Reimbursement Glossary

actual charge: The charge that a provider bills a patient

allowable charge: Maximum amount that the payer will reimburse a provider for a service

ALOS (average length of stay): The average number of days a patient is hospitalized per hospital visit

ambulatory care: Also called outpatient care; health care provided without the patient being admitted to a hospital for an overnight stay

APC (Ambulatory Payment Classification): Medicare payment categories for outpatient hospital services

appeal: Formal request made by a provider or patient for review of a denial or payment amount for a health care service

ASC (ambulatory surgery center): Provides outpatient surgical services to patients; some ASCs are owned or controlled by hospitals, while others are owned by physicians; hospital-based ASCs are physically and administratively separate from the rest of the hospital and are financially independent and distinct from other hospital operations

assignment of benefits: Authorization granted by the patient that allows payment directly to the provider for health care services

authorization: Approval of a health care service by a payer

benefit: A drug, service, procedure or supply covered by an insurance plan; also, the amount payable to the insured or designated health care provider for covered expenses

benefit payment schedule: List of maximum fees an insurance plan will pay for covered health care services

benefit period: Medicare term for the period of time that starts with the first day of hospitalization and ends when the patient has been out of the hospital or skilled nursing facility for 60 consecutive days

bundled payment: A pre-negotiated payment for a group of related services (e.g., obstetrical services for prenatal, delivery and postnatal care)

cafeteria plan: Arrangements under which employees may choose their own benefit structure

capital expense: Cost incurred when purchasing physical assets such as fixed medical equipment

capital related expense: Costs incurred indirectly as the result of capital purchases; examples include expenses associated with depreciation, interest and lease/rentals

capitated payment: A pre-determined fixed amount for specified health care services; providers are not reimbursed for charges that exceed the capitated (fixed) amount

carrier: Any organization that underwrites or administers life, health or other insurance programs

carve-out: A medical service that is separated from a contract and paid under a different arrangement

case manager: A nurse, doctor, or social worker who works with patients, providers and payers to coordinate all services considered necessary to provide the patient with a plan of medically necessary and appropriate health care

case mix: Measure of the types of cases being treated by a particular health care provider; used to determine costs and complexity of care needed to service the provider’s typical patient base

case rate: Flat fee for all the health care services a patient requires per diagnosis over a specific period of time; with a case rate, the provider has increased flexibility in determining how to meet patient needs

CHAMPUS (Civilian Health and Medical Program of Uniformed Services): Medical assistance program for military families, retirees and their families, some former spouses, and survivors of deceased military members; now called TRICARE Standard throughout most of the United States

CHAMPVA (Civilian Health and Medical Program of the Veterans Affairs): Program for families of veterans who have total, permanent, service-connected disabilities, or for surviving dependents of veterans who died as a result of service-connected disabilities

charge: Published price of a health care service charged by a provider

charge data: Statistics on actual charges collected from submitted claims and other sources

claim: Request by a patient or provider made to the payer for payment of health care services

CMS (Centers for Medicare and Medicaid Services): a federal agency within the U.S. Department of Health and Human Services; responsible for the oversight of Medicare, Medicaid, State Children’s Health Insurance Program and others

CMS-1500 form: Standardized claim form used by non-institutional providers for submission to payers

coding system: Standard coding used to identify and define health care provider services, including diagnoses, procedures and levels of care

co-insurance: The patient’s share of covered health insurance benefits; usually expressed as a percentage of a service or prescription drug

commercial insurance: Health insurance provided by a non-government payer

comorbidity: A medical condition that exists concurrently with a primary diagnosis being treated

complication: A medical condition that occurs during treatment

conversion factor (CF): Dollar amount multiplied by the relative value unit (RVU) to arrive at an approved payment amount for physician services; used with the Medicare resource-based relative value scale (RBRVS); conversion factors vary by geographical area and time period

coordination of benefits: Process for determining the respective responsibilities of two or more health insurance plans that have some financial responsibility for a medical claim; designed to prevent double payments for a claim

co-payment: Fixed out-of-pocket dollar amount that a patient pays per service or prescription drug; different from co-insurance, which is based on a percentage of the cost

cost plan: Type of managed care contract under Medicare Part C that does not have "lock-in" requirements; patients can choose to receive care from any provider

cost to charge ratio: Measurement of how much hospitals billed for services versus how much the services actually cost or the amounts that hospitals actually received in payment for those services

covered service or benefit (coverage): Service that is medically necessary and reimbursable as a health plan benefit; a covered benefit must always be medically necessary but not every medically necessary service is a covered benefit

CPT code (Current Procedural Terminology): Five-digit number accompanied by a narrative description of a procedure or service provided by a physician; used by physicians to report professional services such as office visits, surgical procedures, labs, x-rays and other medical services; maintained by the American Medical Association and updated annually

customary charge: One of the factors determining a physician’s payment for a service under Medicare; calculated as the physician’s median charge for that service over a prior 12-month period

deductible: Out-of-pocket amount that a patient pays for health care services before an insurance company or Medicare begins paying; typically, an insured person must meet a deductible each calendar year

DME (durable medical equipment): Medical item that can withstand repeated use; typically used in the home, e.g., oxygen tents, wheelchairs, walkers and hospital beds

DRG (Diagnosis-Related Group): System of classification based on diagnosis and treatment of an illness; determines payment for inpatient hospital services

drug formulary: List of prescribed drugs covered by a health plan

durable medical equipment: See "DME"

Eligible expenses: Charges covered under a health plan

E&M code (Evaluation and Management code): Subset of CPT codes used to report physician services such as office visits, hospital visits and consultations on the same day that a procedure is performed

EOB (Explanation of Benefits): Document issued by payers to explain services provided, amount being billed and payments made

fee for service (FFS): Traditional and increasingly rare method of payment for health care services where specific payment is made for specific services rendered; if the cost of services increase, the fee for those services will also increase

fee schedule: A listing of maximum fees for specified medical services that a payer uses to reimburse a provider; physician fee schedules are often based on CPT codes

flexible benefit plan: A program offered by some employers in which employees may choose among a number of health care benefit options (also see "cafeteria plan")

flexible spending account (FSA): A plan offering employees a choice between taxable cash and non-taxable benefits for unreimbursed health care expenses or dependent care expenses

formulary: An approved list of prescription drugs covered by a payer

gatekeeper: The provider or entity (e.g., primary care physician, case manager, etc.) responsible for determining when and what services a patient can access and receive reimbursement for

global fee: A total charge for a specific set of services related to a specific procedure or condition (e.g., obstetrical services for prenatal, delivery and postnatal care); also called "global contract" or "global payment method"

global period: Number of days following a major procedure that will be covered by a payer for all related procedures

group health plan: A health plan that provides health coverage to employees, former employees and their families; supported by an employer, employee organization or other organized group

HCFA (Health Care Financing Administration): See "CMS"

HCFA 1500: A universal claim form used to submit claims to payers; can be submitted in paper or electronically

HCPCS (Health care Common Procedure Coding System): From the Center for Medicare and Medicaid Services (CMS); a system of coding for provider services, procedures, supplies and other services

health benefits package: The services and products a health plan offers

HMO (Health Maintenance Organization): Health plan that contracts with medical facilities, physicians, ancillary services and employers to provide health care to a group of individuals; generally reduces costs and paperwork for the patient

home health care: Full range of medical and other health-related services such as physical therapy, nursing and social services that are delivered by a provider in the patient's home

ICD-9-CM (International Classification of Diseases, 9th Edition): Universal coding method used to collect uniform and comparable health information on disease, injury, mortality and illness; separated into diagnosis codes, which are used only by hospitals, and procedure codes, which are reported by both hospitals and physicians

indemnity insurance plan: Increasingly rare health plan that pays providers on a fee-for-service basis

inpatient care: Health care given to a patient in a hospital, nursing home, skilled nursing or other medical facility; must include an overnight stay

institutional review board (IRB): A group of medical professionals that provides peer review of protocols to protect the rights of people participating in medical research and clinical trials

intermediary: Private payer that contracts with the federal government to process Medicare claims and administer Medicare Part A

IPA (Independent Practice Association): Type of health maintenance organization (HMO) that provides services through an association of self-employed physicians or physician groups who provide services in their offices with their own staffs but who negotiate contracts as a group of providers

IPPS (Inpatient Prospective Payment system): Medicare’s system for paying hospitals for services rendered to individuals in an inpatient setting

length of stay (LOS): Number of days a patient stays in a hospital while receiving inpatient care; does not apply to outpatient procedures

letter of medical necessity (LOMN): Letter written by a physician that explains why an intended procedure is appropriate for the unique needs of a given patient; an LOMN must accompany a request for prior authorization

lifetime limit: A cap on the benefits paid under a policy. For example, many policies have a lifetime limit of $1 million, which means that the insurer agrees to cover up to $1 million in covered services over the life of the policy.

LOS: See "length of stay"

managed care: System used to control the use and costs of health care services; providers generally agree to abide by the plan’s cost and quality-control measures; most often refers to HMOs and PPOs

maximum fee schedule: Maximum amount a payer will pay for a procedure or service

medical necessity: A service or supply that is appropriate and necessary for the symptoms, diagnosis or treatment of a medical condition

Medicaid: Federal program that provides medical assistance for certain individuals who meet predetermined state requirements (often low-income or "medically needy" individuals); funded by both federal and state governments but administered almost solely by state governments

medical savings account (MSA): An account in which individuals can accumulate contributions to pay for medical care or insurance; MSAs do not need to be associated with an employer

Medicare: Nationwide, federally funded and administered program that covers the cost of health care services for the elderly (> 65 years) and disabled; Medicare is administered by the Center for Medicare and Medicaid Services (CMS) at the national level but is managed at the local level by carriers; funded by Social Security and Medicare taxes

Medicare Part A: Covers inpatient hospital services, some skilled nursing facilities and some home health care services

Medicare Part B: Covers physician services and outpatient services

Medicare Advantage (Part C): Formerly called Medicare + Choice; allows patients to choose from several coverage options (e.g., traditional Medicare plan, managed care, private insurance, etc.)

Medicare Part D: Stand-alone outpatient drug plan offered by third-party payers; depending on the plan, costs, benefits, choices, quality, etc., may vary widely

Medicare Prescription Drug Plan (MPDP): See "Medicare Part D"

Medigap: Private insurance plan that covers deductibles and services not covered by Medicare

modifier: A numeric or alphanumeric modifier used with CPT or HCPCS codes to identify changes in procedures under the code used

morbidity: Illness, injury or disability occurring in a defined population

mortality: Death rate

multiple procedure rule: Under the multiple-procedure rule, if a physician performs more than one procedure on the same day for the same patient, the first procedure is paid at 100%, and subsequent procedures are paid at a decreased rate (typically 50% of the applicable rate)

open enrollment period: A period of time in which eligible subscribers may enroll in, or transfer between, available health care programs; under an open enrollment requirement, a plan must accept all who apply during that specific period

outlier: A patient whose length of stay or treatment cost differs substantially from the stays or costs of most other patients in a DRG; under DRG reimbursement, outliers are given exceptional treatment subject to peer and organization review

out of network: With most HMOs, a patient cannot have any services reimbursed if provided by a hospital or provider who is not in the network; there may be a provision for reimbursement of "out of network" providers but this usually involves a higher copay or a lower reimbursement amount for the patient

out of pocket expenses: Portion of health services that must be paid for by the plan member, including deductibles, co-payments and co-insurance; can also refer to the payment of services not covered by or approved for reimbursement by the health plan

outpatient care: Medical or surgical care furnished by a hospital to a patient who is not admitted for an overnight hospital stay

participating provider: Provider under a contract with a health plan who has agreed to provide services, usually for a set payment established by the payer

pay-for-performance programs: Financial incentives for health care providers as a reward for the achievement of certain benchmarks of performance

payer: Entity that pays health care providers for services performed; payers receive a premium from either the patient or the patient’s employer in return for health care coverage

payer mix: Mix of insurance programs from which providers are reimbursed for services performed

payment: Actual dollar amount that a provider receives from a payer for health care services

peer review organization: A hospital, clinic or committee that reviews delivery of health care services to ensure the care is medically necessary and appropriate

per diem: Negotiated per-day fee for services; usually applies to inpatient hospital and nursing facilities

policyholder: Purchaser of an insurance policy; usually an employer who purchases coverage for employees

PPO (Preferred Provider Organization): Health care plan that contracts with independent providers who agree to provide services to a defined population at a discounted rate

practice guidelines: Developed through a process that combines scientific evidence of effectiveness with expert opinion; practice guidelines are also referred to as clinical criteria, protocols, algorithms, review criteria or health care guidelines

premium: Periodic payment (usually monthly) made to a payer to keep an insurance policy active; must be paid before and regardless of whether services are actually received

prior authorization: Process by which a provider requests authorization from the payer to perform a specific service and verifies that the patient has coverage for that procedure; prior authorization does not guarantee payment; also called prior approval, precertification or predetermination

Prospective Payment System (PPS): A payment method that establishes rates, prices or budgets before services are rendered and costs are incurred; providers generally retain or absorb at least a portion of the difference between established revenues and actual costs

provider: One who provides health care services to patents; can be physicians, nurse practitioners, clinics, hospitals, nursing homes, dentists, psychologists, etc

RBRVS (resource-based relative value scale): System used by Medicare to assign relative value units (RVUs) to each procedure performed in physician office and hospital settings; payment may vary based on the site of service

reimbursement: The actual payment received by providers for services rendered; based on benefits covered under a health care plan

RVU (relative value unit): Unit of measure that permits comparison of the amount of resources required to perform various provider services; reflects national averages and sums up physician work, practice expense, etc

self-insured plan: An organization that assumes the financial risk of paying for health care; usually refers to an employer

site of service: Location at which a medical or surgical service or procedure is performed

sole community hospital: Only source of hospital services available to covered patients in a geographical area

staged procedure: Procedure during which a related procedure or service will be performed by the same physician during the postoperative period

standard of care: A diagnostic and treatment process that a provider should follow for a certain type of illness

supplemental insurance: Any private health insurance plan held by a beneficiary; includes Medigap policies and post-retirement health benefits

third-party payer: Any organization that pays for health care or medical expenses

tiered formulary: List of preferred prescription drugs in which different drugs have different co-pays; each drug is assigned to a specific "tier" within the formulary; generic drugs are typically most cost-effective and therefore belong to the most preferred tier

triage: Classification of ill or injured persons by severity of condition; designed to maximize and create the most efficient use of scarce resources of medical personnel and facilities

TRICARE Standard: See "CHAMPUS"

UB-92 form: Common claim form used by hospitals to bill for services; also known as the CMS-1450 form

unbundling: Act of separating a medical procedure into its many components, typically resulting in separate payments that are higher than one payment for the bundled procedure

underinsured: People with public or private health insurance policies that do not cover all necessary health care services, resulting in out-of-pocket expenses that exceed their ability to pay

universal access: The right and ability to receive a comprehensive, uniform and affordable set of confidential, appropriate and effective health services

universal coverage: A type of government-sponsored health plan that would provide health care coverage to all citizens

upcoding: Intentional or accidental act of changing a procedure code to reflect a higher amount of care

usual, customary and reasonable (UCR): Commonly charged fee for health services in a particular area

utilization review (UR): A method of tracking, reviewing and rendering opinions regarding care provided to patients; usually involves the use of established guidelines and protocols

workers' compensation: State-mandated program providing insurance coverage for work-related illnesses or injuries