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Glossary of Reimbursement Terms
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
A
Abuse
A provider incident which is inconsistent with accepted medical, fiscal, or business practices that directly or indirectly results in unnecessary costs to the Medicare program or to a Medicare beneficiary. Examples of abuse may include excessive charges, improper billing practices, and balance billing beneficiaries more than the allowed amount.
Actual Acquisition Cost (AAC)
The cost (invoice price) of a drug to a pharmacy, physician, or hospital that is providing the product to a patient. Some insurers require providers to submit pharmaceutical invoices with claims to demonstrate actual acquisition cost.
Acute Care
Medical treatment rendered to individuals whose illnesses or health problems are of a short-term or episodic nature. Acute care facilities are those hospitals that mainly serve people with relatively short-term, acute health problems.
ADAP
The AIDS Drug Assistance Program was created in 1987 to fund the states purchase of AZT. ADAP programs are now part of the Ryan White Comprehensive AIDS Resources Emergency (CARE) Act. ADAPs provide HIV/AIDS related prescription drugs to low income, underinsured and uninsured patients. Each state or territory administers its own ADAP including the formulary, financial criteria and clinical eligibility.
Adjudication
Any process by which a claim or dispute gets settled is called adjudication. In the case of medical claims, adjudication generally means the process used to get a claim paid. This can involve re-billing, appealing, or using legal means to reach a payment settlement.
Advance Beneficiary Notice
This used to be known as the Waiver of Liability. Advance Beneficiary Notice ("ABN") is a written notice to a Medicare beneficiary that Medicare may not pay for an item or service based upon lack of medical necessity. The patient must sign the ABN and the patient may be billed if the claim is subsequently denied.
Adverse Selection
The phenomenon whereby individuals or groups with atypical health risk disproportionately enroll in a specific health plan or type of health plan. Adverse selection may be influenced by individual decisions in response to benefit design and plan characteristics as well as by insurer marketing and rating practices.
Allowable (Medicare Allowable)
This is the total fee schedule amount allowed by Medicare and other payers. For Medicare Part B, 80% of the allowable is paid by Medicare and 20% by the patient.
Ambulatory Care
Health Services that are provided on an outpatient basis in contrast to services provided in the home or to an inpatient.
American Hospital Formulary Service (AHFS)
One of the two major compendia recognized by the Medicare program.
Ancillary Services
Additional, non-routine services provided to assist or enhance the regular services offered by an institution or health care provider. For hospitals, they may include x-rays, drugs, or laboratory.
APCs
APCs are Ambulatory Payment Classifications, a Medicare prospective payment system for the hospital outpatient clinic. APCs do not impact physicians' offices. APCs are clinically consistent groups that receive a defined payment. APCs have a weight, a conversion factor, and, then, a geographic adjustment for many services (except for pharmaceuticals whose payment is based on ASP or AWP). Patients may pay 20% or more of the APC. The maximum amount that the patient may pay for any APC, including multiple drug units, is the inpatient deductible for a specific year (for 2002, this equals $812). Multiple APCs may be paid for a single encounter in a calendar day.
Appeals
The provider may address a denial of a claim by submitting an appeal. The purpose of an appeal is to ensure correct payment is made for a reasonable and necessary service. Under Medicare Part B, appeals can be filed under the following conditions: (1) the claim was assigned; (2) the claim was not assigned and the claim was denied due to medical necessity and the beneficiary could not have known that services would not be covered; or (3) the provider acted as an authorized representative of the beneficiary. Under current Medicare regulations (which may change in the near future), there are five levels of appeals:
- Carrier Review
- Fair Hearing/Qualified Independent Contractor Hearing (QIC)
- Adminstrative Law Judge Review (ALJ)
- Departmental Appeals Board (DAB) Review
- Federal Court Review
Appropriateness
Appropriate health care is care for which the expected health benefit exceeds the expected negative consequences by a wide enough margin to justify treatment.
Assignment
Under Medicare, if the provider accepts assignment, they must agree to bill Medicare directly and to accept the Medicare allowable as the full reimbursement amount.
Assignment of Benefits
A form or other certification that patients must sign to authorize a third party or payers to the provider for services rendered.
Average Sales Price (ASP)
ASP is defined as the average price from manufacturer, net of all discounts, rebates, charge backs, and credits for drugs. ASP will be determined using sales reports provided by manufacturers that will include information on total units sold and total revenue for each drug. The Medicare allowed amount for most physician administered drugs is based on ASP plus 6%.
AWP (Average Wholesale Price)
A pricing point established by wholesalers, upon which many pharmaceutical pay rates are based. AWP is officially determined through surveys of wholesalers' listed wholesale price, and it is equivalent to a suggested retail price. AWP is published in the Red Book, Medispan, and First Databank.
B
Beneficiary
A person enrolled in an insurance program is a beneficiary of that plan. A Medicare beneficiary is enrolled in the Medicare program and has a Health Insurance Claim (HIC) number.
Benefit
A drug, supply, service, or procedure included as a covered item in an insurance contract or public program.
Benefits Improvement Act (BIPA)
BIPA, which was enacted on December 21, 2000, amended Titles XVIII, XIX and XXI of the Social Security Act to provide benefits improvements and beneficiary protections in the Medicare and Medicaid programs and the State Children's Health Insurance Program (SCHIP), as revised by the Balanced Budget Act of 1997 and the Medicare and Medicaid and SCHIP Balanced Budget Refinement Act of 1999.
"The Blues"
An informal name for Blue Cross and Blue Shield plans.
Bundled Payment
This is an inclusive payment that includes two or more related services and/or supplies. An example of a bundled payment is the global surgical payment which includes all services and supplies used in a certain period, which may be 0, 10, or 90 days depending upon the fee schedule and procedure code.
C
Cap
A "cap" is a fixed amount that will be paid by a health plan for all services or a single item or service. For example, in some Medicare supplements, there can be an annual cap on drug payments of $2,000-3,000.
Capitation
Capitation is a method employed by managed care organizations to limit health service risk. This is a method by which the employer or insurance company pays a group of providers or a provider a set per member per month fee multiplied by the number of persons in the plan (called 'lives'). This lump sum is used to pay for all services, regardless of what services cost.
Carrier
An insurer that is contracted to administer Medicare Part B (outpatient services) within a specific geographic area, such as a state.
Carve-Out
Certain types of therapies or drugs, such as contraceptives, growth hormones, and injectable drugs that are excluded from coverage by HMOs and PPOs at the option of the employer or as negotiated by a contracting provider. Alternatively, carve-outs can refer to specific services (e.g., mental health, prescription drugs) that are managed outside of a traditional insurance program by a specialty agent.
Case Management
Management of an individual patient's care, typically for a chronic or expensive illness, by a registered nurse or other qualified individual. The case manager is charged with determining the most appropriate, cost-effective treatment plan for a patient.
Case Rate
A monthly or per spell of illness rate that is used by Managed Care companies for certain types of illnesses to pay for all costs of care. An example of a case rate is a single rate for Bone Marrow Transplants.
Categorically Needy
A Medicaid category that refers to individuals given public assistance under the Social Security Act because they are low-income, and are aged, blind, disabled, or members of families with dependent children. Because of the category to which they belong, they are eligible for benefits.
C-code
A Level II HCPCS code temporarily assigned to new drug for use with the hospital outpatient prospective payment system (HOPPS).
Claim
A form submitted to the insurer for the payment for items and services that are covered under the insurance contract.
Claims Review
A process carried out by an insurer whereby
claims are approved or rejected for reimbursement based on a set of
standard criteria. (See Drug Utilization Review).
Closed-Panel HMO
An HMO plan in which providers are not allowed to practice outside the HMO-provider network. Examples include staff and group model HMOs.
Clean Claim
For Medicare purposes, a claim the carrier will pay without review because it passes all claim edits and is transmitted in an acceptable format or on an acceptable form. Clean Medicare claims transmitted electronically will be paid in fourteen (14) days.
CMS (Formerly HCFA)
The Centers for Medicare and Medicaid Services ("CMS") is the agency that oversees the Medicare, Medicaid, and SCHIPs programs for the federal government. The primary duties of this agency are to implement policy; process/review claims; maintain program integrity; and manage Congressional budget allocations for healthcare expenditures for these programs.
CMS 1450 (Formerly HCFA 1450)
This form, sometimes known as the UB-92 or UB, is the claim form used by hospitals to summarize detailed charges for insurance billing. Almost all payers accept the CMS 1450.
CMS 1500 (Formerly HCFA 1500)
The CMS is the claim form used to bill Part B Medicare and is used by most of the other payers to pay or deny professional fees and other office-based services.
COBRA (Comprehensive Omnibus Reconciliation Act)
A plan to ensure that a person can maintain their healthcare benefits after employment ends. COBRA, in most cases, is paid by the employee to the past employer and can be maintained for eighteen months.
Coding
Refers to the alphanumeric systems used by hospitals, physicians, and other medical care providers to identify services to state, federal, and international agencies and to classify services on claim forms submitted to insurers. All medical procedures and diagnoses must be described on claim forms with numerical and written designations from one of the recognized "coding" systems (e.g., CPT, ICD-9, and HCPCS).
Coinsurance
Coinsurance is a portion per claim of the balance of covered medical services for which a beneficiary is responsible after paying the deductible. Under Medicare Part B, the coinsurance amount is 20% of the allowable or sum of the allowables for a date or dates of service.
Commercial Insurer
A private, for-profit insurance company such as Aetna or Mutual of Omaha. Typically, these organizations provide health insurance or other standard insurance products like life insurance, automobile insurance, or homeowners' insurance.
Compendia
Compilations of drug monographs listing labeled and approved unlabeled uses. Also used to refer to the USPDI and AHFS.
Consultation
A professional service rendered by a physician upon the request for an opinion or treatment plan from another physician. The consultant must submit to the requesting physician documentation of a history, examination, and medical decision-making that is appropriate and necessary for the patient's diagnosis. A physician is no longer a consultant when they assume responsibility for ongoing care of the patient.
Contractual Adjustment
The contractual adjustment is the "write down" or "write off" from charges to what insurance companies actually allowed for services rendered by a provider.
Coordination of Benefits (COB)
Provision designed to limit benefits for patients with more than one health insurance plan such that no more than 100 percent of expenses are covered, and to designate the order in which the multiple carriers are to pay benefits. COB also ensures that the patient's out of pocket expenses are limited to the extent possible under the assigned insurance plans.
Copayment
The portion of the allowed payment where the insured or covered persons pay a specified flat amount per unit of service or unit of time (e.g., $10 per visit) and their insurer pays the rest of the cost. The copayment is incurred at the time the service is provided. The amount paid does not vary with the cost of the service (unlike coinsurance, payments that are a fixed percentage of the cost).
(Note: This term is frequently but incorrectly used interchangeably with Coinsurance)
Cost-Based Reimbursement
One of the 'older' methods of payment of medical care by third parties for services delivered to patients. In cost-based systems, the amount of the payment is based on the estimated costs to the provider of delivering the service. Until August 2000, Medicare used cost-based reimbursement to pay hospitals for outpatient services.
Coverage
The scope of benefits for which an insurer will pay when deemed medically necessary and appropriate.
Covered Services
Appropriate and necessary hospital, medical, and miscellaneous health care service utilization by the insured that entitle him/her to a payment of benefits under the scope of a health insurance policy. These typically are specific items meeting criteria that include safety, effectiveness, acceptance by the local medical community, non-experimental status, government approval, and other criteria as outlined in the health insurance plan.
CPT codes
A list of five digit codes used to describe procedures, which is developed and updated annually by The American Medical Association. The procedures described are usually performed by or supervised by physicians.
Critical Care
Critical care is the term that is used for the continuous care of patients who are in imminent danger of death or permanent disability.
D
Deductible
A fixed annual payment that a patient must make for medical services before any insurance reimbursement is available. The amounts vary widely by insurer and contract. As with Medicare, the deductible may vary for hospital and medical services.
Denial
Denials, particularly for Medicare claims, may describe three types of claim determinations: non-coverage, medical necessity, and un-bundling. Non-coverage denials may not be appealed because Medicare never covers the service. Un-bundling denials denote claims that are denied because Medicare (or other payer) concludes that a service is included in another billed service and are not separately payable. However, this type of denial may be due to poor application of code modifiers or misunderstanding of the coding system. In either case, un-bundling denials may not be appealed, resubmittal of the claim may be indicated if documentation supports the use of an appropriate modifier. Medical necessity denials are subject to appeal, if the case has documentation to demonstrate care was reasonable and necessary for the patient's diagnosis. Beneficiaries may pay for services that are non-covered and for denied claims due to medical necessity, if they previously signed an ABN for that service. Medicare patients may never be billed for un-bundled services.
Diagnosis-Related Groups (DRGs)
A per discharge patient classification system that categorizes patients into groups that are clinically coherent and homogeneous with respect to inpatient short-stay hospital resource use. The Medicare prospective payment system (PPS) uses approximately 500 DRGs as the basis for paying participating short-stay hospitals under Medicare. One DRG is payable per hospital stay regardless of the length of stay and the number of services used.
Direct Contracting
An arrangement whereby employers, unions, and other "primary" payers bypass insurance companies and HMOs and contract directly with organized provider networks (e.g., a physician-hospital organization or independent practice association) or individual providers.
Discounted Charges
A payment system in which insurers pay the provider's charges minus a certain pre-determined percentage.
Disproportionate Share Hospital (DSH)
Hospitals that serve a relatively large number of low-income, Medicaid, and uninsured patients with special needs. DSHs receive an increased payment under Medicare's PPS or under Medicaid.
Drug Benefit Program
Optional coverage program for prescriptions usually offered by Health Maintenance Organizations. In 2006 Medicare beneficiaries will be able to enroll in an optional drug benefit. The optional drug benefit that starts in 2006 is the Medicare Part D Drug Benefit. The Medicare Part D drug benefit will be available through Medicare Advantage (managed care) programs, as well as through "stand-alone" Prescription Drug Plans (PDPs).
Drug Utilization Review (DUR)
Also known as drug utilization evaluation (DUE) is a process to monitor the frequency and usage of prescriptions. Typically, a DUR committee examines the number of prescriptions per member per month and the average cost per prescription. The utilization and costs of pharmaceuticals are reviewed for each physician, physician group, medical specialty, retail pharmacy, employee group, and member. HMOs, hospitals, Pharmacy Benefit Managers (PBMs) and some other payers commonly perform DUR.
Dually-Eligible Patients
Patients who are eligible for Medicaid and Medicare, also known as "Medi-Medi's".
Durable Medical Equipment Regional Carriers (DMERCs)
Four specialty carriers that process claims for durable medical equipment and for oral drugs that are approved for Medicare coverage. The four DMERC carriers are:
E
Enrollees
Persons who are insured by and receive health care through an HMO or Medicare Advantage managed care plan are referred to as enrollees or members.
Established Patient
The term used in CPT and by Medicare to describe a patient who has been seen in a practice by a member of the same specialty in the last thirty-six months.
Estimated Acquisition Cost
A state's estimate of the price generally paid by providers for a particular drug. Most states used a drug's AWP to calculate the drug's EAC.
Evaluation & Management Codes (E&M Codes)
Evaluation & Management codes are the first part of CPT in the code range 99201-99499. They are used to classify cognitive services rendered to patients by physicians and other providers of patient care. The levels of most, but not all, Evaluation & Management services are determined by the documentation of the history, physical, and medical decision-making.
Exclusion
Clauses in an insurance contract that deny coverage for select individuals, groups, locations, properties or risks.
Explanation of Benefits (EOB)
The EOB is a communication tool used by insurance companies to explain their payment for services billed on a specific claim and what the patient owes. A check or proof of money transferred often accompanies the EOB.
F
Fee-for-Service (FFS) Reimbursement
The traditional health care payment system, under which physicians and other providers receive a payment for each of unit of service they provide and bill to the insurance company.
Fee Schedule
A listing of the maximum fees that an insurer will pay for certain services. Physician fee schedules usually are based on CPT codes.
First Data Bank
A reference for current pricing, including AWP and WAC, on prescription drugs. Primary source of pricing for the Medicaid program.
Fiscal Intermediary
An insurance company that is contracted by CMS to administer the Medicare program for Part A (hospital, inpatient & outpatient claims).
Food and Drug Administration (FDA)
An agency with the Department of Health and Human Services that determines and monitors the safety and efficacy of products.
Formulary
A list of drug products from which a physician may choose to prescribe for patients. Formularies are generally used by insurance companies to limit the types of prescription drugs dispensed by a pharmacy and by hospitals to limit the brands and types of drugs utilized by the clinical staff.
Fraud and Abuse
Under Medicare rules, fraud describes an act to intentionally deceive or misrepresent a claim presented to a federal program for payment. Fraud includes, but may not be limited to, altering claim forms to obtain higher reimbursement; billing for services which were not done or purchased by the provider; falsely representing services rendered; and, solicitation of or receiving kick-backs or bribes in exchange for referrals. Abuse is a provider incident, which is inconsistent with accepted medical, fiscal, or business practices that directly or indirectly results in unnecessary costs to the Medicare program or to a Medicare beneficiary. Examples of abuse may include excessive charges, improper billing practices, and balance billing beneficiaries more than the allowed amount.
G
Gatekeeper
The primary care provider of a Health Maintenance Organization, who manages patient care and is responsible for determining when referrals to specialists are necessary and appropriate. This provider is responsible for the administration of a patient's treatment and must coordinate and authorize medical services.
G-codes
Temporary codes used to identify professional health care procedure and services that would otherwise be coded in the CPT, but for which there are no CPT codes. In 2005, the AMA introduced new codes to represent select physician drug administration services.
Geographical Practice Cost Indices (GPCIs)
One of the major components of the Medicare physician fee schedule. GPCIs, which may also be known as the Geographical Adjustment Factors (GAFs), are used to adjust relative values to the relative cost of living in a geographic location. There are three sets of GPCIs for work, overhead, and malpractice relative values.
Global Capitation
A form of capitation payment in which the payment covers both facility costs and physician care.
GPOs (Group Purchasing Organizations)
Collective entity consisting of two or more hospitals (members) that purchases, negotiates and contracts for their members directly with manufacturers. GPO members may include hospitals, Integrated Delivery Networks (IDNs), Surgery Centers, Clinics and Home Health Agencies (HHAs) and some oncology physician practices.
H
HCPCS Codes
Health Care Financing Administration Common Procedural Coding System (HCPCS) codes are billing codes for most procedures, supplies, drugs, and physician services covered under Medicare. The coding system is divided into three levels: Level I consists of CPT codes; Level II some times called National HCPCS codes denote supply, injection, radiopharmaceuticals and miscellaneous codes; Level III designates alphanumeric codes issued by local carriers.
Health Care Financing Administration (HCFA)
HCFA is now known as The Center for Medicare and
Medicaid Services. See CMS.
HCFA 1450 (See CMS 1450)
HCFA 1500 (See CMS 1500)
Health Maintenance Organization (HMO)
A prepaid health care plan that provides or arranges comprehensive health services for its enrolled members. HMOs may be organized differently as represented by the following four models:
- HMO-Group: HMO that contracts with one or more independent group practices that exclusively provides health services to HMO patients.
- HMO-IPA: HMO that contracts directly with physicians in independent practice, or with one or more associations of physicians in independent practice.
- HMO-Network: HMO that contracts with two or more independent group practices that provide health services to HMO patients and patients covered by other payers.
- HMO-Staff: HMO that delivers health services through a salaried physician group that is employed by the HMO unit.
Health Plan Employer Data and Information Set (HEDIS)
A core set of performance measures designed by the National Committee for Quality Assurance to enable plans and employers to accurately trend health plan performance in a comparative manner.
HIPAA (Health Insurance Portability and Accountability Act of 1996)
The Health Insurance Portability and Accountability Act of 1996 was legislation that was passed in 1996 to address four major issues: 1) Portability of health insurance benefits; 2) Fraudulent claims to federal health programs; 3) Transferability and consistency of health data; and, 4) Privacy of patient-specific health information. Since 1996, implementation of each section has occurred at different times. In April 2003, the privacy of patient-level health information will be implemented.
HMO Member
Persons who are insured by and receive health care through the HMO are referred to as members or enrollees.
Home Health Services
Services and items furnished to an individual who is under the care of a physician by a home health agency or by others under arrangements made by such agency. Services are furnished under a plan established and periodically reviewed by a physician. They are provided on a visiting basis in an individual's home and include: nursing, physical therapy, dietary, counseling, and social services; part-time or intermittent skilled nursing care; physical, occupational, or speech therapy; medical social services, medical supplies and appliances (other than drugs and biologicals); home health aide services, and services of interns and residents. To participate in Medicare, a Home Health Agency (HHA) must meet health and safety standards as set by the Department of Health & Human Services.
Home Infusion Therapy
The provision of intravenous drugs and biologics in the home, often in conjunction with a home health agency.
Hospice
A public agency or private organization that is primarily engaged in providing pain relief, symptom management, and supportive services to patients that are certified to be terminally ill. Medicare beneficiaries may elect to receive hospice care instead of standard Medicare benefits for terminal illness.
Hospital Outpatient Prospective Payment Systems (HOPPS)
Basis for Medicare reimbursement in the hospital outpatient setting.
I
Incident to a Physician's Professional Services
A Medicare term that describes the services or supplies that are furnished as an integral, although incidental, part of the physician's personal professional services in the course of diagnosis or treatment of an injury or illness. To be paid by Medicare as being incident to a physician's service, the service or item must be commonly furnished in the physician's office; must be an expense to the physician; must be rendered without charge or billed on a physician's claim; and, must be supervised by a physician who is in the office suite.
Indemnity Health Insurance
A form of health insurance in which a person prepays a premium in exchange for a specific amount of monetary coverage in the event of illnesses or accidents. In the event of illness or accident, the enrollee or the care provider submits a "claim" to the insurance organization. The insurance organization then reimburses the party either all or, in most cases, a percentage of the incurred costs.
Independent Practice Association (IPA)
A group otherwise unaffiliated physician practices that come together for the express purpose of securing managed care contracts. IPAs may contain single specialty or multi-specialty practices; most often a wide variety of physician specialists join hands in order to offer a vast array of services for potential managed care organizations.
Individual Consideration
Refers to when coverage and reimbursement decisions are made on a case-by-case basis.
Inpatient Care
Inpatient care means that a patient is hospitalized as an inpatient upon order of a physician. Inpatient care usually denotes that the patient is at an acute level of care in a short-term facility for medical, psychiatric, or rehabilitative care.
Integrated Delivery Networks (IDNs)
An organization that has direct responsibility for centralizing purchasing and/or contracting of its affiliated hospitals. Some systems actively negotiate contacts directly for their affiliated hospitals. Other systems are members of a Group Purchasing Organization (GPO) and provide their affiliated hospitals with access to GPO contracts.
Individual Determination
Medicare contractors may review claims on an individual basis regardless of whether Local Coverage Determination (LCD), National Coverage Decision, or coverage provision in a Medicare manual exists. When making individual determinations, the Carrier or Intermediary must be sure that the claim is coded correctly; the service is appropriate for the condition listed on the claim; and, that services were medically necessary. Other payers may call this process individual consideration.
Intermediary (or Fiscal Intermediary)
Relates to an organization that is contracted to administer Medicare Part A, Medicaid, or other payer benefits within a specific geographic area such as a state.
International Classification of Diseases-9th Revision-Clinical Modification (ICD-9-CM)
ICD-9-CM is a statistical classification system made up of numeric and alphanumeric codes used to describe diseases, symptoms, conditions, and procedures. During the 1980s, ICD-9-CM moved into the reimbursement arena. ICD-9-CM is now used to report diagnoses for billing in all settings and procedures for inpatient billing.
J
J-codes
This National HCPCS Level II code set is used to describe drugs covered by the Medicare program.
Joint Commission on Accreditation of Healthcare Organizations (JCAHO)
A national private, nonprofit organization whose purpose is to encourage the attainment of uniformly high standards of institutional medical care. Establishes guidelines for the operation of hospitals, home health agencies and other health facilities and conducts survey and accreditation programs.
L
Legend Drug
A drug product that cannot be dispensed legally without a prescription.
Length of Stay (LOS)
The number of days a patient is treated in a hospital. One goal of managed care is to reduce hospital length of stay.
Letters of Medical Necessity (LMN)
A letter from a patient's physician justifying use of a particular drug for a particular indication. Often submitted with a claim or appeal as supporting documentation.
Local Coverage Determinations (LCDs)
LCDs, established by section 522 of the Benefits Improvement and Protection Act (BIPA), is a decision by a fiscal intermediary or carrier whether to cover a particular service. An LCD is a determination as to whether the service is reasonable or necessary. LCDs appears on all Medicare contractor web sites and address local coverage, coding and medical review related billing issues.LCD's have now replaced Local Medical Review Policies (LMRP's) that were used for the same purpose.
Long Term Care
Continuous health care delivered by a hospital or other health care institution (including home health care) to a patient for 30 days or more.
M
Major Medical
Insurance for health care that includes physician services, durable medical equipment (DME), and home health care. Major medical does not include hospital-based care, and may carve out pharmacy benefits. Most Major Medical policies sold as private insurance contain maximums on the total amount that can be paid by the insurer.
Managed Care
Health care plans that integrate the financing and delivery of appropriate health care services to covered individuals by arrangements with selected providers to furnish a comprehensive set of health care services, explicit standards for selection of health care providers, formal programs for ongoing quality assurance and utilization review, and significant financial incentives for members to use providers and procedures associated with the plan.
Managed Care Organization (MCO)
An MCO is an umbrella term that encompasses Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), and any variation of organization that provides managed care.
Managed Indemnity Program
A hybrid insurance program in which the insurer uses various tools to monitor cost-effectiveness such as pre-certification, second surgical opinion, case management, and utilization review. Also called managed fee-for-service programs.
Medicaid
Also known as Title XIX, Medicaid is a joint federal/state health insurance program for low income persons who receive public assistance or whose medical expenses are high enough to "spend-down" their income in order for recipient to qualify for the program. This program is administered by each state, and has fairly tight restrictions on payment for many items and services.
Medically Necessary
Services or supplies which meet the following tests:
- they are appropriate and necessary for the symptoms, diagnosis, or treatment of the medical condition;
- they are provided for the diagnosis or direct care and treatment of the medical condition;
- they meet the standards of good medical practice within the medical community in the service area;
- they are not primarily for the convenience of the plan member or a plan provider; and
- they are the most appropriate level or supply of service that can safely be provided.
Note: Medically necessary does not automatically mean covered. A
medically necessary service may be excluded from coverage by a
patient's health insurance plan. (See Exclusion).
Medicare
Medicare provides health insurance benefits to elderly (aged 65 or older) and disabled Americans. It is funded by the federal government and administered by the Centers for Medicare and Medicaid Services. Medicare has two parts: (1) Part A - Hospital Insurance and (2) Part B - Supplemental Medical Insurance. Part A covers institutional services such as hospitalization, nursing home care, hospice and the services of a home health agency. Part B covers outpatient services such as physician services, lab and radiology; ambulance, durable medical equipment, orthotics, prosthetics and drugs administered incident to a physician's services.
- Medicare pays for physician services on a fee schedule (RBRVS) basis.
- Medicare allows payment for most injectable drugs administered incident to a physician visit at a total allowable based on ASP plus 6%. (Use this link to access the ASP pricing files on the CMS web site; http://www.cms.hhs.gov/)
- Medicare pays for inpatient care based on DRGs.
- Medicare pays for hospital outpatient services based on APCs.
Medicare Managed Care
This is now known as Medicare Advantage. The Medicare Advantage program has replaced the Medicare Plus Choice program. Under the Medicare Advantage program a beneficiary may elect to replace the standard fee-for-service benefits under Parts A and B of Medicare by enrolling in an HMO or PPO. Managed Care plans may administer the program differently than the rest of the Medicare program. For example, they may have lower coinsurance payments or have prescription drug benefits. They must also abide by coverage policies passed by Congressional action, i.e. the Medicare Cancer Coverage Improvement Act.
Medicare Modernization Act
On December 8, 2003, President George W. Bush signed into law the Medicare Prescription Drug, Improvement and Modernization Act (MMA) of 2003. This landmark legislation provides seniors and people living with disabilities with a prescription drug benefit, more choices and better benefits under Medicare, the most significant improvement to senior health care in nearly 40 years.
Medicare Secondary Payer
Under certain circumstances, Medicare may be the secondary payer when beneficiaries have a third party payer. Medicare may be secondary to Workers' Compensation, automobile, medical no-fault, and liability insurance. Moreover, some beneficiaries have retained private insurance from current or former employers. For ESRD (End Stage Renal Disease), Medicare is the secondary payer until the patient is eligible for Medicare coverage. The MSP program prohibits Medicare payment in cases where payment is made or can reasonably be expected from another payment source.
Medigap
A private insurance policy purchased independently by a Medicare beneficiary to fill the coverage/reimbursement gaps in Medicare. Medigap policies are designed to supplement Medicare by paying the Medicare deductibles and coinsurance. Medigap policies may also provide coverage, though often limited, for services excluded by Medicare such as outpatient prescription drugs.
Medical Necessity
An item or service that is reasonable and necessary to the treatment of an illness or injury or to improve the functioning of a malformed body part.
Modifiers
Modifiers are two digit numeric or alphabetic codes that are attached to HCPCS codes to denote an exceptional or noteworthy billing situation with respect to the definition of the attached code.
N
National Committee for Quality Assurance (NCQA)
A non-profit organization created to improve patient care quality and health plan performance in partnership with managed care plans, purchasers, consumers, and the public sector.
National Coverage Decision (NCD)
A medical policy decision regarding coverage that applies to all Medicare Carriers and Intermediaries. In most cases, these decisions supersede decisions made at a local level.
National Drug Code (NDC)
The identifying drug number assigned by the Food and Drug Administration (FDA). The FDA assigned NDC code may be 10 or 11 digits. The HIPAA compliant NDC for billing purposes is made up of eleven digits- the first five digits refer to the manufacturer, the next four digits refer to the drug compound, and the last two digits refer to dosing information.
Network
A defined group of providers typically linked through contractual arrangements, which provide either specific benefits or a full range of services.
New Patient
According to CPT and Medicare, this is a patient who has not been seen by a member of the practice (same specialty) in thirty-six months.
Nonparticipating Physician
A physician who has decided not to sign a participation agreement with the Medicare program. However, they may wish to take assignment on individual claims. All claims for drugs must be filed on an assigned basis.
O
Outcomes Research
Research on measures of changes in patient outcomes, that is, patient health status and satisfaction, resulting from specific medical and health interventions. Attributing changes in outcomes to medical care requires distinguishing the effects of care from the effects of the many other factors that influence patients' health and satisfaction.
Out-of-Pocket Payments
Medical costs borne directly by a patient without benefits of insurance sometimes called out-of-pocket costs. These include any or all payments to be absorbed by the patient.
Outpatient Care
Outpatient care is care rendered to patients who are not admitted upon order of a physician to acute care, skilled nursing, or custodial facility. No overnight stay.
Outpatient Code Editor (OCE)
An editor that is applied to hospital outpatient claims to check the validity of codes, UB-92 (CMS-1450) fields, and to detect multiple procedure edits for APCs.
Outpatient Prospective Payment System (OPPS)
This prospective payment system for hospital
outpatient departments became law on August 1, 2000. The basic premise
of OPPS is that hospitals will be paid for Medicare patients a set fee
for HCPCS codes submitted to Medicare through the Fiscal
Intermediary. Codes are classified into groups of similar services
called Ambulatory Payment Classifications or "APCs" (See APCs). OPPS was implemented to contain costs in the outpatient department of hospitals.
P
Package Insert (PI)
FDA-approved document that accompanies each drug and details a drug's approved uses, dosage recommendations, safety and precautions, etc. Also known as prescribing information.
Participating Physician
A provider who elects to provide Part B services and to submit claims on an assigned basis. Participation agreements last for twelve months beginning on January 1 of each year.
Pass through Drug
A pass through drug is essentially a carve-out from original version of the Ambulatory Patient Classifications (APCs). This carve out is allowed for 2-3 years and can be reduced due to budgetary constraints. In the original version of the APCs, no drugs other than some chemotherapy drugs had any type of additional payment. In other words, they were bundled into specific APCs. In November of 1999, the Balance Budget Refinement Act (BBRA) was passed establishing a pass through for 116 drugs. These drugs are cancer drugs; supportive care drugs, orphan drugs, biological response modifiers, EPO, and all drugs approved after 12/31/96. Each year, this list is changed to include other drugs that meet these criteria. Medicare originally allowed payment for these drugs at 95% of Average Wholesale Price (AWP). The actual "pass-through amount" was the difference between 95% of Average Wholesale Price and the average acquisition cost. In 2005 and after payment for pass-through drugs is made on the same basis as payment in the physician office setting, ASP plus 6%.
Payer
Refers to any entity that pays for medical services and therapies. Usually it refers to a health care insurer, Medicare, or Medicaid program.
Payer Mix
A breakdown of revenue by payment source, that is the percent contribution each payer makes to the total revenue received by a provider for a particular service or by a particular hospital.
Peer Review
Physician review of patient care provided by other physicians, used to promote quality of care and manage costs often used by HMOs.
Per Diem
Pre-established, fixed payments for a day of patient care. Per diems are used by many Medicaid agencies and HMOs as payment for hospital stays or home health care services.
PhRMA Directory of Patient Assistance Programs
The Pharmaceutical Research and Manufacturers
Association have a web-based Directory of programs for patients who
have no apparent source of payment for their drug therapy. This
directory is available at https://www.helpingpatients.org.
Pharmacy and Therapeutics (P&T) Committee
A group of physicians, pharmacists, and others who review pharmaceutical products and decide which drugs will be on a formulary.
Pharmacy Assistance Programs
State-funded programs providing payment for drugs to certain low-income groups generally the aged and disabled.
Pharmacy Benefit
Coverage of some prescription drugs by an insurance company. Often, beneficiaries will have an identification card designating their eligibility and will have to pay partially for the drug in forms of copayments, deductibles, or coinsurance. Also referred to as "Prescription Drug Benefit".
Pharmacy Benefits Management (PBM) Company
An organization contracted to manage prescription benefits for private insurance plans. Examples are: Advance PCS, Caremark, Express Scripts, and Merck Medco.
Point of Service (POS) Plans
Often known as open-ended HMOs or PPOs, these plans permit enrollees to choose providers outside the plan, yet are designed to encourage the use of network providers.
Practice Guidelines
A set of guidelines set by an organization that physicians should adhere to when determining treatments.
Pre-authorization (also Prior Authorization)
An administrative procedure whereby a health care provider requests permission to institute a treatment plan to a third party before treatment is initiated. The third party usually reviews the request and either approves or denies it based upon established criteria.
Pre-certification
Prior assessment by a payer or payer's agent that proposed services, such as hospitalization, is appropriate for a particular patient.
Preexisting Condition
A physical and/or mental condition of an insured which first manifested itself prior to the issuance of his/her policy or prior to the effective date of coverage of any aspect of the policy.
Preferred Provider Organization (PPO)
An arrangement whereby a third-party payer contracts with a group of medical care providers who furnish services at discounted fees in return for prompt payment and a proposed volume of patients.
Preferred Drug List (PDL)
A list created by a payer to recommend preferred medications. Exclusion from a PDL could lead to non-coverage or a higher co-pay for that drug. Also known as a formulary.
Premium
A monthly fee paid by Medicare enrollees. Hospital Insurance (HI) enrollees who are Social Security or Railroad Retirement beneficiaries and who qualify for coverage through age or disability are not required to pay premiums. Aged persons who are not eligible for automatic HI enrollment may pay a monthly premium to obtain HI coverage. Supplementary medical insurance enrollees pay a monthly premium that is updated annually to reflect changes in program costs.
Primary Care
Basic or general healthcare traditionally provided by family practice, pediatrics and internal medicine.
Primary Care Physician
In some managed care plans, the patient is assigned to a primary care physician. The primary care physician is responsible for screening all referrals for specialty care for patients assigned to them. Thus, they are essentially a gatekeeper that is paid by the insurance plan either on a capitated basis or through a risk-sharing or bonus pool arrangement.
Private Insurer
A private entity that provides health insurance benefits, including Blue Cross and Blue Shield plans, commercial insurers, and managed care plans.
Profiling
Statistical techniques used to identify providers who over- or under-utilize services. The purpose of profiling is to improve the quality of care via education and feedback.
Prospective Payment System (PPS)
PPS is the Medicare system of payments to hospitals based on predetermined amounts for each inpatient discharge through the use of diagnosis-related groups (DRGs) and each outpatient encounter based upon one or more ambulatory payment classifications (APCs). In the aggregate, the hospital keeps the difference between the payments received from Medicare and its costs of treating Medicare patients. The hospitals are at risk for costs incurred above the prospectively determined payments, limited by additional payments for outlier cases with unusually long stays or unusually high costs.
Provider Identification Number (PIN)
An assigned number that identifies the provider of health care services to Medicare or to another insurance company.
R
Red Book
A reference for current pricing, including AWP and WAC, on prescription drugs. Prior to ASP methodology, Medicare's primary source of AWP information.
Reimbursement
Refers to the actual payments received by providers for benefits covered under an insurance plan.
Relative Value Unit (RVU)
Provides a basis for comparing services in terms of a set of resources common across all medical services, including work units, practice expense and malpractice units. The RVU is used to set a fee for each service. Commonly used by Medicare to set reimbursement levels for physician services.
Remittance Advice
A statement or notice that a Part A provider receives from Medicare to reflect the final payment status of claims–either paid or denied. It also evidences the patient's portion of the payment.
Resource-Based Relative Value Scale (RBRVS)
A fee schedule based on the three types of resources associated with individual procedures. These resources are physician work, practice expense, and malpractice. It was adopted in 1992 as the basis for physician payment for Medicare Part B services, and is now also used by many Medicaid agencies and private insurers. The relative value of each service is the sum of values assigned to physician work, practice expense, and professional liability insurance costs, adjusted for each locality by geographic adjustment factors.
Revenue Code
Codes on the Medicare CMS-1450 (UB-92) that denote the cost center as defined by Medicare in which a cost was incurred. These revenue codes are important in terms of tracking costs and charges for Medicare cost reporting. Revenue code 0636 must be used for payment of the Pass-Through products for outpatient drug claims through APCs.
Rider
A document that modifies or amends an insurance contract.
Risk Adjustment
An analysis methodology in which calculated payment rates are adjusted to account for systematic differences in levels of service usage and expenses among identifiable groups of patients. Such adjustments allow for appropriate payment of physicians who have higher practice costs because they treat patients with particular characteristics or comorbidities.
Risk Contract
An agreement with a managed care organization (MCO) to furnish services for enrollees for a determined, fixed payment. The MCO is then liable for services regardless of their extent, expense, or degree.
Risk-sharing
Provisions of many managed care plans in which at least part of the provider's income (or vendor's payment) is directly linked to the financial performance of the plan.
S
Secondary Payers
Insurance organizations that are responsible for patient medical bills once a primary insurer has paid its share. For example, Medicaid plans are secondary payers to Medicare for patients who are eligible for both programs.
Self-Pay
Refers to patients without medical insurance who must fund their medical care out-of-pocket.
Skilled Nursing Facility
An institution that is primarily engaged in providing skilled nursing care and rehabilitative services to inpatients, and meets specific regulatory certification requirements. Each SNF admission requires a written order from a physician certifying need for this level of care.
Spend-Down
Under Medicaid, refers to a method by which an individual establishes Medicaid eligibility by adjusting gross income through incurring medical expenses until net income (after medical expenses) meets Medicaid financial requirements.
Sub-capitation
An HMO pays a single capitation amount to a large multi-specialty physician group. These physician groups then allocate their capitation revenues internally on a "sub-capitation" basis.
Subscriber
A person or organization that pays premiums to a managed care organization or insurance company for health benefit coverage. Subscribers may be individuals or employers.
Superbill
A billing form that usually is a list of the most commonly utilized services in a practice or clinic with the corresponding HCPCS codes and, sometimes, corresponding charges for these services. Superbills are used as the basis for billing, but may not be submitted to most payers in lieu of a CMS-1500.
Supplemental Security Income (SSI)
A program of income support for low-income aged, blind, and disabled persons established by Title XVI of the Social Security Act. Patients who receive SSI automatically qualify for Medicaid.
Supplementary Medical Insurance (SMI)
Supplementary medical insurance (also known as Medicare Part B) is a voluntary insurance program that provides insurance benefits for physicians, outpatient hospital services, ambulatory services, and other medical supplies and services to aged and disabled individuals who elect to enroll under the program in accordance with the provisions of title XVIII of the Social Security Act. Enrollee premium payments and contributions from funds appropriated by the Federal Government finance the SMI program.
T
Technology Assessment Committee
Physicians, nurses, and pharmacists who evaluate new medical products for insurance companies or large providers.
Therapeutic Substitution
The dispensing of a drug, which is the same chemical entity but a different formulation as the prescribed drug, without prior authorization of the prescribing physician; often approved by the P&T Committee. Used as a cost management tool by HMOs and Pharmacy Benefit Managers.
Third-Party Administrator
Individual or company that contracts with employers to manage a self-insured health insurance program.
Third Party Payer
Any organization, public or private, that pays for health or medical expenses on behalf of beneficiaries or recipients. The individual receiving the service is the first party, the individual or institution providing the service is the second party, and the organization paying for it is the third party.
Time Limit for Claims Filing
Claims for Medicare must be filed at the end of the calendar year following the year that the claim was filed. The exception to this rule is that claims filed in the last three months of the year may be filed by the end of the year following the subsequent year. For example, a claim for a date of service in November 2001 must be filed by December 31, 2003.
Treatment Protocol
A series of treatments for a specified illness, which has been determined and recommended as the standard of care.
Triple Option Plan
A health insurance plan that allows subscribers to choose from three health care options—HMO, PPO, and indemnity plan—from one insurance company.
U
UB-92
This is an old name for the billing form used by hospitals for both inpatient and outpatient claims. It is now called the CMS-1450.
UCR (Usual, Customary, and Reasonable) Payment
The use of fee screens to determine the lowest value of physician reimbursement based on: 1) the physician's usual charge for a given procedure, 2) the amount customarily charged for the service by the other physicians in the area (often defined as a specific percentile of all charges in the community), and 3) the reasonable cost of services for a given patient after the medical review of the case.
Unique Physician Identification Number
A unique number assigned by CMS to identify physicians and suppliers who provide medical services and supplies to beneficiaries. UPINs are required for physicians, ordering and referring physicians, and suppliers when billing Medicare.
USPDI (United States Pharmacopoeia Drug Information)
One of the major two compendia recognized by the Medicare program.
Utilization
The extent to which the members of a covered group use a program or obtain a particular service, or category of procedures, over a given period of time. Usually expressed as the number of services used per year or per numbers of persons eligible for the services.
Utilization Review
A method invoked by insurers to monitor and control patients' utilization of health care services. Review can be performed both prospectively (through prior-authorization) or retrospectively for hospital admissions, diagnostic tests, and drug therapies.
V
Verification of Coverage
Confirmation that a specific treatment is a covered benefit under an existing policy, usually before treatment is provided.
W
Waiver
See Advance Beneficiary Notice (ABN).
Wholesale Acquisition Cost (WAC)
A manufacturer's charge to the wholesaler to purchase a drug. The WAC is a published price and does not generally reflect any rebates or discounts.
Withhold
A percentage of the fee negotiated with a physician by an HMO, which is withheld and paid at the end of the year based on the profits of the HMO and the degree to which the physician has met certain standards of care, such as compliance to a formulary.
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