This glossary is based upon definitions found in two sources: Glossary of Terms. 1998. Managed Care. Center for the Health Professions and California Managed Care Education and Research Network; and, Managed Care Terms. A thru Z. Medical Interface. Bronxville, New York: Medicom International.

ACCREDITATION. Accreditation programs attempt to measure and evaluate health providers against a set of industry-driven standards and against peer performance.

ADJUSTED ADMISSIONS. A measure of all patient care activity in a hospital, including inpatient and outpatient care. Adjusted admissions are the sum of inpatient admissions and an estimate of the volume of outpatient admissions that could have been produced with the same amount of resources. 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). Actuarial projections of per capita Medicare spending for an individual in a particular county. These estimations are based on the following population factors: age, sex, institutional status, Medicaid status, employment, and disability status. The Health Care Financing Administration (HCFA) uses this formula to make monthly payments to risk and cost contractors.

ADMINISTRATIVE SERVICES ONLY (ASO) A self-funded plan that contracts with an insurance company for services such as claims processing, stop-loss coverage, and so on.

ADVERSE SELECTION . A disproportionate share of relatively unhealthy individuals, compared with the population from which the share is drawn, who have enrolled in a health plan, whether indemnity or managed care.

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

ALLOWABLE COSTS . Those items or elements of an institution's costs that are reimbursable under a payment formula.

ALTERNATIVE CARE. Medical care received instead of inpatient hospitalization, including outpatient surgery, home health care, skilled nursing facility care, and such nontraditional care as that provided by midwives.

AMBULATORY CARE . Health services delivered on an outpatient basis (without an overnight stay).

AMBULATORY SURGICAL CENTER (ASC). A freestanding facility certified by Medicare where certain types of procedures are performed on an outpatient basis.

AMBULATORY VISIT GROUP (AVG) .  Similar to Diagnosis-Related Groups (DRGs), except that they are for outpatient rather than inpatient care.

ASSOCIATION OF MANAGED HEALTHCARE ORGANIZATIONS (AMHO). The national trade association for PPOs, founded in 1983. Formerly known as the American Association of Preferred Provider Organizations.

BALANCE BILLING. The physician charges more than Medicare-allowed amounts, subject to a limit. The Medicare patient is responsible for the difference.

BASIC BENEFITS. The list of "basic health services" outlined in a member's certificate. These services are required under applicable state and federal laws and regulations.

BASIC DRG PAYMENT RATE. The rate of payment a hospital will receive for a Medicare patient in a specific diagnosis-related group.

BASIC HEALTH SERVICES. These are the benefits that all federally qualified HMOs must offer as defined under Subpart A, 110.102 of the Federal HMO Regulations.

BENEFICIARY. A person who is enrolled in the Medicare program or eligible to receive insurance benefits.

BENEFIT PACKAGE . A set of particular services or benefits that the HMO, government agency, or employer must provide its subscribers under the terms of its contract.

CALIFORNIA RELATIVE VALUE STUDIES (CRVS).  This is a coded listing of physicians’ services with unit values to indicate the relativity of charges to the median.

CAPITATION (CAP). The method of paying health care providers or insurers in which a per-member, monthly payment is made to a provider that covers contracted services (over a specified period, usually a year) and is paid in advance, whether or not the service is used. This rate may be fixed for all members, or can be adjusted according to the age and sex of the member, based on actuarial projections of medical utilization.

CARVE OUT .  An employer eliminates coverage for a specific category of services (such as vision care) and purchases these services separately from a specialized vendor or provider according to a predetermined fee schedule or capitation arrangement.

CASE MANAGEMENT. The service performed by one member of a medical team or organization, usually the primary care physician, as they supervise the provision of medical care for each patient under his/her care. Case management will be used to ensure the delivery of coordinated and appropriate care in a managed care setting and therefore, is an essential skill.
 
CASE MIX. The number and frequency (mix) of patients treated by a particular institution such as a hospital.

CATCHMENT AREA. An HMO draws its patients from this geographic area..

“CENTRAL OFFICE.” In HMO circles, the name given to the Office of Health Maintenance Organizations (OHMO) which is housed in the US Department of Health and Human Services and is responsible for directing federal HMO programs.

COMMUNITY ORIENTED PRIMARY CARE (COPC). A way to provide primary care services that systematically identify health problems in a defined population. These problems are addressed through both medical and non-medical interventions to meet the health needs of the population.

COMPUTERIZED PATIENT RECORD. An electronic system that makes it possible for physicians and clinical staff to capture, store, and communicate patient medical information.

CONCURRENT REVIEW. A screening method of reviewing a procedure or hospital admission, in order to validate the necessity of current care and to explore alternatives to inpatient care.

CONSOLIDATED OMNIBUS BUDGET RECONCILIATION ACT (COBRA). The law that requires employers to offer continued health insurance coverage to employees who have had their health insurance coverage terminated (possibly because they are now unemployed).

CONTINUUM OF CARE. A range of medical treatments and social services provided during a single inpatient hospitalization or for multiple conditions over a lifetime. A hospital, for example, may offer services ranging from a nursery to hospice care.

COPAYMENT. The nominal fee paid by an HMO member to the provider to offset cost of paperwork and administration for each office visit or pharmacy prescription filled.

COST CONTRACT. The agreement between a health plan and the Health Care Financing Administration (HCFA) under which the health plan provides health services and is reimbursed for its costs.

COST SHARING. This term refers to the financial arrangement in which a member of a health plan must pay some of the costs to receive care.

COST SHIFTING . Some members of a health plan must pay some of the costs (to receive care) in order to offset uncompensated care losses and lower net payments from other payers.

CREDENTIALING . The examination of a physician or health care provider's credentials in order to determine their eligibility for clinical privileges at a hospital or to a contract with a Managed Care Organization (MCO).

DATA RETRIEVAL. Collecting care data on a patient from the medical records.

DEDUCTIBLE . The portion of an individual's health care expenses that they must pay before the insurer's coverage begins.

DIAGNOSIS-RELATED (or, DIAGNOSTIC RELATED) GROUPS (DRGs). Classification system developed at Yale University in which hospital procedures are rated in terms of cost and intensity of services delivered. The system uses 383 major diagnostic categories based on the ICD-9 codes. The DRG system classifies patients into groups based on the principal diagnosis, type of surgical procedure, presence or absence of significant comorbidities or complications, and other relevant criteria. A standard rate per procedure is derived from the scale, which is paid by Medicare for their beneficiaries, regardless of the cost to the hospital to provide that service.

DIRECT CONTRACTING . The contractual agreement between individual employers or business coalitions and a health care provider. There is no HMO/PPO intermediary. Services are provided on a predefined price schedule in exchange for the purchase of services in defined volume. The employer can stipulate that the plan includes specific services preferred by their employees.

ELECTRONIC DATA INTERCHANGE (EDI). The electronic exchange of information between two or more parties via computers.

EXCLUSIVE PROVIDER ORGANIZATION (EPO). A form of PPO (Preferred Provider Organization) in which patients must visit a caregiver that is on its panel or network of physicians. The EPO will provide limited reimbursement or no coverage for visits made to an outside provider (an office or hospital). Participating physicians are paid on a fee-for-service basis.

EXTENDED CARE FACILITY. A nursing home-type setting that provides skilled, intermediate, or custodial care.

FEDERALLY QUALIFIED HEALTH CENTER (FQHC).  A federal payment option that allows qualified providers in medically undeserved areas to receive cost-based Medicare and Medicaid reimbursement. It also enables nurse practitioners, physician assistants and certified nurse midwives to receive direct reimbursement.

FEDERALLY QUALIFIED HMO. An HMO that meets certain standards outlined by the Public Health Service Act. These provisions are aimed at protecting consumers and include prepaid care for a fixed amount per month or year and community rating.

FEE-FOR-SERVICE (FFS). The traditional method of reimbursing health care providers in which the physician is paid according to each unit of service performed. Conventional indemnity insurers use this method of reimbursement.

GATEKEEPER. The primary care physician, or first contact physician, in a managed care setting. This physician, or gatekeeper, screens patients to determine the appropriate level and delivery of care for each patient, administers the patient's treatment and authorizes referrals to specialists, diagnostic tests, and hospitalizations.
 
GROUP CONTRACT. An agreement between a health plan (HMO) and a subscribing group which specifies rate, performance convenants, relationships among parties, schedule of benefits, and other conditions.

GROUP MODEL HMO .  There are two kinds of group model HMOs: the staff model in which services are provided by physicians who belong to a specially formed and legally separate medical group that only serves the HMO; and the model in which the HMO contracts with an existing, independent group of physicians to deliver medical care. See Health Maintenance Organization.

GROUP PRACTICE WITHOUT WALLS (GPWW).  Physicians are organized into a network in order to share common administrative costs in a corporate structure. They own the assets of the consolidated business operation, while preserving the independence of separately run practices. A large enough network can bid for managed care contracts.

HEALTH CARE FINANCING ADMINISTRATION (HCFA). The federal agency (part of the US Department of Health and Human Services) responsible for administering Medicare and overseeing states' management of Medicaid.

HEALTH INSURANCE PURCHASING COOPERATIVES (HIPCs). Public or private organizations which arrange health insurance coverage for the workers of all member employers, thus making that coverage more affordable because they are able to spread the risks over a larger population. Also known as Health Alliances or Voluntary Purchasing Cooperatives.

HEALTH MAINTENANCE ORGANIZATION (HMO). A form of health insurance which offers comprehensive health services, usually including inpatient and ambulatory care, to members on a pre-paid basis. Physicians are paid a salary, reduced fees, or captivated rate for services. For patients, who can chose from the contracted physicians, it means no deductible and no insurance forms, and only a minimal copayment for each office visit (to cover the paperwork handled by the HMO). Specific models of HMOs include the following:

STAFF MODEL HMO. This is the purest form of managed care in which the HMO owns and operates all of the medical facilities. Physicians are salaried employees of the HMO. The HMO has the tightest control in this type of medical practice because of practice guidelines.

INDIVIDUAL PRACTICE ASSOCIATION (IPA). Primary care physicians are required in this model. They are contracted with the IPA and see patients in private or group practice settings on a fee-for-service (FFS) or capitation basis (for HMO patients). Physicians belonging to the IPA guarantee that care needed by each patient for whom they are responsible will not cost more than a certain amount. A portion of their payments (usually 20% per year) is placed in a "withhold fund." In this manner, the physician is put "at risk" for keeping down the treatment cost: if they do, they are reimbursed their entire withhold fund; if they don't, the HMO can withhold an amount from the fund. This is the basis for the HMO's financial viability.

GROUP MODEL. A physician group contracts with HMOs (usually, with more than one HMO) for their business. Physicians are employed and paid by the group--not by the HMO. The administration of the group practice decides how the HMO payments will be distributed to each member physician. It is unusual for member physicians to have any fee-for-service patients.  This type of HMO, popularized by Kaiser-Permanente, one of the pioneers of the HMO movement, is usually located in a hospital or clinic setting and may include a pharmacy.

HYBRID or MIXED-MODEL. In this model, at least two managed care organizational models are combined into a single health plan, with its members getting options ranging from staff to IPA models.

NETWORK-MODEL. A network of group practices under the administration of one HMO

HEALTH PLAN EMPLOYER DATA AND INFORMATION SET (HEDIS). A set of standardized performance measures designed to help make comparisons between health care plans on quality, access and patient satisfaction; membership and utilization; financial information; and health plan management.

INDEMNITY. Traditional unrestricted major medical, fee-for-service insurance coverage. Providers are paid according to the service performed and patients have complete freedom in choosing a physician. 

INDEPENDENT PHYSICIAN ASSOCIATION (IPA).  A legal entity (usually a group of dentists or physicians in independent practices) who enter into collective contracts with HMOs, PPOs, and other insurers to provide services. IPAs are organized by the physicians themselves, a third party or the physicians' clients (i.e. the HMO, PPO, and so on).

INTEGRATED DELIVERY SYSTEMS (IDS). A system of organizations, practice groups, and professionals that assume the responsibility for the delivery of a complete spectrum of health services including primary care, hospital care and other related health services.

INTEGRATED PROVIDER NETWORK (IPN) . A network made up of primary and secondary hospitals and providers within an individual city or other specific geographic area.

INTERNET . A loosely configured system that connects millions of computers. It is the successor to an experimental network built by the US Department of Defence in the 1960s.

INTRANET .  A small internet which is usually set up within one organization allowing small groups of people to have access to specific information.

MANAGED CARE . Any system of health service payment or delivery arrangements in which the health plan or provider tries to promote quality, reduce variation of practice, and manage utilization of services. The arrangement usually involves a defined delivery system of providers who have some form of contractual relationship with the plan. The goal of this model of health care delivery is to reduce health care costs.

MANAGED CARE ORGANIZATION (MCO) . Any type of organization, such as an HMO, PPO, EPO, IDS and so on, which provides managed care.

MANAGEMENT SERVICES ORGANIZATION (MSO) . A company that offers administrative services (utilization review, case management, claims processing, customer service, credentialing) to MCOs (Managed Care Organizations) and physician groups. The MSO may own the facilities and employ the non-physician staff, while the physician group provides the patients for the hospital.
 
MEDICAID. The federal/state health insurance system, which provides coverage for those unable to afford private health insurance, based upon income criteria.

MEDICARE . The federal/state health insurance for qualified disabled persons and people over 65 years of age. Medicare Part A covers hospitalization and is mandatory. Medicare Part B covers outpatient services and is optional.

MEDICARE PROVIDER ANALYSIS AND REVIEW (Med-PAR). A Health Care Financing Administration data file that contains clinical characteristics, such as diagnoses and procedures, and charge data for every hospital inpatient bill submitted to Medicare for payment.

MEDIGAP. Insurance provided by carriers to supplement the monies reimbursed by Medicare for medical services so that the Medicare beneficiary is not at risk for the difference between Medicare's reimbursement and the physician's fee.

NATIONAL COMMITTEE OF QUALITY ASSURANCE (NCQA). An independent non-profit organization that has worked with consumers, health care purchasers, state regulators and the managed care industry in developing standards that evaluate the structure and function of medical and quality management systems in managed care organizations. NCQA's Standards for Accreditation of Managed Care Organizations evaluates a managed care plan's performance in the areas of quality management and improvement, utilization management credentialing, members' rights and responsibilities, preventive health services, and medical record-keeping.

OFFICE OF HEALTH MAINTENANCE ORGANIZATIONS (OHMO). Housed within the US Department of Health and Human Services, this office is responsible for directing the federal HMO program. Also known as the "Central Office" in HMO circles.

OPEN ACCESS. This health plan model allows members to see a participating specialist without a referral or authorization. This type of arrangement is most commonly found in IPA-model (Individual Practice Association) HMOs.

OUTLIERS . Cases with extremely long periods of stay (day outliers) or extraordinarily high costs (cost outliers) when compared to other cases in the same diagnosis-related group

PEER REVIEW. This is an evaluation of a physician's performance by his/her peers who are usually from within the same geographic area and medical specialty.

PER MONTH PER MONTH (PMPM). Refers to the revenue generated by each plan's member for one month.

PHYSICIAN HOSPITAL ORGANIZATION (PHO). This model is the basic component of an Integrated Delivery System. In its simplest form, it is an organization that collectively commits both physicians and the hospital to deliver care and share in the financial risk. It sometimes uses existing IPA (Independent Physician Association) structures or individual physician contracting.

PHYSICIAN PAYMENT REVIEW COMMISSION (PPRC). Congress created this Commission in 1986 to recommend changes in current reimbursement procedures and policies for physicians receiving payments from Medicare.

POINT-OF-SERVICE (POS). Also known as an "open-ended" HMO, the POS model provides freedom of choice at higher co-payments and deductibles. Referrals are required for maximum benefits. Contracted or networked physicians are paid on a pre-paid, contractual basis; non-network providers are paid on a fee-for-service basis.

PREFERRED PROVIDER ORGANIZATION (PPO). This is a network of providers, which allows the enrollee the option of pursuing care outside of the network (for higher fees, deductibles and co-payments). The PPOs are readily accountable to purchasers for cost, quality, access, and services associated with their networks. Authorizations are required for hospitalization, surgery, and some high cost procedures. All physicians are paid on a fee-for-service basis. Physicians who belong to the network are paid reduced fees in exchange for their preferred status. Preferred provider organizations are marketed directly to employers as well as to insurance companies and TPAs, who then market the network to their employer clients.

PRIMARY CARE CASE MANAGEMENT (PCCM). A Medicaid managed care program in which an eligible person may use services only with authorization from his/her assigned primary care provider. The provider must locate, coordinate, and monitor all services for the patient.

PRIMARY CARE NETWORK. A group of primary care physicians who have linked together in some fashion to share the risk of providing care to their patients (who are members of a given health plan).

PRIMARY CARE PROVIDER OR PHYSICIAN (PCP). Sometimes referred to as "the gatekeeper," the Primary Care Physician is usually the first physician to see a patient. PCPs treat routine injuries and illnesses and focus on preventative care. If necessary, the PCP refers the patient to a specialist (secondary care) or admits them to a hospital. The American Academy of Family Practice defines primary care as "care from doctors trained to handle health concerns not limited by problem origin, organ systems, gender or diagnosis."

PROFESSIONAL REVIEW ORGANIZATION (PRO). An organization that reviews the records and activities of a health care group, institution, or provider. Physicians generally review physicians; a group of administrators, physicians, and allied health care personnel review a hospital; and so on. A PRO may be independent or sponsored by a state.

PROFILING. This is an analytical tool that uses epidemiologic methods to compare practice patterns of providers on the dimensions of cost, service use, or quality of care. The provider's pattern of practice is expressed as a rate, aggregated over time, for a defined population of patients.

PROVIDER . Any supplier of health care services such as a physician, pharmacist, case management firm, and so on.

QUALITY ASSURANCE (QA) . The Quality Assurance Program is an internal peer review process that monitors the quality of care delivered by physicians, medical institutions, or any health care vendor in order to insure that a health plan's enrollees are receiving the best care possible.

RISK. The chance or possibility that the revenues of the insurer will not be enough to cover expenditures incurred in the delivery of contractual services. HMOs often employ sharing of risk as a utilization control mechanism.
 
RISK POOL .  A specific patient population and geographic location used to determine revenue and expenses, and to define expected claim liabilities. Risk Pools are more common in primary care than with specialists.

SERVICE AREA. The territory within specific boundaries that an HMO designates for providing service to members.

SKILLED NURSING FACILITY (SNF). A nursing care facility, typically an institution for convalescence or a nursing home, which participates in the Medicaid and Medicare program which meets specified requirements for service, staffing and safety. A Skilled Nursing Facility will provide a high level of specialized care for long-term or acute illness and is considered an alternative to extended hospital stays or difficult home care.

STOP-LOSS . A plan or provider insures with a third party against a risk (such as a catastrophic claim) that the plan cannot cover. Stop-loss limits the exposure for both the insurer and the purchaser.

TELEMEDICINE. Off-site physicians providing consulting services to health care professionals on the scene by means of closed circuit television; or, the ability of healthcare providers to examine patients remotely by means of a computer.

TERTIARY CARE. Services provided by highly specialized providers such as neurosurgeons, thoracic surgeons, intensive care units, and so on, or, at a highly specialized medical center. Such care usually involves the utilization of expensive technology resources.

THIRD-PARTY PAYMENT. The term refers to the monetary reimbursement for medical services from someone other than the member or the member's insurance plan.

TOTAL QUALITY MANAGEMENT (TQM).  Also known as Continuous Quality Improvement (CQI), it refers to a philosophy of management in which, through a continuous loop of monitoring, evaluating, and correcting, businesses increase and maintain the highest quality output possible. Originally developed by W. Edward Deming, this approach to management makes use of input and feedback from staff and patients in order to understand and improve on processes in health care.

UNCERTAINTY. Uncertainty can result when you have incomplete knowledge of pathophysiology of disease and/or therapeutic mechanisms, if diagnostic tests are imperfect, and/or if the results of therapy are uncertain.

UTILIZATION REVIEW (UR). A process performed by the health plan to evaluate the appropriateness, necessity, and quality of services prescribed by a particular physician-provider. The review can be performed on a prospective, concurrent, or retrospective basis and helps to determine if a physician will obtain any of the money in the withhold fund at the end of the health plan's fiscal year.

UTILIZATION REVIEW ACCREDITATION COMMISSION (URAC). A Washington-based, nonprofit corporation that was formed in 1990 to improve the quality of utilization review in the health care industry by providing a method of evaluation and accreditation of utilization review programs.

WELLNESS . Wellness is considered to be the result of four key factors over which an individual has some control: human biology, environment, health care organization (system), and lifestyle. Wellness is a way of life which equips the individual to realize the full potential of his/her capabilities and to overcome and compensate for weaknesses; a lifestyle which recognizes the importance of nutrition, physical fitness, stress reduction, and self-responsibility.

WITHHOLD FUND . The portion of the monthly capitation payent to
physicians withheld by the MCO until the end of the year in order to create an incentive to control costs. If the provider (hospital services, specialty referrals, laboratory and imaging usage, and so on) meets the costs control targets, the withhold fund is paid to the provider. It costs exceed target levels, the provider loses the fund.

Please contact Dr. Mark T. O'Connell cmoconnell@miami.edu or Dr. Eugene F. Provenzo, Jr. provenzo@miami.eduwith questions or comments. ©Copyright 2000 University of Miami, School of Medicine.  All rights reserved