A

Accountable Health Plans (AHP): Under the proposed American Health Security Act of 1993, these would be the insuring delivery systems and would offer a standardized federally defined benefit plan set by the National Health Board.

Adjusted Average Per Capita Cost (AAPCC): An estimate developed by HCFA of the cost of care for Medicare beneficiaries in a given area.

Adjusted Community Rate (ACR): The premium the managed care organization would charge to provided the Medicare-covered benefits to a group account adjusted for the expected increased utilization by Medicare beneficiaries.

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

Admissions/1000: The number of hospital admissions per thousand plan enrollees.

Adverse Selection: Describes a plan with a disproportionate percentage of enrollees who are more likely to file claims and use services because of existing higher health risk conditions.

Age/Sex Rating: A method of structuring capitation payments based on enrollee/membership age and sex.

Alliance: As originally described in the proposed American Health Security Act of 1993, one or more regional health alliances would be established in each state to provide health care for all residents in that geographic region. Current usage refers to smaller alliances with voluntary participation.

Alternative Delivery System (ADS): A method of providing health care benefits that departs from traditional indemnity methods. An HMO, for example, can be said to be an alternate delivery system.

Ambulatory Patient Groupings (APGs): Similar to DRGs, assigns ambulatory patients into case types to provide a pricing mechanism for outpatient services.

Anniversary: The beginning of a subscriber group's benefit year. A subscriber group with a year coinciding with the calendar year would be said to have a January 1st anniversary.

Any Willing Provider (AWP): State laws requiring a managed care network to accept any physician or non-physician provider who meets the network's usual selection criteria, is willing to be reimbursed at the managed care organization's rates and agrees to the managed care organization's utilization guidelines.

Attrition Rate: Disenrollment expressed as a percentage of total membership. An HMO with 50,000 members experiencing a two percent monthly attrition rate would need to gain 1,000 members per month in order to retain its 50,000-member level.

Average Length of Stay (ALOS): Refers to the number of hospital days per admissions (total days/total admissions). May also be called length of stay (LOS) and estimated length of stay (ELOS).

Agency for Health Care Policy (AHCPR): Established to recommend practice guidelines, standards, performance measures and medical review criteria for clinical treatments of importance to Medicare.

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B

Basic Health Services: Benefits that all federally qualified HMOs must offer; defined under Subpart A, 1 10.102 of the Federal HMO Regulations.

Benefit Package: A collection of specific services or benefits that the HMO is obligated to provide under terms of its contracts with subscriber groups or individuals.

Benefit Year: A 12-month period that a group uses to administer its employee fringe benefits program. A majority of subscribers use a January through December benefit year. A benefit year, however may not match the fiscal year used by a group.

Break-Even Point: The HMO membership level at which total revenues and total costs are equal and therefore produces neither a net gain nor loss from operations.

Bundled Billing: The setting of an inclusive package price or global fee for all the medical services required for a specific procedure (usually includes both professional and institutional services), for example, maternity care or coronary artery bypass graft.

Business Coalition: Several employers in a community form a cooperative to purchase health care at a lower cost for their employees.

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C

Capitation: The per capita payment for providing a specific menu of health services to a defined population over a set period of time. The provider usually receives, in advance, a negotiated monthly payment from the HMO. This payment is the same regardless of the amount of service rendered by the group.

Captured Care: Percentage of a practice's care provided under managed care contracts and capitation.

Care Management Committee (CMC): Committee designed to monitor Quality Improvement, Cost Containment, Utilization Review, Clinical Pathways and Primary Care Coordination for clients.

Carve-Out: Services separately designed and contracted to an exclusive, independent provider by a managed care plan. For example, psychiatry is often a carved-out service.

Case Management: Coordination of patient care to insure appropriate care and to reduce costs of providing service.

Cash Indemnity Benefits: Sums that are paid to insure for covered services and that require submission of a filed claim. Insureds may assign such payments directly to providers of services (hospitals, physicians, etc.). Payments may or may not fully reimburse insureds for costs incurred.

Catchment Area: The geographic area from which a managed care organization draws its patients.

Census: A statistical listing of enrollees by age, sex, number of dependents, etc.

Cherry Picking: Refers to insurance plan practice of enrolling only healthy individuals while not accepting individuals with existing health problems.

Choice Plus: A POS plan offered as a health care option to employees of Lehigh Valley Health Network. This POS plan capitates the primary care physician (PCP).

Clinic Without Walls: A business entity legally combining independent physicians or medical practices in order to create centralized management and decision-making structures and to share administrative, billing, and purchasing costs. The result is an organization with multiple sites. The physicians and medical practices retain their independence by maintaining their private offices and practice styles. Assets are not merged.

Clinical Service Organization: Created by academic medical centers to integrate the activities of the medical school, faculty practice plan and hospital to negotiate with managed care plans.

Closed Panel: 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. This term usually refers to group and staff HMO models.

Coinsurance: The portion of the cost for care received and for which an individual is financially responsible. Usually this is determined by a fixed percentage, as in major medical coverage. Often coinsurance applies after a specified deductible has been met.

Community Choice: POS plan designed by the Lehigh Valley Business Conference on Health Care and administered by Keystone Health Plan.

Community Rating: A method for determining health insurance premiums based on actual or anticipated costs in a specific geographic location as opposed to an experience rating that looks at individual characteristics of the insureds.

Complete Care Organization (CCO): Hospitals and providers working cooperatively to provide care within a community.

Composite Rate: A uniform premium applicable to all eligibles in a subscriber group regardless of number of claimed dependents. This rate is common among labor unions and large employer groups and usually does not require any contribution by the union member or employee.

Consortium Research on Indicators of System Performance (CRISP): This is a group of 23 integrated delivery systems using a common set of performance indicators.

Continuous Quality Improvement (CQI): See Total Quality Management (TQM).

Contract: An HMO agreement executed by a subscriber group (see group contract). The term may be used in place of subscriber when referring to penetration within a given subscriber group. Also used to designate an enrollee's coverage.

Contract Mix: The distribution of enrollees according to contracts classified by dependency categories, for example, the number or percentage of singles doubles or families. Contract mix is used to determine average contract size.

Conversion Privilege: This gives an individual insured under a group plan the right to convert from a group health policy to an individual policy in the event the individual policy in the event the individual leaves the group.

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D

Days per Thousand: Utilization measure of hospital days incurred annually for each thousand covered lives. Decapitation: Inadequate capitation.

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

Diagnosis Related Groups (DRGs): Classification system developed at Yale University using 383 major diagnostic categories based on the ICD-9 codes. This procedure assigns patients into case types. DRGs were originally designed to facilitate the utilization review process but they are also used to analyze patient case mix in hospitals and determine hospital reimbursement policy.

Direct Contracting: Individual employers or business coalitions contract directly with providers for healthcare services with no HMO/PPO intermediary. This enables the employer to include in the plan the specific services preferred by their employees and is usually done under ERISA guidelines.

Discounted Fee-For-Service: Physician’s services are provided as fee-for-service but at a negotiated rate less than his/her usual fee. Drug Formulary: List of medications covered by a plan and dispensed through participating pharmacies.

Disease Management: The systematic approach to identify, assess, educate and measure outcomes of patients with targeted chronic diseases, to promote self management and to control disabling conditions.

Dual Choice: A health benefit offered by an employment group permitting eligibles of the group permitting eligibles of the group a voluntary choice of health plans; usually the employer’s primary insurer and an HMO.

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E

Employer Mandate: State law requiring employers to pay a share of their employees’ health coverage. Encounter: One visit to a provider. If more than one evaluation or treatment takes place at that visit, it is still usually considered one encounter.

Emerging Healthcare Organizations (EHO): Hospitals, physicians and/or payers that are merging, integrating or affiliating in response to changes in the healthcare environment. Endorsement: Official change in the provisions of coverage issued by the insurer and attached to the policy or certificate.

Enrollment: The process of converting subscriber group eligibles into HMO members or the aggregate count of HMO enrollees as of a given time.

ERISA: The Employee Retirement Income Security Act was enacted in 1974 and sets federal requirements for pension and employee benefit plans to include employer health plans.

Exclusive Provider Organization (EPO): While similar to a PPO in that an EPO allows the patient to go outside the network for care, if he/she does so in an EPO, they are required to pay the entire cost of care. An EPO differs from an HMO in that EPO physicians do not receive capitation but instead are reimbursed only for actual services provided. (Fee-for-service)

Experience Rating: A method to determine an HMO premium structure based on the actual utilization of individual subscriber groups. This is not a permissible rating method under federal qualification requirements. Age, sex and utilization experience are the principal determinants in rate setting using this method. Outside the HMO setting, experience rating is the most prevalent method used.

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F

Faculty Practice Plan: A form of group practice organized around a medical school. The faculty associated with the plan provide patient care as part of the teaching and research responsibilities of the medical school. The practice plans is responsible for billing, collections, contract negotiation and redistribution of income.

Federal Qualification: The Health Maintenance Organization Act of 1973 encouraged the development of HMOs. Under this act, HMOs that voluntarily chose to comply with regulatory requirements more stringent than state law are eligible to receive federal grants and loans. The act also requires large employers to make HMO plans available to their employees if requested to do so by an HMO in the employer’s location.

Fee-For-Service (FFS): The patient is charged 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.

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G

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, and 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.

Group Practice Without Walls (GPWW): Fully integrated Medical Group practicing in multiple locations. Physicians are employees of the Medical Group, but practice in separate, independently run offices. Central office can offer array of administrative support services such as billing, collections and non-physician support. Physicians are charged a general corporate overhead plus any itemized administrative cost their practice might generate. Technically, all practice income goes to the Medical Group, however, each physician generally is paid on an individual productivity less charges assessed for services obtained from central office. GPWW is potentially a confederation, not a bona fide "group practice."

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H

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 health care 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 staff model.

Health Plan Employer Data and Information Set (HEDIS): A pilot project begun in 1991 to standardize health plan performance measures of quality, access, patient satisfaction, utilization and finance.

Health Plan Purchasing Cooperative (HPPC): May also be called a coalition. Under managed competition plans proposed during the 1993 healthcare reform discussions, it was suggested individuals would purchase coverage from Accountable Health Plans through the HPPC. Employers with over a specific number of employees (undetermined, perhaps 1000), would be required to offer coverage through the HPPC or the employer could lose their tax deduction on employee health benefits. It has been proposed these would be state chartered and there would only be one in a defined region.

Health Professions Shortage Areas (HPSA): Federal designation for areas with shortages of healthcare providers.

HMO Regulatory Agency: A state agency empowered to grant or rescind an HMO’s authority to transact business, to license its solicitors, and to regulate its affairs in the best interest of the consuming public. In nearly all states, these powers are vested in insurance departments. In California, the regulatory agency is the state’s corporations commission.

Hold Harmless: Managed care contracts often include a clause stating if either the HMO or physician is held liable for malpractice or corporate malfeasance, the other party is not.

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I

Incurred But Not Reported (IBNR): An amount of money to be accrued as an accounts payable for medical expenses incurred (or) for which the plan or provider is responsible but has not yet been billed. These are often referrals from a medical group to be paid under its capitation.

Indemnity Carrier: Usually an insurance company or benevolent association that offers selected overages within a framework of fee schedules, limitations, and exclusions as negotiated with subscriber groups. Insureds are reimbursed after carriers review and process filed claims. Aetna, Connecticut General, and Prudential are examples of indemnity carriers.

Individual Practice Association/Organizations (IPA/IPO): This is a network of licensed providers practicing in their own offices and participating in a managed care plan. The providers charge agreed-upon rates to enrolled patients and bill the IPA on a fee-for service basis.

Institute of Medicine (IOM): Chartered in 1970 by National Academy of Science to enlist distinguished members of appropriate professions in the examination of policy matters pertaining to the health of the public. Advisor to federal government on issues of medical care, research and education.

Integrated Delivery System (IDS): Strategic alliances between hospitals and physicians who assume shared risk though common ownership, governance, revenue/capital, planning and/or management through a number of vehicles (MSO, Foundation, PHO, joint venture, hospital division, etc.). Fueled by managed care, integrated systems shift the focus of care from hospitals to health care systems, from specialist to primary care emphasis.

Integrated Provider Network (IPN): Comprised of primary and secondary hospitals and providers within a city or other geographic area.

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J

Joint Commission for the Accreditation of Healthcare Organizations: This not-for-profit organization accredits hospitals, outpatient facilities and other institutions.

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K

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L

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M

Managed Care: Use of a planned and coordinated approach to providing healthcare with the goal of quality care at a lower cost. Usually emphasizes preventive care and often associated with an HMO.
Managed Care Organization (MCO): Refers to any type of organizational entity providing managed care such as an HMO, PPO, EPO, etc.

Managed Competition: A theory originally proposed in 1993 by the Jackson Hole Group that suggested the individual employee receive a fixed sum from his/her employer and the individual employee chooses the health plan they prefer. If the plan they choose costs more than the employer's fixed sum, the employee is responsible for the difference. The individual employee would have a tax incentive to select the lower priced options because they would only be able to deduct the amount of the lowest cost option. The proposal's proponents believe this would encourage individual consumers of healthcare to be more price conscious and they also believe this will cause healthcare insurers to hold down the cost of their plans to make them more competitive. Because insurance under this proposed system is not tied to the employer, employees would not lose coverage when they change jobs. Under this proposed system there is no provision to set premiums that appropriately cover the risk of an individual patient or specific patient population. Since originally introduced, the term has come to be used also for purchasers contracting with an integrated system to provide comprehensive services to their enrollees.

Managed Risk Medical Insurance Board (MRMIB): Established to administer the HIPC program, now administers other state programs which interface with commercial health plans such as AIM, Cal Kids and Healthy Families.

Management Services Organization (MSO): A legally separate entity that provides practice management services to a hospital, physicians or PHO. The MSO may own the facilities and employ the non-physician staff used to deliver care. An entity which provides managed care administrative support services such as contracting, QA, UM, credentialing, case management and other such services for health care providers and or provider networks

Maryland Quality Indicator Project (MQIP) - Inpatient and ambulatory performance outcome measurement program. Begun in 1985 in Maryland, it has grown to include almost 1000 hospitals in the US and internationally.

Market Area: The targeted geographic area or areas in which the principal 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. (See service area.)

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.

Maximum Allowable Charge: The amount set by an insurance company as the highest amount that can be charged for a particular medical service.

Medical Cost Ratio (MCR): Compares the cost of providing service to the amount paid for the service.

Medical Foundation: Tax exempt, non-profit corporation-organized affiliate or subsidiary of a hospital. Owns and operates practices, facilities, equipment and supplies. It also employees all non-physician personnel. Contracts with third party payors. Physician entity wholly owned by participating physicians ("MD Inc"), which employ all physicians and contracts with the Foundation to provide professional medical coverage for all practices.

Medical IRAs: A variation of the individual retirement account that would establish a tax deferred savings account for an individual to cover the cost of healthcare services.

Medical Loss Ratio: Cost of care provided as a percentage of premium revenues (or) the total cost of medical services as a percentage of premium revenues. Health plans often refer to the loss ratio as the cost of all healthcare versus the premium.

Medically Underserved Area (MUA) A federal designation performed by the Federal DSD which is part of the Bureau of Primary Health Care. MUAs are used primarily for the placement of community health centers, rural health clinics, and participation in federally funded programs. To determine if an area can be designated as an MUA, its index of medical underservice (IMU) score must be computed. The IMU score is based on four factors: the ratio of primary care physicians per 1000 population, the infant mortality rate, the percent of the population age 65 and older, and the percentage of the population below the poverty level. These numbers are checked against weighted values and summed to give the IMU score. If this score is 62 or less, an area can qualify as an MUA.

Medically Underserved Population (MUP). Populations may be designated as medically underserved on the basis of their income, insurance, language, cultural and health status, or if they have measurable barriers to obtaining primary care from existing professionals in their community. Any provider or community organization may apply for MUP designation to the BPHC/DSD. Having a MUP designation at one time met the requirement for funding under certain federal health care programs.

Medicare Risk Contract: A contract between a managed care plan and HCFA to provide services to Medicare beneficiaries for a fixed monthly payment and requires all services to be provided on an at-risk basis.

Medicare Supplement: Voluntary, private insurance coverage purchased by Medicare enrollees to cover cost of services not provided by Medicare.

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.

Midlevel Practitioner: A non-physician health care provider that is trained and licensed to deliver a range of primary care and other services to patients. Midlevels are often used by HMOs and other health plans to deliver services at a lower cost than if these services are provided by physicians. Nurse Practitioners (NP), Clinical Nurse Specialists (CNS), and Physician Assistants (PA) are examples of midlevel practitioners.

Morbidity Rate: Actuarial term showing likelihood of medical expenses occurring.

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N

National Association of Health Data Organizations (NAHDO) Established to support state data organizations and used to promote the development and enhancement of publicly accessible databases at the state level.

National Association of Quality Assurance Professionals (NAQAP)

National Business Coalition on Health (HBCH): Founded in 1989 to serve as a coalition of coalitions with the mission of facilitating communication and sharing among coalitions on issues related to specific managed care related projects, public policy and management.

National Committee on Quality Assurance (NCQA): A not-for-profit organization performing accreditation review of managed care plans.

National Health Board: Under the proposed American Health Security Act of 1993, this board would be responsible for setting national standards and overseeing the health system to be administered by the states.

National Health Service Corps (NHSC)  is a medical professional education loan repayment program of the PHS. NHSC financial aid recipients are assigned upon graduation to work off their loan payments through their employment in federal programs operating in MUAs or HPSAs.

Network: A group of providers that is organized to deliver services to a particular population or region

Network Model: An organizational form in which the HMO contracts for medical services within a network of medical groups. For federal qualification purposes, such models are designated as IPAs.

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O

Omnibus Reconciliation Act: Federal tax and budget conciliation acts affecting Medicare reimbursement and other areas.

OHMO: Office of Health Maintenance Organizations, with headquarters in Rockville, MD; a component of the U.S. Department of Health and Human Services. Charged with responsibility for directing the federal HMO program. Also known as the Central Office in HMO circles.

Open-Ended HMO: Enrollees are allowed to receive senates outside the HMO provider network without referral authorization, but are usually required to pay an additional copay and/or deductible.

Open Enrollment Period: The period of time stipulated in a group contract in which eligibles of the group can choose a health plan alternative for the coming benefit year. There is also an open enrollment period as defined in the Federal HMO Regulations requiring HMOs who meet certain criteria to conduct annual open enrollments for periods of not less than 30 days (refer to 110.107 of the Federal HMO Regulations). This federally required "open enrollment" of individuals should not be confused with enrollment of individuals many HMOs pursue as a normal part of their marketing strategies.

Open Panel: Private physicians contract with a plan to provide care in their own offices.

Outcomes Based Approach to Health Care: Quantitative measurement of the impact on routinely delivered care on patients' lives; to establish a more accurate and reliable basis for clinical decision making by providers and patients; to evaluate the effectiveness of care and to identify opportunities for improving process of care and reducing costs.

Outliners: A patient who varies significantly from other patients in the same DRG (such as a longer or shorter length of stay, death, leaving against medical advice, etc.).

OPM: Office of Personnel Management, with headquarters in Washington, DC. This agency administers and directs the Federal Employees Health Benefits plans. It is the contracting source for HMOs wishing to become FEHB carriers.

Outcomes Measurement: Formal process for measuring the effectiveness of medical treatment and patient satisfaction with treatment results.

Out-of-Area Benefits: The scope of emergency benefits (and related limitations) available to HMO members while temporarily outside their defined service areas. Some HMOs offer unlimited out-of-area emergency coverage. Others impose a stated maximum annual dollar benefit. Emergency coverage is usually the only HMO benefit in the total benefit package for which members may need to file claims forms for reimbursement of their out-of-pocket expenditures for care.

Out-of-Area Services: Services received by HMO enrollees when the member is outside the plan's established geographic area of service as defined in the contract and service agreement. Usually these services are not covered unless a delay would adversely affect the individual's health status.

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P

Peer Review: Evaluation of a physician's performance by other 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 Contact/Per Month (PC/PM): Amount of dollars for each contract (single or family) for each month.

Per Diem: Total payment rate per day regardless of actual charges.

Per Member Per Month (PMPM): Refers to the cost or revenue from each plan's member for one month.

Per Thousand Members Per Year (PTMPY): A common indicator of hospital utilization.

Performance Management (PM). Systems for managing quality in health care which constantly look at new ways to improve service delivery, practice of health workers and governance of health care institutions.

Physician/Hospital Organization (PHO): An organizational entity that is formed between hospitals and physicians that allows for cooperative activity while allowing a level of independence to the participating parties. This organizational structure is usually formed to pursue managed care contracts. A joint venture or network involving hospitals and physicians which cooperatively provides administrative or health care services in a managed care environment while retaining ownership of their individual assets

Physician Payment Review Commission (PPRC): Created by Congress in 1986 to recommend changes in current reimbursement procedures and polio ties for physicians receiving payments from Medicare. The commission prepares an annual report to Congress.

Point of Entry (POE): Serves as a "gatekeeper" primary care physician in a worker's compensation case.

Point-of-Service: This product may also be called an open-ended HMO and offers a transition product incorporating features of both HMOs and PPOs. Beneficiaries are enrolled in an HMO but have the option to go outside the network for an additional cost. A growing number of HMOs now offer a Point of Service (POS) option. These "escape hatch" plans allow HMO members to seek care from non-HMO physicians, but the premiums for POS plans are more costly than those for traditional HMOs which restrict choice of physician. Moreover, when an HMO member receives care from a non-participating physician or hospital, the HMO pays less than its usual 100% coverage of necessary medical services.

Pooling: Combining risk.

Ports:  Patient Outcome Research Teams. Multi-disciplinary task forces that define and evaluate patient outcomes for specific disorders that result from variations in practice patterns.

Practice Management Companies (PMC) (a.k.a. management service organizations): Aggressive for profit management companies buying/organizing physician groups for managed care. Benefits: capital equipment contributions, management discipline and expertise. PMCs are relatively physician friendly.

Preexisting Condition: A current or previous health condition that may limit an individual from obtaining health insurance.

Preferred Provider Organization (PPO): A group of physicians and/or hospitals who contract with an employer to provide services to their employees. 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. A health plan that encourages savings by establishing a network of preferred providers -- health professionals who agree to provide medical services to plan members for discounted rates. Plan members may go "out of network" to seek medical services from non-affiliated medical professionals. Members are charged higher co-payments for this option.

Prescription Benefit Mangers (PBMs): Monitor prescription claims for HMOs and track what drugs and the volume prescribed by the plan's participating physicians.

Preventive Care: An approach to health care which emphasizes preventive measures such as routine physical exams, diagnostic tests (e.g. PAP tests), immunizations, etc.

Primary Care Physician (PCP): Provides treatment of routine injuries and illnesses and focuses on preventative care. Serves as gate keeper for managed care. 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." These physicians provide a full range of basic health services to their patients. General practitioners, pediatricians, family practice physicians and internists are recognized by health plans as primary care physicians, and a growing number of plans are including obstetrician/gynecologists in this category. HMOs usually require that each enrollee be assigned to a primary care physician who functions as a GATEKEEPER.

Primary Care Provider (PCP). Under managed care these providers offer a full range of basic health services to their patients. General practitioners, family practitioners, internists or pediatricians are most often recognized by health plans as PCPs. Some managed care plans include obstetricians for woman. Managed care plans usually require that each enrollee be assigned to a PCP who functions as a gatekeeper.

Primary Care Network: The structure for these networks will vary considerably depending on the specific network. It may range from a loose association of physicians in a geographic area with a limited sharing of overhead, patient referral, call, etc. to a more structured association with commonly owned satellite clinics, etc.

Prior Authorization: Procedure used in managed care to control utilization of services by prospective reviewing and approval.

Progressive Rates: A method employed by some HMOs in which they implement new rates either monthly, quarterly, or semiannually. Any new or renewal subscriber groups with anniversaries falling within such periods would automatically be subject to prevailing rates in effect during those periods, and these rates are generally guaranteed for the full 12-month benefit year. This method is said to offer greater rate parity than a fixed rate throughout the HMO's fiscal year. Consequently, it has the effect of containing rate changes on a group-to-group basis each benefit year.

Provider Service Organization (PSO) An at-risk entity (typically a closed network) that is owned/operated by providers (rather than an insurer).

Providers: Those institutions and individuals who are licensed to provide health care services (for facilities, physicians, pharmacists, etc.). Providers in a defined service area are principally owned by, affiliated with, employed by, or under contract to an HMO.

Public Health Service (PHS):  resides within the U.S. Department of HHS. PHS provides public health related functions in all U.S. territories and also administers a number of health care funding programs including PL329 (migrant health initiative clinics), PL330 (urban and rural health initiative clinics), PL340 (homeless health services), and the NHSC

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Q

QA: Quality Assurance, an obsolete form of quality management which counted the percentage of adverse incidents or omissions in relation to total work performed to determine if "quality" had been achieved. QA has been replaced by a number of performance measurement (PM) systems which constantly look at new ways to improve outcomes.

Quality Assurance Program, Utilization Management  (QA/UM) An internal peer review process that audits the quality of care delivered. The various methods used by health plans to measure the amount and appropriateness of health services used by its members. These checks can occur before, during, and after services have been sought or received from health professionals or institutions. The program should include an educational mechanism to identify and prevent discrepancies in care.

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R

Rating Bands: Limits set on the difference between the lowest and highest premium rates to be charged to different employer groups that have different case characteristics such as age, industry and location.

Regional Health Care System (RHCS): An integrated system including a hospital, physician other providers within part of or region offering a full range of services.

Reinsurance: A type of production purchased by HMOs from insurance companies specializing underwriting specific risks for a speculated premium. This becomes a cost of doing business for HMOs. Typical reinsurance risk overages are: 1) individual stop-loss, 2) aggregate stop-loss 3) out-of-area and 4) insolvency protection. As HMOs grow in membership, they usually reduce their reinsurance coverage (and related direct costs) as they reach a financial position to assume such risks themselves.

Repricing: The process by which Spectrum Administrators captures clinical and financial data from provider claims. The claim is adjusted to reflect the Valley Preferred fee schedule and forwarded to the client's TPA for final claims processing.

Reserves: Restricted cash investments or highly liquid investments or highly liquid investments intended to protect the HMO against insolvency or bankruptcy. Regulatory agencies any mandate reserve requirements; also, some HMOs establish voluntary reserves by systematically setting aside a small portion of each month's realized revenues.

Resource-Based Relative Value Scale (RBRVS): This relative value scale was developed for HCFA for Medicare reimbursement. Relative values are assigned to CPT-4 codes on the basis of the resources needed to perform the service.

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 Pool: Funds are set aside to cover over-utilization or to encourage limits on utilization or to encourage limits on utilization. More commonly seen in primary care than with specialists.

Risk Contract: An arrangement through which a health provider typically agrees to provide a full range of medical services to a set population of patients for a pre-paid sum of money. The provider is responsible for managing the care of these patients, and risks losing money if total expenses exceed the pre-determined amount of funds. Also, managed care plans that serve Medicare beneficiaries are often referred to as risk plans.

Rural Health Clinic (RHC): A clinic that is located in a rural underserved area and meets federal guidelines and is designated to receive enhanced reimbursement for the treatment of Medicare and Medicaid beneficiaries

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Safe Harbor: Under federal fraud and abuse and self referral laws, OIG issues "Safe Harbor" exemptions which define scenarios which will immunize certain health care transactions from federal fraud and abuse and anti-self referral prohibitions

Safety Net: Public and private services designed to assist indigent and other groups that may otherwise be unable to receive such services (e.g., health care, social services, housing assistance).

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 achieve an increase in market share or how to expand its service or market area. Self-Insurance: An entity itself assumes the risk of coverage and makes appropriate financial arrangements rather than purchasing insurance from a third party and paying a premium for this coverage.

SB697: Federal law which requires non-profit hospitals, in order to maintain their tax exempt status, to perform a community needs assessment and to submit a community benefit report documenting their charitable contributions.

Second surgical Opinion (SSO):

Selective Contracting: Process by which managed care organizations contract with a limited number of health care providers servicing managed care enrollees in order to ensure compliance with the health plan's terms and conditions, due to legal, cost, quality and and/or access issues.

Self Insurance: Method of providing insurance coverage in which an employer takes responsibility for directly covering the health care costs of its employees, rather than paying premiums to a health plan for this purpose. Self insured employers typically utilize "third party administrators" to provide administrative services (e.g., enrollment, claims payment).

Service Area: The territory within certain boundaries that an HMO designates for providing service to members. Since easy access into the health delivery system is a primary HMO tenet, it is generally believed that a member should not have to drive longer than 30 minutes in order to gain access to the system. Some HMOs establish a mileage radius from their medical delivery sites; some rely on zip codes; other use county boundaries in defining service areas.

Single-Payer System: Financing mechanism in which government acts as the only insurer and sets reimbursement rates for providers.

Skilled Nursing Facility (SNF): May be a freestanding facility or part of a hospital that has been certified by Medicare to admit patients requiring subacute care and rehabilitation. A facility that provides long-term inpatient care to patients requiring skilled nursing services (most "nursing homes" are SNFs).

Small Subscriber Group Aggregate: A combination of small businesses, professional associations, or other entities formed for the purpose of being considered a single, large subscriber group.

Social HMO (SHMO): A HCFA project that began in 1982. It is designed to integrate acute and long-term care for enrolled Medicare beneficiaries over age 65.

Spectrum Administrators: A full service TPA owned and operated by Lehigh Valley Health Network. Spectrum Administrators is contracted with LVPHO to provide repricing services and marketing support.

Staff Model HMO: The staff model 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.

Standard Class Rate: Used to calculate monthly premium rates using a base revenue requirement per member or per employee multiplied by group demographic information.

State Action Immunity: When not preempted by the federal government, specific activities will be immunized from federal prohibitions if a State clearly articulates a State policy immunizing the specific activities and actively supervises such private activities. This State power is based on the supremacy clause of the U.S. constitution

Stop-Loss: The purchase of insurance coverage from a third party in the event of unexpected financial loss to the plan or provider, may be individual or aggregate and usually both. In the event of a catastrophic claim. Stop-loss limits the exposure for both the insurer and the purchaser.

Sub-Capitation: The assigning of partial risk by a health plan or global capitated entity, to a health care provider for a contracted per member per month reimbursement for a defined set of services. For example: primary care physicians can be sub-capitated for just primary care outpatient and inpatient services; a laboratory or a pharmacy can be sub-capitated at "X" dollars per member per month for their respective services.

Subrogation: Requires the insured individual to assign any rights to recover damages to the insurer (not allowed by law in some states).

Subscriber: An employer, union, or association that contracts with an HMO for its prepaid health care plan, which is offered to eligible enrollees.

Super PHO: Responsible for oversight and certification of individual PHOs, central administration and management, utilization review, financial management, contracting, claims, member services, information services. May be formed to support And IDS.

Supplemental Health Services: The benefits an HMO offers that exceed their basic health service requirements, as defined in Subpart A, 1 10. 101 (c) and 110.102 of the Federal HMO Regulations. Tax Equity and Fiscal Responsibility Act (TEFRA): One of its provisions prohibits employers and health plans from requiring workers 65-69 to use Medicare instead of the employers health plan.

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Tax Equity and Fiscal Responsibility Act (TEFRA): One of its provisions prohibits employers and health plans from requiring workers 65-69 to use Medicare instead of the employers health plan.

Third Party Administrator (TPA): An administrative organization other than the employee benefit plan or healthcare provider that collects premiums, pays claims an/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 a practice's systems to identify and improve sources of error, waste or redundancy. Uses input and feedback from all levels of staff and patients to understand and improve current processes.

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Unbundling: Billing separately for the components of a service previously included in a single fee.

Uninsured: Those that do not have health insurance. Estimated at 15-20 percent of the U.S. population, consisting primarily of the "working poor" (employed workers that do not receive health insurance benefits through their employer and cannot afford to purchase coverage on their own) and children.

Utilization: The frequency with which a benefit is used, for example, 3,200 physician office visits per 1,000 HMO members per year. Utilization experience multiplied by the average cost per unit of service delivered equals capitated costs.

Utilization Management: 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.

Utilization Review: The various methods used by health plans to measure the amount and appropriateness of health services used by its members. These checks can occur before, during, and after services have been sought or received from health professionals

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Vertical Integration: Arrangements/agreements between providers of different levels of services to cooperate in the delivery and/or financing of these services (e.g., hospital-physician). Also see "Horizontal Integration."

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Withhold: A percentage of payment to the provider held back by the HMO until the cost of referral or hospital services has been determined. Physicians exceeding the amount determined as appropriate by the HMO lose the mount held back. The amount of withhold returned depends on individual utilization by the gatekeeper; referral patterns through the year by the gatekeeper, groups of physicians or the overall plan pool: and financial indicators for the overall capitated plan.

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