Accreditation: A professional status given to a health care provider by an organization in exchange for meeting a specific set of standards.

Adjudication: Processing a claim through a series of edits to determine proper payment.

Adjusted Community Rating: The process of determining a group's premium rate in which an HMO adjusts the standard or pure community rate premium by adding or subtracting an amount that reflects the group's past claims experience.

Administrative Costs: The costs assumed by a managed care plan for administrative services such as claims processing , billing and overhead costs.

Adverse Selection: A particular health plan, whether indemnity or managed care, is selected against by the enrollee, and thus an inequitable proportion of enrollees requiring more medical services are found in that plan. Example: Low en4rollee out-of-pocket costs might lure those individuals requiring more health services into an HMO rather than an indemnity plan because the former does not have a deductible. Therefore, the HMO would have a greater proportion of less-healthy enrollees, thereby driving up costs and increasing financial risk.

Allowable Charge: The maximum fee that a third party will reimburse a provider for a given service.

Allowable Costs: Items or elements of an institution's costs that are reimburseable under a payment formula. Allowable costs may exclude, for example, uncovered services, luxury accommodations, costs that are not reasonable and expenditures that are unnecessary.

Ambulatory Care: Outpatient medical services.

Ancillary Care: Additional health care services performed, such as lab work and x-rays.

ASO (Administrative Services Only): A self insured plan contracts with an insurance company for services such as claims processing and stop-loss coverage.

Authorization: As it applies to managed care, authorization is the approval of care, such as hospitalization. Pre-authorization may be required before admission takes place or care is given by non-HMO providers.

Bed Days: A measurement used by managed care plans to indicate the total number of days of hospital care provided to a member of a health plan.

Board Certification: A physician who is board certified has pursued advanced training in his or her specialty and has passed a qualifying examinations; a physician who is board eligible has received the training but has not taken or passed the exam.

Cafeteria Plan: A corporate benefits plan under which employees are permitted to choose among two or more benefits that consist of cash and certain qualified benefits. Cafeteria plans are also called flexible benefit plans or flex plans.

Capitation: A payment structure in which an HMO pre-pays a provider a flat amount for each member's medical care, usually on a monthly basis.

Carve Out: To separately purchase services that are typically part of a managed care package. For example, an HMO may “carve out” the vision care benefit and select a specialized vendor to supply these services on a stand-alone basis.

Case Management: The process by which patients with extensive, complex or serious medical conditions can receive planned treatment that is both cost effective and of high quality. Early intervention and a systematic coordination of care among multiple providers are elements of this approach.

Coinsurance: A term used to describe the enrollee's share of cost. The insurer pays a fixed percentage of the enrollee's medical expenses, and the enrollee pays the balance.

Community Rating: The process of determining a group's premium rate in which the HMO sets premium rates based on the average cost of providing care to the HMO's enrollees. This rating method is required of federally qualified HMOs.

Copayment: A flat, set amount-for example, $5 or $10 - must be paid at the time of service for certain medical services. This is the patient's out-of-pocket expense for health care treatment.

CPT (Current Procedural Terminology): A set of five-digit codes that apply to medical services delivered.

Credentialing: The process of reviewing a provider's qualifications to be sure they meet the criteria established by a managed care organization.

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

Direct Contracting: Individual, self-insured employers or business coalitions contract directly with providers for health care services with no HMO or PPO intermediary. This enables employers to include in the plans the specific services preferred by their employees.

Discounted Fee-For-Service: A payment structure in which physicians are paid a certain percentage of their normal fees.

Disease Management: A philosophy toward the treatment of the patient with an illness (usually chronic in nature) that seeks to prevent recurrence of symptoms, maintain high quality of life, and prevent future need for medical resources by using an integrated, comprehensive approach to health care. Pharmaceutical care, continuous quality improvement, practice guidelines and case management all play key roles in this effort, which (in theory) will result in decreased health care costs as well.

EPO (Exclusive Provider Organization): A managed care organization usually made up of a group of physicians, one or more hospitals and other providers who contract with an insurer, employer or other sponsoring group to provide discounted medical services to enrollees. It is similar to a PPO in that it allows the patient to go out of network for care; however, the patients will not be reimbursed if they do so.

Experience Rating: The rating method used by most traditional indemnity insurers, which uses the group claims experience to establish premium rates.

Federal Employees Health Benefits Program (FEHBP): The health benefits program for federal employees that is administered through the U.S. Office of Personnel Management.

Federally Qualified: An accreditation for HMO's that can be obtained from the Office of Pre-paid Health Care (OPHC). OPHC ensures that an HMO meets certain requirements by conducting an extensive review of its operations and financial strength.

Fee-for-Service: A payment structure in which the insurer will either reimburse the group or pay the provider directly for each medical expense incurred by the member and covered by the group contract.

Formulary: A list containing the names of certain prescription drugs that an HMO covers when dispensed to its members who have drug coverage.

Fully Insured Plan: A group health care plan funding arrangement in which the group policy holder makes monthly premium payments to the organization that provides the health coverage, and the insurer bears the responsibility of guaranteeing claims payments.

Gatekeeper: A term used to describe one role of a primary care physician in an HO or other managed care network that requires its members to have their care provided, arranged or authorized by member's primary care physicians.

Global Capitation: Providers are paid a single per-member-per month rate to cover all care (professional, facilities and technical services) for a population of people.

Global Case Rates: Providers are paid a lump sum upon referral to cover all care (professional, facilities and technical services) specific to a defined episode.

Group Model HMO: This type of closed-panel HMO generally is made up of one or more physician group practices that are not owned by the HMO but operate as independent partnerships or professional corporations. Instead of employing the doctors and paying them salaries, the HMO contracts with the group practice to provide or arrange covered services for each HMO member who is a patient of the group.

Group Practice Without Walls: A legal entity formed by a network of physicians who maintain their individual practice locations. The Group Practice Without Walls acquires the assets of the practices and provides administrative services.

HEDIS (Health Plan Employer Data and Information Set): The NCQA's standardized set of performance measures for HMOs.

HMO (Health Maintenance Organization): A health care delivery system that provides comprehensive services for subscribing members in a particular geographic area. Most HMO care is provided through a managed network made up of doctors, hospitals and other medical professionals selected by the HMO. HMO enrollees are required to obtain care from this network of providers in order for their care to be covered, except incases of emergency. All the care that members may need is paid for by the single monthly fee, plus nominal copayments. Generally, there are five types of HMOs: Staff Model, Group Model, IPA, Network Model and Mixed Model.

Incurred But Not reported (IBNR): These are medical expenses that the authorization system has not captured and for which claims have not yet his the door. Unexpected IBNRs have torpedoed more managed care plans than any other cause.

IDS (integrated Delivery System): A network of hospitals, physicians and other medical services, along with an HMO or insurance plan, formed to cost-effectively provide a population with a full “continuum of care” for prevention through check-ups, tests, surgery, rehabilitation, long-term and home care-and is accountable for costs, quality of care and customer satisfaction.

Indemnity Insurance: Also known as traditional health insurance, it pays a certain percentage of the charges billed by the provider, and the patient is responsible for the balance.

IPA (Independent Practice Association): A confederation of physicians and other providers assembled for the purpose of contracting with payers. Participating providers accept the fee schedules negotiated by the IPA, but typically may continue to see patients covered by other plans.

IPA Model HMO: A type of open-panel HMO that typically includes large numbers of individual private practice physicians. Under this structure, physicians practice in their own offices.

Length of Stay: The number of consecutive days a patient is hospitalized.

Managed Care: The integration of both the financing and delivery of health care within a system that seeks to manage the accessibility, cost and quality of that care.

Mandated Benefits: State legislatures have passed statutes requiring any health plans being offered in the state to include certain treatments for coverage. These treatments may include chiropractic care, mental and nervous disorder coverage, routine mammograms and organ transplants.

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

Medical Loss Ratio: The difference between premiums collected and claims paid out.

MSO (Management Services Organization): often owned by hospitals, MSOs contract with physicians (individually or in groups) to provide administrative and practice-management services.

Mixed Model HMO: A type of HMO that combines certain characteristics of two or more HMO models.

NCQA (National Committee for Quality Assurance): An independent, nonprofit organization that assesses and reports on MO quality.

Network Model HMO: A type of HMO that contracts with a number of IPAs an/or medical groups to form a physician network. This allows an HMO to market its services in a broader geographic area.

Open Access: Open access arrangements allow members to see participating providers, usually specialist, without referral from the health plan's gatekeeper. These types of arrangement are most often found in IPA model HMOs.

Outcomes Measurement: This process measures the results of specific medical treatments in an effort to pinpoint a pattern and develop reliable practice patterns for providers to follow that keep care quality high, while delivering cost-effective medicine.

PCP (Primary Care Physician): A physician who serves as a group member's personal physician and first contact in a managed care system. PCPs include family/general practitioners, internists, pediatricians and OB/GYNs.

PHO (Physician Hospital Organization): An organizational entity that is formed between hospitals and physicians that allows for cooperative activity, while allowing for a level of independence to the participating parties. The PHO functions as a contracting representative in negotiations with HMOs and other MCOs.

PO (Physician Organization): The PO is a managed care contracting entity owned by and composed exclusively of physicians. The PO tends to be more tightly controlled in terms of members and adherence to treatment protocols than an IPA. POS typically share information systems, claims-processing procedures, financial data, medical records and other technical support functions.

POS (Point of Service) Plan: A type of managed care plan that allows members to choose whether to seek medical care within the plan's network or seek medical care out of network at the point of service (i.e., at the time services are rendered).

PPM (Physician Practice Management) Firm: A firm that purchases physicians' practices in exchange for a percentage of the gross receivables. The PPM leases the office back to the physician or employs the physician on a salaried basis. The PPM then contracts with area MCOs.

PPO (Preferred Provider Organization): A select, approved panel of physicians, hospitals and other providers who agree to accept a discounted fee schedule for patients and to follow utilization review and preauthorization protocols for certain treatments.

PSN (Provider Sponsored Network): These range from loose alliances between physicians to legal entities formed between hospitals and physicians for the purposes of managed care contracting.

PSO (Provider Sponsored Organization): A term used in Medicare reform legislation to define a providers sponsored health plan hat would be licensed to provide coverage of the Medicare benefits package.

Providers: Institutions and individuals licensed to provide health care services, for example, hospitals, physicians, pharmacists, etc.

Resource-Based Relative Value Scale (RBRVS): This is a relative scale developed for the Health Car Financing Administration for use by Medicare. The RBRVS assigns relative values to each CPT code for services on the basis of the resources related to the procedure rather than simply on the basis of historical trends. The practical effect has been to lower reimbursement for procedural services (e.g., cardiac surgery) and to raise reimbursement for cognitive services (e.g., office visits).

Self-Funded or Self-Insured Plan: A group health care plan funding arrangement in which the organization sponsoring the plan takes complete financial responsibility for making all claims payments and paying all related expenses.

Staff-Model HMO: A type of closed-panel HMO in which the physicians are salaried employees of the HMO. Medical services in staff models are delivered at HMO-owned health centers.

Stop-Loss Insurance: Insurance coverage that enables sponsors of self-insured group health care plans to place a dollar limit on their liability for paying claims.

Tertiary Care: Tertiary care is administered at a highly specialized medical center. It is associated with the utilization of high-cost technology resources.

Third Party Payer: A public or private organization that pays for or underwrites coverage for health care expenses.

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

Utilization: The frequency with which a benefit is used.

Utilization Review: A utilization management method intended to reduce the occurrence of unnecessary or inappropriate hospitalizations of patients.

Virtual Integration: A pattern of strategic alliances designed to win the cost advantages of affiliation without the overhead disadvantages of ownership.

Withhold: When a percentage of payment to the provider is held back by the HMO or PSN until the cost of referral or hospital services has been determined. Physicians exceeding the amount determined as appropriate lose the amount held back.