Glossary
Benchmarking Comparing the performance of one organization
or individual to a group of peers or competitors. Requires measuring the
performance of a number of organizations or individuals on set dimensions.
Often used on an ongoing basis to set performance standards and targets
and then work towards reaching those goals.
Capitation The per capita payment for providing a specific
menu of health services to a defined population over a set period of time.
Fee-for-service/prepaid medical groups usually receive, in advance, a negotiated
monthly payment from the HMO. This payment is the same regardless of the
amount of service rendered by the group. Often paid on a per member per
month basis (PMPM).
Center of Excellence Created when a hospital develops expertise
in the provision of certain healthcare services and becomes uniquely qualified
to provide one or more of those tertiary specialty services. Payors may
build centers of excellence networks for high cost procedures by contracting
for various specialty services with different providers.
Charges The amount that a provider bills the payor to be
paid in exchange for the provider delivering healthcare services.
Copayment The portion of a claim or medical expense that a
healthcare plan member must pay out of his/her pocket. Usually a fixed
amount in many HMOs.
Covered Lives Refers to the number of members in a managed
care plan (e.g. US Healthcare has 300,000 members or 300,000 covered lives)
Credentialing (clinical) Refers to obtaining and reviewing
the documentation of professional providers. Such documentation includes
licensure, certifications, insurance, evidence of malpractice insurance,
malpractice history, and so forth. In the context of managed care refer
to clinical outcomes comparisons between providers to determine high quality
providers.
Credentialing (economic/financial) In the context of managed
care, refers to the economic/financial comparison of providers (hospitals
and surgeons) to determine low cost providers. Also referred to as Economic
Profiling and can be a determining factor for providers obtaining managed
care contracts.
Days per Thousand A standard unit of measurement of utilization.
Refers to an annualized use of the hospital or other institutional care.
It is the number of hospital days that are used in a year for each thousand
covered lives.
Deductible The portion of a member's healthcare expenses that
must be paid out of his/her pocket before any insurance coverage is available.
More common in insurance plans and PPOs than in HMOs. May be required
only for use of the out-of-network portion of a POS plan.
Diagnostic Related Group (DRG) A statistical system of classifying
any inpatient stay into groups for the purposes of payment. DRGs may be
primary or secondary, and an outlier classification also exists. This is
the form of reimbursement HCFA uses to pay hospitals for Medicare recipients.
Also used by private health plans for contracting and reimbursement purposes,
and by a few states for all payors.
Discount The amount off of charges billed by a provider that
the payor uses to calculate reimbursement for the provider. Contractual
agreement pre-determined by the payor and provider.
Exclusive Provider Organization (EPO) A provider network similar
to a PPO wherein a patient must pay the entire cost of any care obtained
outside the EPO network of providers. EPO providers typically are paid
for services rendered instead of by capitation.
Favored Nations Discount Provider and payor agree in their
contract that the provider will automatically give the payor the best discount
it provides anyone else.
Fee-For-Service Refers to a group that charges the patient
according to a fee schedule set for each service and/or procedure to be
provided and the patient's total bill will vary by the number of services/procedures
actually received. The patient is billed at the time of service.
Formulary A list of drugs or supplies that a physician is
required to prescribe, unless there is a valid medical reason to use a nonformulary
drug or supply.
Gatekeeper A primary care physician in an HMO who makes referrals.
His/her function is to reduce health care utilization and costs.
Global or Package Pricing Fixed, competitive rates negotiated
and paid by the health plan for the provision of a pre-defined set of services.
Usually used to reimburse for a type of procedure and all services related
to that procedure, regardless of the amount of resources used while providing
that care.
Group Contract An agreement between the HMO and a subscribing
group specifying rates, performance covenants, relationships among parties,
schedule of benefits, and other conditions. The term is generally limited
to a 12-month period and may be renewed after that.
Group Model HMO There are two kinds of group model HMOs.
The first type of group model is called the closed panel, in which medical
services are delivered in the HMO-owned health center or satellite clinic
by physicians who belong to a specially formed but legally separate medical
group that only serves the HMO. The group is paid a negotiated monthly
capitation fee by the HMO, and the physicians in turn are salaried and generally
prohibited from carrying on any fee-for-service practice. In the second
type of group model, the HMO contracts with an existing, independent group
of physicians to deliver medical care. Usually, an existing multispecialty
group practice adds a prepaid component to its fee-for-service mode and
affiliates with or forms an HMO. Medical services are delivered at the
group's clinic facilities (both to fee-for-service patients and to prepaid
HMO members). The group may contract with more than one HMO.
HCFA Health Care Financing Administration, part of the U.S.
Department of Health and Human Services. In addition to its many other
functions, HCFA is the contracting agency for HMOs who seek direct contractor/provider
status for provision of the Medicare benefit package.
Health Maintenance Organization (HMO) An organization of healthcare
personnel and facilities that provides a comprehensive range of health services
to an enrolled population for a fixed sum of money paid in advance for a
specified period of time. These health services include a wide variety
of medical treatments and consults, inpatient and outpatient hospitalization,
home health service, ambulance service, and sometimes dental and pharmacy
services. The HMO may be organized as a group model, an individual practice
association (IPA), a network model or a staff model.
Indemnity Carrier Usually an insurance company or benevolent
association that offers selected coverages within a framework of fee schedules,
limitations, and exclusions as negotiated with subscriber groups. The insured
are reimbursed after carriers review and process filed claims. Aetna, Connecticut
General, and Prudential are examples of indemnity carriers.
Individual Practice Association (IPA) Under this structure
physicians practicing in their own offices, participate in a prepaid healthcare
plan. The physicians charge agreed-upon rates to enrolled patients and
bill the IPA on a fee-for-service basis.
Integrated Network (Integrated System) A strategic alliance
between groups of healthcare providers and services with the intent of creating
a single healthcare system which blends the organization, delivery, and
management of healthcare to patients. The ultimate goal is to coordinate
and provide quality healthcare in an efficient and cost-effective manner.
Frequently formed in response to the pressures of managed care.
Managed Care A system of healthcare delivery that attempts
to manage the cost of healthcare, the quality of healthcare, and access
to that care. Managed healthcare is actually a range of systems, varying
from so-called managed indemnity, through PPOs, POS, open panel HMOs, and
closed panel HMOs.
Managed Care Organization (MCO) A generic term for a managed
care plan. The term encompasses plans that do not conform exactly to the
strict definition of an HMO, for example it may also apply to a PPO.
Market Area The targeted geographic area or areas in which
the principle market potential is located; it may be the same as an HMO's
defined service area, but not necessarily. Frequently, market areas overlap
service areas.
Market Share That part of the market potential that an HMO
or a fee-for-service/prepaid medical group has captured; usually market
share is expressed as a percentage of the market potential.
Member Month A unit of volume measurement. A member month
is equal to one member enrolled in an HMO for one month, whether or not
the member actually receives any services during the period. Two member
months are equal to one member enrolled for two months or two members enrolled
for one month. Many internal operating statistics for HMOs are expressed
in terms of member months.
Mixed Model A managed care plan that combines more than one
type of delivery system, traditionally used to describe an HMO with both
closed and open panels.
NCQA National Committee for Quality Assurance. Not-for-profit
organization that perform accreditation reviews on HMOs and other managed
care plans, focusing on quality issues.
Network Model Health plan contracts with multiple physician groups
to deliver healthcare services to its members.
Open-Ended HMO Enrollees are allowed to receive services outside
the HMO provider network without referral authorization, but are usually
required to pay an additional copay and/or deductible.
Outcomes Measurement Measurement of all of the results of
treatment. Includes the total cost of the episode of care, the immediate
health improvement of the patient and long-term health status of the patient.
Payors (Payers) Entities which pay for the cost of care provided
to patients. (e.g. employers, insurers)
Peer Review Evaluation of a physician's performance by other
physicians, usually within the same geographic area and medical specialty.
Penetration The percentage of business that an HMO is able
to capture in a particular subscriber group or in the market area as a whole.
For example, signing up 10 enrollees or members out of 100 eligibles yields
a 10 percent penetration.
Per Case Reimbursement See Diagnostic Related Group.
Per Diem Reimbursement Reimbursement, usually to a hospital,
based on a set rate per day. Can be varied by services (e.g.. medical/surgical,
obstetrics, mental health, and intensive care) or can be uniform regardless
of intensity of services.
Physician/Hospital Organization (PHO) A legal or informal
organization that is formed between hospitals and physicians. By bonding
the hospital and attending medical staff, it permits for cooperative activity
while allowing a level of independence to the participating parties. This
organizational structure is usually formed to pursue managed care contracts.
Point-of-Service (POS) A health plan where members do not
have to choose how to receive services until they need them. This product
may also be called an open-ended HMO and offers a transition product incorporating
features of both HMOs and PPOs. Members are enrolled in an HMO but have
the option to go outside the network for an additional cost.
Practice Guidelines (Critical Pathways) Clinical specifications
for physicians and other care-givers to follow when treating a particular
medical situation and coordinating the patient's care among multidisciplinary
teams. Helps hospital monitor and measure its staff and physician activities.
Preferred Provider Organization (PPO) A health plan that contracts
with independent providers at a discount for healthcare services. In a
PPO the patient may go to the physician of his/her choice, even if that
physician does not participate in the PPO, but the patient receives care
at a lower benefit level.
Providers Those institutions and individuals who are licensed
to provide health care services (for example, hospitals, skilled nursing
facilities, physicians, pharmacists, etc.). Providers in a defined service
area are principally owned by, affiliated with, employed by, or under contract
to an HMO.
Quality Assurance Program An internal peer review process that
audits the quality of care delivered. The program should include an educational
mechanism to identify and prevent discrepancies in care.
Risk The chance or possibility of loss. For example, physicians
may be held at risk if hospitalization rates exceed agreed-upon thresholds.
The sharing of risk is often employed as a utilization control mechanism
within the HMO setting. Risk is also defined in insurance terms as the
probability of loss associated with a given population.
Risk sharing Providers and payers share the risk for the cost
of health services provided. Prospective payment methodologies, such as
DRGs or Per Diems are examples of risk sharing.
Saturation A condition that occurs when an HMO achieves its
maximum penetration either in a subscriber group or in the marketplace itself.
When this condition becomes evident, an HMO's first goal is to retain its
saturation level while assessing how to make further inroads for an increase
in market share or how to expand its service or market area.
Self-insured or Self-funded Plan A health plan where the risk
for medical cost is assumed by the company rather than an insurance company
or managed care plan. Under ERISA, self-funded plans are exempt from state
laws and regulations such as premium taxes and mandatory benefits. Self-funded
plans often contract with insurance companies or third-party administrators
to administer the benefits.
Staff Model The staff model HMO consists of a group of physicians
who are either: salaried employees of a specially formed professional group
practice which is an integral part of the HMO plan or salaried employees
of the HMO. Medical services in staff models are delivered at HMO-owned
health centers, and generally, only to HMO members. The physicians in either
form of staff model are usually limited in their fee-for-service activities.
Supplemental Health Services The benefits an HMO offers that
exceed their basic health service requirements, as defined in Subpart A,
110.101 (c) and 110.102 of the Federal HMO Regulations.
Third Party Administrator (TPA) An administrative organization
other than the employee benefit plan or healthcare provider that collects
premiums, pays claims and/or provides administrative services.
Total Quality Management (TQM) Also called continuous quality
improvement and uses the concepts originally developed by W. Edward Deming
to study systems and processes at medical groups to identify and improve
sources of error, waste or redundancy. Uses input and feedback from all
staff and patients to understand and improve on problems in current procedures.
Upcoding When a provider bills for a procedure that reimburses
better than the service actually performed. For example, an office visit
normally paid at $40 is coded and billed by the provider as one that is
paid at $50.
Utilization The frequency with which a benefit is used, for
example, 3,200 doctor's office visits per 1,000 HMO members per year. Utilization
experience multiplied by the average cost per unit of service delivered
equals capitated costs. Also, used to describe the amount of services and
resources consumed per hospital day.
Utilization Management or Review A process that measures use of
available resources (including professional staff, facilities, and services)
to determine medical necessity, cost effectiveness, and conformity to criteria
for optimal use.