying the ratio of third-party payer charges to total charges against the total operating costs in a hospital operating department.

Covered Lives
The total number of people in a health plan or the people covered by an insurer.

Covered Services
Specific health care services and supplies for which payers provide reimbursement under the terms of the applicable contract (Medicaid, Medicare, group contract, or individual subscriber contract).

Credentialing
See physician credentialing.

Credentialing and Privileging
Process by which hospitals determine the scope of practice of practitioners providing services in the hospital. The criteria for granting privileges or credentialing are determined by the hospital and include individual character, competence, training, experience and judgment.

Credentialing Verification Organization (CVO)
An independent organization that confirms the professional credentials of providers for a managed care organization rather than requiring the providers to provide this information independently.

Critical AccessHospital (CAH)
Designated within the Medicare Rural Hospital Flexibility Program as a limited service rural, not-for-profit, or public hospital that provides outpatient and short-term inpatient hospital care on an urgent or emergency basis and is a part of a rural health network.

Critical Pathway
A health care management tool based on clinical consensus on the best way to treat a disease or use a procedure and designed to reduce variations in health care procedures.

Current Assets
Assets that are expected to be turned into cash within one year (e.g., accounts receivable).

Current Liabilities
Obligations that will become due and payable with cash within one year.

Current Procedural Terminology (CPT)
Coding system for physician services developed by the American Medical Association; basis of the HCPCS coding system.

Current Ratio
A financial ratio designed to measure liquidity based on the relationship or balance between current assets and current liabilities.

Custodial Care
Basic long-term care, also called personal care, for someone with a terminal or chronic illness.

Customary Charge
One of the screens previously used to determine a physician's payment for a service under Medicare's customary, prevailing, and reasonable payment system. Customary charges were calculated as the physician's median charge for a given service over a prior 12-month period. See Customary, Prevailing, and Reasonable.

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Days Per Thousand
A standard unit of hospital utilization measurement that refers to the annualized use (in days) of hospital or other institutional care for each 1,000 covered lives.

Death Rate (Hospital-Based)
Number of deaths of inpatients in relation to the total number of inpatients over a given period of time.

Deductible
Amount of expense a covered person must pay, typically in a calendar year, before the health plan will make payment for eligible benefits.

Deemed Status
A hospital is “deemed qualified” to participate in the Medicare program if it is accredited by the Joint Commission, thus avoiding the need for a duplicative Medicare accreditation survey.

Defensive Medicine
Health care under which providers order more test than necessary to protect themselves form potential lawsuits by patients. Defensive medicine is said to be a major reason health care costs are so high, particularly under fee-for-service medicine.

Denial
The refusal by a third-party payer to reimburse a provider for services, or a refusal to authorize payment for services prospectively. Denials are generally issued on the basis that a hospital admission, diagnostic test, treatment, or continued stay is inappropriate according to a set of guidelines.

Dependent
A member of a health plan by virtue of a family relationship with the member who has the health plan coverage.

Depreciation
The amortization of the cost of a physical asset (plant, property, and equipment) over its useful life. Annual depreciation is the amount charged each year as expense for such assets as buildings, equipment, and vehicles. Accumulated depreciation is the total amount of depreciation of the hospital’s financial books. Funded depreciation refers to setting aside and investing the accumulated depreciation so that monies can be used for replacement and renovation of assets.

Diagnosis Related Groups (DRGs)
Method of reimbursing providers based on the medical diagnosis for each patient. Hospitals receive a set amount, determined in advance, based on the length of time patients with a given diagnosis are likely to stay in the hospital. Also called prospective payment system.

Direct Contracting
Agreement between a hospital and a corporate purchaser for the delivery of health care services at a certain price. A third party may be included to provide administrative and financial services.

Directors’ and Officers’ (D&O) Liability Coverage
Insurance protection for directors and officers of corporations against suits or claims brought by shareholders or others alleging that the directors and/or officers acted improperly in some manner in the conduct of their duties. This coverage does not extend to dishonest acts.

Discharge Planning
Evaluation of patients’ medical needs in order to arrange for appropriate care after discharge from an inpatient setting.

Discharges
The number of patients who leave an overnight medical care facility (usually a hospital but occasionally an extended care facility).

Discounted Fee-For-Service
A common risk-sharing payment method similar to fee-for-service except that the amount of money a provider charges for its health services is discounted based on a negotiated amount of percentage that is agreed on between the provider and the health plan.

Disease Management
The process in which a physician or clinical team coordinates treatment and manages a patient’s chronic disease (such as asthma or epilepsy) on a long-term, continuing basis, rather than providing single episodic treatments. Assists in providing cost effective health care using preventive methods, such as diet, medication, and exercise for a patient with heart disease.

Disproportionate Share (DSH) Adjustment
A payment adjustment under Medicare's prospective payment system or under Medicaid for hospitals that serve a relatively large volume of low-income patients.

DRG Creep
The prohibited practice of classifying patients at a higher level of severity in order for a health care provider to receive higher Medicare payments.

DME
Durable Medical Equipment

Drug Enforcement Administration (DEA)
The federal agency that licenses individuals to prescribe medications.

Drug Formulary
List of prescription drugs covered by an insurance plan or used within a hospital. A
positive formulary lists eligible products while a negative one lists exclusions. Some insurers will not reimburse for prescribed drugs not listed on the formulary; others may have limited reimbursement for non-formulary drugs.

Durable Power of Attorney for Health Care
Allows an individual to designate in advance another person to act on his/her behalf if he/she is unable to make a decision to accept, maintain, discontinue or refuse any health care services. (see Advance Directive)

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Economic Credentialing
The use of economic criteria unrelated to quality of care or professional competency in determining an individual's qualifications for initial or continuing hospital medical staff membership or privileges.

Economies of Scale
Rewards of efficiency and cost savings resulting from mass production.

ED or ER
Emergency department or emergency room.

Effectiveness
The degree to which care is provided in the correct manner, given the current state of knowledge, to achieve the desired or projected outcome(s).

Efficacy
The degree to which the care of the individual has been shown to accomplish the desired or projected outcome(s).

Efficiency
The relationship between the outcomes (results of care) and the resources used to deliver care.

Elective
A health care procedure that is not an emergency and that the patient and doctor plan in advance, such as knee replacement.

Eligibility
The status that defines who receives health care services and benefits and for what period of time they qualify to use those benefits.

Eligibility Verification
The process of confirming that a person is a subscriber to a health plan, which, with some insurance plans, means confirming the member’s benefit plan and co-payment responsibilities.

Emergency Medical Services System (EMS)
A system of personnel, facilities, and equipment administered by a public or not-for-profit organization delivering emergency medical services within a designated geographic area.

Emergency Medical Treatment and Active Labor Act (EMTALA)
Also known as the “antidumping” provision under COBRA, legislation requiring that all patients who come to the emergency department of a hospital must receive an appropriate medical screening exam regardless of ability to pay and be stabilized if they are to be transferred to another facility.

Emergency Preparedness Plan
A process designated to manage the consequences of natural disasters or other major emergency disruptions to the ability to provide care and treatment.

Employee Assistance Programs (EAPs)
Programs under which employers contract with companies to provide alcohol, substance abuse, and other mental health services for their employees if these services are not covered under their employee health care benefits.

Employee Benefit Survey
Survey of employers administered by the U.S. Bureau of Labor Statistics to measure the number of employees receiving particular benefits such as health insurance, paid sick leave, and paid vacations.

Employee Retirement Income Security Act (ERISA)
Federal law that regulates various employee benefits, and also exempts from state regulation those companies that manage their own health care benefit plans.

Employer Mandate
A requirement that employers pay part or all of their employees’ health insurance premiums. Under an employer mandate, employees get their health insurance through their company rather than buying it individually or having the government pay for it in a tax-based or single-payer system.

EMS
Emergency medical system. Refers to a systematic, community linkage among hospital trauma centers, ambulance units and other emergency vehicles, personnel trained in emergency medicine, and communications systems so that severely ill or injured persons are transported and treated promptly and appropriately.

Enrollee
A person who is covered by health insurance. See also Beneficiary.

Enrollment
(1) The total number of covered person (i.e., the enrolled group) in a health plan. (2) The process by which a health plan signs up individuals and groups for membership.

Entitlements
Programs in which people receive services and benefits based on some specific criteria, such as income or age. Examples of entitlement programs include Medicaid, Medicare, and veterans’ benefits.

Environmental Assessment
A planning method involving identification of the major external factors expected to present opportunities and/or problems over the planning period and an analysis of the operational implication of those factors on the organization.

Environmental Health
An organized community effort to minimize the public's exposure to environmental hazards by identifying the disease or injury agent, preventing the agent's transmission through the environment, and protecting people from the exposure to contaminated and hazardous environments.

Episode of Care
The collection of all medical and pharmaceutical services rendered to a patient for a given illness, disease, or injury, across all settings of care (inpatient, outpatient, ambulatory) and across providers, for the duration of that illness.

Ethics Committee
Multi-disciplinary group which convenes for the purpose of staff education and policy development in areas related to the use and limitation of aggressive medical technology; acts as a resource to patients, family, staff, physicians and clergy regarding health care options surrounding terminal illness and assisting with living wills.

Exclusions
Medical conditions specified in an insurance policy for which the insurer will provide no benefits.

Excess Capacity
Difference between the number of hospital beds being used for patient care and the number of beds available.

Exclusive Contract
An agreement that gives a physician or physician group the right to provide all administrative and clinical services required for the operation of a hospital department and precludes other physicians from practicing that specialty in that institution for the period of the contract.

Experience Rating
A system used by insurers to set premium levels based on the insured's past loss experience. For example, rating may be based on service utilization for health insurance or on liability experience for professional liability insurance. An employer whose employees are unhealthy will pay higher rates than another whose employees are healthier.

Experimental Procedure
Health care services or procedures that: (1) public and private health insurance plans believe are not widely accepted as effective by American health care professionals; or (2) have not been scientifically proven to be effective for a particular disease or condition.

Explanation of Benefits (EOB)
A statement mailed to a member or covered insured explaining how and why a claim was or was not paid; the Medicare version is called an explanation of Medicare benefits.

Extended Care Facility (ECF)
A hospital unit for treatment of inpatients who require convalescent, rehabilitative, or long-term skilled nursing care.

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Gainsharing
Is an incentive program focused on improving operating results, typically implemented at the group or organizational level.

Gatekeeper
The person in a managed care organization who decides whether or not a patient will be referred to a specialist for further care. Physicians, nurses and physician assistants all function as gatekeepers.

General Practitioner (GP)
A doctor who practices general medicine and is involved in primary care.

Generalists
Physicians who are distinguished by their training as not limiting their practice by health condition or organ system, who provide comprehensive and continuous services, and who make decisions about treatment for patients presenting with undifferentiated symptoms. Typically include family practitioners, general internists, and general pediatricians.

Generics
Drugs that have the same chemical equivalents as a brand-name drug and are typically less expensive. Generic equivalents are often prescribed as a cost-saving alternative.

Governance
The legal authority and responsibility for the public health system.

Governing Body
The legal entity ultimately responsible for hospital policy, organization, management, and quality of care. Also called the governing board, board of trustees, commissioners, or directors. The governing body is accountable to the owners(s) of the hospital, which may be corporation, the community, local government, or stockholders.

Graduate Medical Education (GME)
The period of medical training that follows graduation from medical school; commonly referred to as internship, residency, and fellowship training.

Gross Domestic Product (GDP)
The total current market value of all goods and services produced domestically during a given period; differs from the gross national product by excluding net income that residents earn abroad.

Group Insurance
The most common type of health insurance in the United States. The majority of health insurance is offered through businesses, union trusts, or other groups and associations. For insurance purposes, most groups are composed of full-time employees.

Group Practice
Provision of medical services by three or more physicians formally organized to provide medical care, consultation, diagnosis and/or treatment through the joint use of equipment and personnel. The income from the medical practice is distributed in accordance with methods determined by members of the group. Group practices have a single-specialty or multi-specialty focus.

Group Practice Without Walls (GPWW)
A legal organization that consists of a network of physicians who maintain their own private practices. The GPWW purchases the assets of each practice, but physicians keep autonomy by seeing private patients, keeping their own employees, and making their own schedules. Also referred to as a clinic without walls.

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Health
Defined by the World Health Organization as “a state of complete physical, mental and social well being and not merely the absence of disease or infirmity.”

Health Alliance
Organization established to act as a collective purchasing agent for health insurance benefits for individuals and to manage the process of individual health plan choices under managed competition. Health alliances service specific geographic regions. They provide enrollees with information on cost, quality of care and enrollee satisfaction for standard benefits coverage under several plans. Also provide fixed payments to those plans on behalf of enrollees.

Health and Human Services (HHS)
The U.S. Department of Health and Human Services, formerly the Department of Health, Education and Welfare.

Health Care Provider
An individual or institution that provides medical services (e.g., a physician, hospital, laboratory). This term should not be confused with an insurance company which “provides” insurance.

Health Insurance Portability and Accountability Act of 1996 (HIPAA)
(1) A federal law that made many changes in employer-sponsored health plans. The law allows individuals to move from job to job without losing coverage as the result of pre-existing conditions. HIPAA also guarantees access to group coverage for employees in companies with 2 to 50 employees, and established the need to provide patients total access to their care information and have the ability to amend their records. (2) HIPAA includes a medical privacy regulation issued by the U.S. Department of Health and Human Services that obligates hospitals, doctors and other providers to use a patient’s health information only for treatment; obtaining payment for care; and for their own operations, including improving the quality of care they provide to their patients. Hospitals cannot use or disclose a patient’s health information in other ways, such as marketing or research, unless they get the patient’s written permission before doing so. In addition, providers must inform patients how their health data will be use, establish systems to track disclosure of patient information, and permit patients to inspect, copy and request to amend their own health information.

Health Maintenance Organization (HMO)
A managed care plan that integrates financing and delivery of a comprehensive set of health care services to an enrolled population. HMOs may contract with, directly employ, or own participating health care providers. Enrollees are usually required to choose from among these providers and in return have limited copayments. Providers may be paid through capitation, salary, per diem, or prenegotiated fee-for-service rates.

Health Plan
Network of doctors, hospitals and insurers that provides coverage through contracts negotiated with health alliances.

Health Plan Employer Data and Information Set (HEDIS)
A set of standardized measures of health plan performance. HEDIS allows comparisons between plans on quality, access and patient satisfaction, membership and utilization, financial information, and health plan management. HEDIS was developed by employers, HMOs, and the National Committee for Quality Assurance.

Health Promotion
The process of fostering awareness, influencing attitudes, and identifying alternatives so that individuals can make informed choices and change their behavior in order to achieve an optimum level of physical and mental health.

Health Savings Account (HSA)
See Medical Savings Account.

Health Care Reform
Changes to the overall health care delivery system: its structure, financing, coverage, and services.

Health Care System
Corporate body that owns and/or manages multiple entities including hospitals, long term care facilities, other institutional providers and programs, physician practices and/or insurance functions.

Hill-Burton Program
A federal program of financial assistance created by the Hospital Survey and Construction Act of 1946 for the construction and modernization of health care facilities. In return for this funding, hospitals are required to provide a specified level of charity care each year. Named for its two principal congressional proponents, Hill and Burton.

Holding Company
A separate entity used to hold a variety of subsidiary groups that often perform related functions but have a distinct corporate identity.

Holistic Health
Health viewed from the perspective that the patient is collectively more than the sum of his or her parts; that body, mind, and spirit must be in harmony to achieve optimum health, and, therefore, that a multidisciplinary approach to health care is required.

Home Health Care
Provides health care services in a patient’s home rather than a hospital or other institutional setting. The services provided include nursing care, social services and physical, speech or occupational therapy.

Horizontal Integration
A linkage or network of the same types of providers, e.g., a multi-organization system composed of acute care hospitals. It is used as a competitive strategy by some hospitals to control the geographic distribution of health care services.

Hospice
An organized program of holistic care for the terminally ill which emphasizes caring as opposed to curing and which includes inpatient care, homecare, respite care, and family support.

Hospital Affiliation
Contractual agreement between a health plan and one or more hospitals, such as an agreement for a hospital to provide the inpatient benefits offered by a health plan. May also refer to arrangements between hospitals and other health care financing or provider organizations.

Hospital Alliance
Agreements between hospitals to voluntarily join together on some services to reduce costs and achieve economies of scale.

Hospital-Physician Alliance (HPA)
A partnership between a hospital and a group of its staff physicians. Such alliances range from an informal sharing of expertise to a more structured arrangement involving computer networking, assistance with physician recruitment, and physician practice development. Examples of formal HPA structures include: physician-hospital organizations for managed care contracting, management service organizations for practice management, and integrated delivery systems for development of a broad range of clinical services.

Hospital Pre-Authorization
Managed care technique in which the insured obtains permission from a managed care organization before entering the hospital for non-emergency care.

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Incentives
Financial rewards built into the health care system to encourage providers or patients to act in a certain way. The doctor’s financial incentive in the fee-for-service system is to perform more procedures or services because pay is based on services rendered. In a managed care system with fixed fees, usually paid in advance, the incentive is to do fewer procedures, use fewer specialists, and keep the patient well.

Incidence
The number of new cases of a particular problem or condition that are identified or arise in a specified area during a specified period of time.

Incurred but not reported (IBNR)
An accounting term that means health care services have been provided but the bill has not yet reached the insurer. It allows calculating an insurer’s liability and reserve needs. Incurred claims are the legal obligation an insurer has for services that have been provided during a specific period.

Incident Report
A written report by either a patient or a staff member that documents any unusual problem, incident, or other situation for which follow-up action is indicated.

Indemnity Insurance
Coverage offered by insurance companies in which individual persons insured are reimbursed for medical expenses by the company. Payments may be made to the individual incurring the expense or, in many cases, directly to providers. Indemnity related only to specific loss incurred by the insured person after the fact.

Indian Health Services (IHS)
A division of the U.S. Public Health Service that is responsible for providing federal health services for American Indians and Alaska natives.

Indigent Care
Medical care for patients who cannot afford to pay for their care.

Individual Case Management
The determination by utilization management professionals of individual patients’ care (usually high-cost, high-resource intensive care) in order to find the most appropriate and cost-effective course of treatment, even if it involves paying for services not routinely covered by the health plan.

Inpatient
A patient receiving acute care through admission to the hospital for a stay of longer than 24 hours.

Integrated Delivery System (IDS)
An entity that usually includes a hospital, a large medical group, and an insurance vehicle such as an HMO or PPO. Typically, all provider revenues flow through the organization.

Intensity of Service
The quantity and quality of resources used in producing a patient care service, such as a hospital admission or home health visit. Intensity of services reflects, for example, the amount of nursing care, diagnostic procedures, and supplies furnished.

Intensive Care Unit (ICU)
A hospital unit for treatment and continuous monitoring of inpatients with life-threatening conditions.

Intermediate Care Facility (ICF)
A facility that provides nursing, supervisory, and supportive services to elderly or chronically ill patients who do not require the degree of care or treatment that a skilled nursing unit is designed to provide.

Internal Medicine Physicians (Internists)
Primary care physicians primarily for adults. Unlike family practice physicians, they normally do not care for children and may perform surgeries.

Investor-OwnedHospital
A hospital operated by a for-profit corporation in which the profits go to shareholders who own the corporation. Also referred to as a “proprietary” hospital.

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The Joint Commission
An independent, voluntary, not-for-profit accreditation body sponsored by the American College of physicians, the American College of Surgeons, the American Hospital Association, the American Medical Association, and the American Dental Association. The Joint Commission conducts accreditation surveys for hospitals and other health care organizations, monitoring the quality of care provided based on standards established by the Joint Commission.

Joint Conference Committee (JCC)
A committee of trustees and physicians (with administrative representation) which serves primarily as a communications vehicle between the board and the medical staff. In some hospitals, the JCC also functions as a board-level quality assurance committee.

Joint Venture
A cooperative financial relationship between two parties (e.g., hospital and physician, two hospitals, hospital and HMO) in which each party shares risks and benefits to provide services, products, or both.

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Length of Stay (LOS)
The number of days between a patient’s admission and discharge from a hospital. Average length of stay (ALOS) is determined by total discharge days divided by total discharges.

Licensed Facilities
Health care sites that require licenses by the state or federal government to offer health care services.

Licensed Practical Nurse (LPN)
A nurse who has completed a practical nursing education program and is licensed by a state to provide routine care under the direction of a registered nurse or physician.

Licensure
A formal process by which a government agency grants an individual the legal right to practice an occupation; grants an organization the legal right to engage in an activity, such as operation of a hospital; and prohibits all other individuals and organizations form legally doing so, to ensure that the public health, safety, and welfare are reasonably well protected.

Liquidity
Financial ratios that measure the ability of a corporation to meets its short-term liabilities as they come due.

Living Will
Document generated by a person for the purpose of providing guidance about the medical care to be provided if the person is unable to articulate these decisions (see Advance Directive).

Long Term Care
Ongoing health and social services provided for individuals who need assistance on a continuing basis because of physical or mental disability. Services can be provided in an institution, the home, or the community, and include informal services provided by family or friends as well as formal services provided by professionals or agencies.

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Magnetic Resonance Imaging (MRI)
Using a scanner, this is a high technology diagnostic procedure used to create cross-sectional images of the body by the use of magnetic fields and ratio frequency fields. Previously know as nuclear magnetic resonance NMR.

Malpractice
Professional misconduct or lack of ordinary skill in the performance of a professional act. A practitioner is liable of damages or injuries caused by malpractice insurance that pays for the costs of defending suits instituted against the professional and damages assessed by the court up to maximum limit set in the policy. Malpractice requires that the patient proves some injury and that the injury was negligently caused.

Managed Care
Any form of health plan that initiates selective contracting to channel patients to a limited number of providers and that requires utilization review to control unnecessary use of health services.

Managed Care Network
A regional or national organization of providers owned by a commercial insurance company or other sponsor (e.g., a managed care plan) and offered to employers and other groups or organizations as either an alternative to, or a total replacement for, traditional indemnity health insurance.

Managed Care Organization (MCO)
A plan or company, such as an HMO, PPO, or exclusive provider organization, that uses the principles of managed care as a basic part of doing business.

Management Information System (MIS)
A system that produces the necessary information in proper form and at appropriate intervals for the management of a program or other activity. The system ideally measures program progress toward objectives and reports costs and problems needing attention. Special efforts have been made in the Medicaid program to develop information systems for each state program.

Management Service Organization (MSO)
A management entity, either for-profit and wholly owned by a hospital or created via a hospital-physician joint venture. An MSO acquires the tangible assets of a medical group and contracts with the group to provide all facilities, equipment and administrative services for a management fee.

Mandated Benefits
Coverage that states require insurers to include in health insurance policies such as prenatal care, mammography screening and care for newborns.

Mandated Providers
The range of health care providers required by federal or state law to be included in any health plan.

Marginal Cost
The cost of producing an extra unit of product; a key consideration in pricing and in calculating cost implications of business expansion or contraction.

Market Basket Index
An index of the annual change in the prices of goods and services that providers use for producing health services. There are separate market baskets for Medicare’s prospective payment system’s (PPS’s) hospital operating and capital inputs; PPS-excluded facility operating inputs; and SNF, home health agency, and renal dialysis facility operating and capital inputs.

Market-Driven Health Reform
Renovations in the general health care system, in both financing and delivery of services, that emanate from the private sector and are associated with managed care principles in which health provider organizations and networks compete on the basis of cost, quality, and access to care. Thus, the strategy is based on marketplace dynamics of competition and price rather than government regulation, management, or rate setting.

Marketing
Activities making information about a health organization or plan known to consumers or eligible persons for the purpose of persuading them to utilize the organization or enroll with the plan.

Market Share
In the context of managed care, that part of the market potential for a managed care company has captured; usually market share is expressed as a percentage of the market potential.

Medicaid
Insurance program, funded jointly by the federal and state governments and managed by the states that provides medical coverage for low-income families and individuals.

Medical Executive Committee
Generally composed of the elected or appointed officers and chairs of clinical departments or divisions of the medical staff organization.

Medical Foundation
A tax-exempt medical group practice conducting research and offering educational programs.

Medical Group
An organized collection of physicians who have a common business interest through a partnership or some form of shared ownership. Some medical groups consist of a group of physicians representing a single specialty; other groups are made up of physicians from two or more specialties.

Medical Record
A record kept for each patient containing sufficient information to identify the patient, to justify the diagnosis and treatment, and to document the results accurately. The purposes of the record are to (1) serve as the basis for planning and continuity of patient care; (2) provide a means of communication among physicians and other professionals contributing to the patient’s care; (3) furnish documentary evidence of the patient’s course of illness and treatment; (4) serve as a basis for review, study, and evaluation; and (5) provide data for use in research and education. The content of the record is confidential.

Medical Savings Account (MSA)
A health insurance option consisting of a high-deductible insurance policy and tax-advantaged saving account. Individuals pay for their own health care up to the annual deductible by withdrawing form the savings account or paying out of pocket. The insurance policy pays for most or all costs of covered services once the deductible is met. Also called a health savings account (HSA).

Medical Staff Bylaws
The written rules and regulations that define the duties, responsibility, and rights of physicians and other health professionals who are part of a facility’s medical staff.

Medical Staff Organization
That body which, according to the Medical Staff Standard of the JCAHO, “include fully licensed physicians, and may include other licensed individuals permitted by law and by the hospital to provide inpatient care services independently in the hospital.” These individuals together make up the “organized medical staff.”

Medical Technology
Includes drugs, devices, techniques, and procedures used in delivering medical care and the support systems for that care.

Medically Indigent
A person who, by current income standards, is not poor but lacks the financial resources to afford necessary medical services.

Medically Necessary
Those covered services required to preserve and maintain the health status of a member or eligible person in accordance with the area standards of medical practice in the medical community where services are rendered.

Medically Underserved Area
A geographic location that has insufficient health resources to meet the medical needs of the resident population.

Medicare
The federal health benefit program for people over 65, those eligible for Social Security disability payments, and those who need kidney dialysis or transplants.

Medicare Assignment
An agreement in advance by a physician to accept Medicare's Allowed charge as payment in full (guarantees not to balance bill). Medicare pays its share of the allowed charge directly to physicians who accept assignment and provides other incentives under the Participating Physician and Supplier Program.

Medicare+Choice
A program created by the Balanced Budge Act of 1997 to replace the existing system of Medicare risk and cost contracts. Beneficiaries have the choice during an open season each year to enroll in a Medicare+Choice plan or to remain in traditional Medicare. Medicare+Choice plans may include coordinated care plans (HMOs, PPOs, or plans offered by provider-sponsored organizations); private fee-for-service plans; or high-deductible plans with medical saving accounts.

Medicare Cost Report (MCR)
An annual report required of all institutions participating in the Medicare program. The MCR records each institution's total costs and charges associated with providing services to all patients, the portion of those costs and charges allocated to Medicare patients, and the Medicare payments received.

Medicare Fee Schedule
The resource-based fee schedule Medicare uses to pay for physicians’ services.

Medicare Part A
Medical Hospital Insurance (HI) under Part A of Title XVIII of the Social Security Act, which covers beneficiaries for inpatient hospital, home health, hospice, and limited skilled nursing facility services. Beneficiaries are responsible for deductibles and copayments. Part A services are financed by the Medicare HI Trust Fund, which consists of Medicare tax payments.

Medicare Part B
Medicare Supplementary Medical Insurance (SMI) under Part B of Title XVII of the Social Security Act, which covers Medicare beneficiaries for physician services, medical supplies, and other outpatient treatment. Beneficiaries are responsible for monthly premiums, copayments, deductibles, and balance billing. Part B services are financed by a combination of enrollee premiums and general tax revenues.

Medicare Payment Advisory Commission (MedPAC)
An advisory body of independent experts created by the U.S. Congress to provide guidance on Medicare provider payment issues. The former Prospective Payment Assessment Commission and Physician Payment Review Commission (PPRC) were merged into the MedPAC at its creation in 1997.

Medicare-Supplement Policy
A type of health insurance policy that provides benefits for services Medicare does not cover.

Medigap Insurance
Privately purchased individual or group health insurance policies designed to supplement Medicare coverage. Benefits may include payment of Medicare deductibles, coinsurance and balance bills, as well as payment for services not covered by Medicare. Medigap insurance must conform to one of ten federally standardized benefit packages.

Merger
Union of two or more organizations by the transfer of all assets to one organization that continues to exist while all others are dissolved.

Metropolitan Statistical Area (MSA)
A geographic area that includes as least one city with 50,000 or more inhabitants, or a Census Bureau-defined urbanized area of at least 50,000 inhabitants and a total MSA population of at least 100,000 (75,000) in New England).

Midlevel Practitioner (MLP)
Nurses, physician assistants, midwives, and other non-physicians who can deliver medical care under the sponsorship of a practicing physician.

Mission Statement
A goal statement developed by health care organizations to provide direction and define purposes and objectives of the organization.

Morbidity
A measure of disease incidence or prevalence in a given population, location, or other grouping of interest.

Mortality
A measure of deaths in a given population, location, or other grouping of interest.

Multidisciplinary Team
An approach to caring for the patient that involves a multidisciplinary team of professionals with the goal of providing comprehensive, integrated care. The team often includes a physician, nurse, and social worker working closely together and, depending on the patient’s needs, may also include an occupational, physical, or other therapist and a psychiatrist or psychologist.

Multi-Hospital System
Two or more hospitals owned, leased, contract managed or sponsored by a central organization. They can be either not-for-profit or investor-owned hospitals.

Multi-Institutional System
An organization affiliation among two or more health care organizations. Multi-institutional systems may be vertically or horizontally integrated. The tie among the institutions can be through ownership, lease, contract management, and vertical integration.

Multispecialty Group
A physician practice environment where diverse fields of medicine may converge to bring patients and purchasers a more unified and comprehensive service package.

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National Association of Insurance Commissioners (NAIC)
The national group of state officials who regulate insurance practices in each of the states.

National Committee for Quality Assurance (NCQA)
A private, not-for-profit organization that assesses and reports on the quality of managed care plans, with the goal of enabling purchasers and consumers of managed health care to distinguish among plans based on quality.

National Drug Code (NDC)
The identifying number for medicines maintained by the Food and Drug Administration (FDA).

National Practitioner Data Bank (NPDB)
A computerized data bank maintained by the federal government that contains information on physicians against whom malpractice claims have been paid or certain disciplinary actions have been taken.

Neonatal
The part of an infant’s life from the hour of birth through 27 days, 23 hours and 59 minutes; the infant is referred to as a newborn throughout this period.

Net Loss Ratio
A measure of a plan’s financial stability, derived by dividing its medical costs and other expenses by its income form premiums.

Network
A group of providers, typically linked through contractual arrangements, which provide a defined set of benefits.

Nonparticipating Physician
A physician who does