Glossary of Terms
AAC: Actual Acquisition Cost
Actual Charge: The charge made by a hospital or other supplier of medical services; the data used as a test of "reasonable charges."
Allowable Charge: This is the maximum amount an insurer will allow for a specified supply or service. Typically, the allowed amount is the lower of the provider's submitted charge or the payer's own maximum fee schedule amount. If the payer does not have a fee schedule, the allowed charge is usually set at some percentage of the provider's submitted charge. Insurers typically pay the allowable charge minus any deductible or co payment. The patient is responsible for the remainder.
ALOS: Average Length of Stay
APC: Ambulatory Payment Classification; these are the Medicare payment categories for services provided in hospital outpatient departments under the Hospital Outpatient Prospective Payment System (OPPS). APCs are determined by the CPT code for the procedure.
ASC: Ambulatory Surgical Center. A distinct entity that operates exclusively for the purposes of furnishing certain outpatient surgical services to patients.
Assignment of insurance benefits: An authorization granted by the patient to allow the insurance company to pay claim benefits directly to the provider of care. It is to the provider's benefit to have the patient sign the “assignment of benefits” statement on each claim form. All benefits due to the provider will be mailed directly to the provider rather than to the patient.
BBA: Balanced Budget Act of 1997.
Beneficiary: The enrollee of an insurance program and the one who is entitled to receive its benefits. Any Medicare, Medicaid or commercial insurance member. However, individuals entitled to Medicaid often are referred to as recipients rather than beneficiaries.
Benefit: A drug, supply, service or procedure included as a covered item in an insurance contract or public program. Also an amount payable by an insurance company to the insured or the insured's designated health care provider for covered medical expenses. From the beneficiary's viewpoint, a "benefit" is a health service or commodity receivable when need for it is demonstrated. For example, the benefits under Medicare Part A include the following:
- Inpatient hospital care
- Follow-up home care or nursing home care
- Some drugs and blood transfusions
- Inpatient lab tests and x-rays
- Medical supplies and durable medical equipment benefit period: A Medicare designation for the period of time covered by the inpatient deductible. With respect to hospital services, a benefit period starts with the first day of hospitalization and ends when the patient has not been an inpatient in the hospital or a skilled nursing facility for 60 consecutive days.
Bundled payment: A pre-negotiated payment for all resources required for a particular service.
Capital Expense: Any cost incurred in the purchase of fixed or moveable medical equipment or in the expansion or modernizing of hospital facilities.
Capital Related Expense: Reasonable costs incurred indirectly as the result of capital purchases. Capital related expenses connected to durable medical equipment purchases may, depending upon the supply arrangement, include the following:
- Net depreciation expense
- Interest expense incurred when acquiring depreciable assets used for patient care
- Lease and rental expense for the use of equipment that would be depreciable if the provider owned it outright.
Capitated Payment: Reimbursement of a fixed, per capita amount for services rendered. For example, under many HMO agreements, health care providers receive a set amount of money per subscriber per month, regardless of the services actually used.
Carrier: An entity that contracts with CMS to administer Medicare Part B (physician and outpatient services) within a specific geographic area, such as a state. The administration of Part B by a carrier includes provider relations, beneficiary services, and claims processing and payment, medical policy development, and program integrity. (see MAC)
Case Mix: The distribution of a hospital's inpatients among various diagnoses and therefore among various DRGs; case mix is a factor in rate setting for a hospital.
Case Rate: A reimbursement mechanism in which payers pay a predetermined dollar amount for a type of inpatient admission or outpatient service usually defined or categorized by the type of diagnosis or diagnoses assigned or procedures performed. Medicare's Diagnosis-Related Group (DRG) is a payment based on case rates.
Charge Data: The statistics on actual charges collected from submitted claims (and all other available sources) and used as the basis for the carriers' computation of customary, prevailing, and reasonable charges.
Claims Administrator: An entity that reviews and determines whether to pay claims to enrollees or physicians on behalf of the health benefit plan. Claim administrators may be insurance companies or their designated claims review organizations, self-insured employers, management firms, third party administrators, or other private contractors.
CMS: The Centers for Medicare & Medicaid Services (formerly the Health Care Financing Administration, or “HCFA”) – the agency within the Department of Health and Human Services (“DHHS”) that administers the Medicare and Medicaid programs.
CMS 1500: This is a standard form for submitting claims for health care services provided by physicians.
Coding: Coding is the process of converting medical information into a condensed form by substituting numeric or alphanumeric codes for the actual individual procedure and services performed and for conditions treated. It is a system of uniform language used to accurately describe medical, surgical, and diagnostic services. An example of a coding system is the CPT code developed by the American Medical Association.
Complications and Comorbidities (CC): A comorbidity, by MS-DRG definition, is a condition existing prior to hospitalization, like diabetes mellitus in a cancer patient. A complication, by MS-DRG definition, is a new condition occurring during the hospitalization, as in postoperative pneumonia. CC's generally adjust reimbursement upward.
CON: Certificate of Need. Some States limit the expansion of certain types of health care services (e.g., open heart surgery) and/or certain types of health care facilities (e.g., hospitals or home health agencies) by requiring that they first apply for and obtain a CON from the State.
Contractors: CMS' collective term for the entities that contract with CMS to process Medicare claims.
Coordination of Benefits: A clause written into an insurance policy or stipulated by state law that requires insurance companies to coordinate the reimbursement of benefits when a policy holder has two or more insurance policies. The benefits from the combined policies may pay up to, but may not exceed, 100 percent of the combined benefits of the combined policies for all medical expenses submitted.
CORF: Comprehensive Outpatient Rehabilitation Facility. A facility which is primarily engaged in providing diagnostic, therapeutic, and restorative services to outpatients for the rehabilitation of injured, disabled, or sick persons on an outpatient basis.
Cost to Charge Ratio: The ratio of expenses including overhead, incurred by the hospital to provide a given service to the amount charged for that service. While charge information is readily available from hospital bills, costs are generally estimated using the Medicare cost report.
CPT: Current Procedural Terminology; these are codes developed by the American Medical Association (AMA) describing physician procedures. The AMA develops and maintains the CPT codes and their meanings. Think of CPTs as words and the CPT book as a dictionary. CPT codes are used to bill third party payers.
Co-Insurance: A cost-sharing requirement under a health insurance policy. It provides that the insured party will assume a portion or percentage of the costs of covered services. The health insurance policy provides that the insurer will reimburse a specified percentage of covered medical expenses after the beneficiary meets any policy deductible requirements. The insured pays the remaining costs up to the policy's maximum liability. For most covered services, Medicare beneficiaries are responsible for a 20% coinsurance. This is based on covered charges.
Co-Payment: A type of cost-sharing with health insurers in which a set charge per claim for services is paid by the beneficiary. Co-payment clauses were designed to make the beneficiary aware of the cost of health coverage and to discourage abuse of health benefits. For example, beneficiaries may be required to pay $20 for each physician visit or $10 for each covered prescription drug.
Coverage: The process by which an item or service is recognized as a benefit as defined by an insurance policy or plan.
Customary Charge: The charge a hospital or provider usually bills beneficiaries for furnishing a particular health product.
Deductible: The amount that a patient must pay for specified medical services before any insurance reimbursement is available. The amounts vary widely by insurer and contract.
Diagnoses Related Groups (DRGs): A system using categories for classifying patients according to diagnosis. Under the Medicare Prospective Payment System, the assumption is that patients within these diagnostic categories present with similar clinical symptoms requiring similar hospital and medical resources during treatment. (See MS-DRG)
DME: Durable Medical Equipment. Under Medicare, in order to qualify, an item must be able to withstand repeated use, be primarily or customarily used for a medical purpose, generally not be used in the absence of illness or injury, and appropriate for use in the home.
DRG: Diagnosis Related Group (See above and MS-DRG)
Eligibility: Qualification for benefits as defined by Medicare regulation.
Evaluation and Management Codes (E & M Codes): The group of CPT codes that describes physician's services such as office visits, hospital visits, and consultations.
Explanation of Benefits (EOB) or Explanation of Medical Benefits (EOMB): The statement sent to covered persons by their health plan listing services provided, amount billed, and payment made.
Fee-for-Service (FFS): Historically, FFS was the traditional method of reimbursement for medical care where the insurers pay providers a fee for medical service based on charges. FFS now represents a very small percentage of the medical reimbursement in the country. FFS is also known as indemnity insurance.
Fee Schedule: A listing of the maximum fees that an insurer will pay for services, procedures, tests, and devices. Physician fee schedules typically are based on CPT codes.
Fee Screens: Another term describing the customary, prevailing, and reasonable charge amounts established by the carrier at the beginning of each fiscal year. It implies that charges (or fees) in excess of these computed rates are screened out.
Fiscal Agent: A contractor that processes or pays vendor claims on behalf of the Medicaid agency. Under Medicare, the fiscal agents are called Medicare Administrative Contractors (MACs).
Fiscal Intermediary (FI): An entity that contracts with CMS to administer Medicare Part A (hospital services) within a specific geographic area such as a state. The administration of Part A by a fiscal intermediary includes provider relations, beneficiary services, claims processing, payment, medical policy development, and program integrity. (see MAC)
FOI (FOIA): Freedom of Information Act. A law that requires the U.S. Government to give out certain information to the public when it receives a written request. FOIA applies only to records of the Executive Branch of the Federal Government, not to those of the Congress or Federal courts, and does not apply to state governments, local governments, or private groups.
Global Contract: The contract with allowables for total services performed, which may include both hospital and physician charges combined.
Grouper Program: A computer application that is used to assign cases to DRG's for purposes of inpatient hospital reimbursement.
Group Practice Prepayment plan: In general, members of group practice prepayment plans pay regular premiums to the plan. In return, the members receive the health services the plan provides without additional payment. Many HMOs have made arrangements with Medicare to receive direct payment for services to Medicare patients.
HCFA (Health Care Financing Administration – Renamed the Centers for Medicare & Medicaid Services, or CMS): See definition above.
Health maintenance organization (HMO): A health organization that both insures and dispenses health care. HMOs typically receive set monthly payments and agree, in exchange, to provide all services needed by the HMO's enrollees. In an HMO, patients typically must receive all health care services from providers who participate in the HMO.
Healthcare Common Procedure Coding System (HCPCS): A list of codes used by providers to describe items and medical services they render.
HHA: Home Health Agency
HHS: Department of Health and Human Services
HMO: Health Maintenance Organization (see definition above)
Hospital Insurance: Hospital insurance (also known as Medicare Part A) is an insurance program providing basic protection against the costs of hospital related health services for people sixty-five or over within the Social Security or Railroad Retirement Systems, as well as to the disabled.
Inpatient PPS: Inpatient Prospective Payment System (IPPS). IPPS is the Medicare system of payments to hospitals based on predetermined amounts for each patient discharge through the use of medicare severity-diagnosis related groups (MS-DRGs). In the aggregate, the hospital keeps the difference between the payments received from Medicare and its costs of treating Medicare patients. The hospitals are at risk for costs incurred above the prospectively determined payments, limited by additional payments for outlier cases with unusually long stays or unusually high costs.
Intermediary: Agency responsible for processing claims and payment of Medicare Part A benefits. (Also called “FI” for “fiscal intermediary” – see MAC)
ICD-9-CM: International Classification of Diseases, 9th Revision Clinical Modifications; A coding system that includes codes for both diagnoses and certain procedures.
LOS: Length of Stay
MDC: Major Diagnostic Category. This classification of diagnoses typically grouped by anatomic systems is the basis for the DRG prospective payment system. Each DRG falls into a MDC category. DRGs are assigned to report inpatient services to Medicare, Medicaid, and private payors, and determining payment.
Medicaid: Also known as Title XIX, Medicaid is a joint federal/State health insurance program for low-income persons who are aged, blind, disabled or members of families with dependent children, who receive public assistance and other low income disabled groups with high medical expenses. The Medicaid Program is jointly funded by the federal government and the State government, which also administers the program.
MediCal: California's name for its State Medicaid program.
Medicare: Medicare provides health insurance benefits to the elderly (age 65 or older), some disabled people, and people with end-stage renal disease. It is funded by the federal government and administered by CMS, although most enrollees pay a monthly premium for Part B coverage. Medicare has 3 parts; Part A Hospital Insurance, Part B Supplementary Medical Insurance, and Part C Medicare + Choice. Part A covers institutional services such as hospitalization, nursing home care, hospice, skilled nursing facility services, and the services of a home health agency. Part B covers hospital outpatient services, physician services, lab and radiology, ambulance, durable medical equipment, orthotics, and prosthetics. Part C governs plans that manage Medicare coverage for members; many of these plans are HMOs or other types of managed care plans.
Medigap: A private insurance policy purchased independently by a Medicare beneficiary to fill coverage/reimbursement gaps in Medicare. Medigap polices are designed to supplement Medicare by paying the Medicare deductibles and coninsurance that the beneficiary would otherwise have to pay. Medigap policies also may include additional services such as prescription drugs. These policies provide coverage of Part A hospitalization gaps, or pay toward Part B covered expenses.
MSA: Metropolitan Statistical Area
NPI: National Provider Identification - Assigned by CMS and given to physicians for purposes of identification on forms and claims.
NPR: Notice of Program Reimbursement or Notice of Proposed Rulemaking
OIG: Office of the Inspector General (of HHS). An entity within HHS that conducts audits, investigations and inspections, and whose role is to prevent and detect waste, fraud and abuse within HHS' programs.
OPPS: Outpatient Prospective Payment System – this is Medicare's method of compensating hospitals for outpatient services. (See APCs)
Outlier Cases: Special payment adjustments made by Medicare for patients who fall outside the norm of inpatient care, because they have extraordinarily high costs or extended lengths of stay.
Participating Provider: A provider who has contracted with a health plan to provide medical services to covered persons. The provider may be a hospital, pharmacy, physician or other facility who has contractually accepted the terms and conditions as set forth by the health plan.
Preauthorization: Preauthorization (sometimes also referred to as pre-certification) is an important process with private insurers in making sure the physician and the hospital or surgery center receive appropriate payment for services delivered. Insurers vary with respect to their preauthorization policies and the type of information they require. If you would like our assistance in obtaining preauthorization for using a Stryker product, please contact Stryker Reimbursement
Premium: A monthly fee paid by enrollees for health benefit coverage.
Per Diem: A pre-established, fixed payment for a day of inpatient hospital care. Used by many Medicaid agencies, PPO's and HMO's as payment for hospital stays, home health, or hospice care.
Prior Authorization: A process that allows providers to determine, in advance, whether and how much an insurer will pay for an item or service.
Provider: A dispenser of health care products and services that are reimbursable under the Medicare program. Providers are given a provider number, which allows them to bill Medicare and be reimbursed according to regulations. Under Medicare, the term provider is sometimes used to refer only to institutional providers, such as hospitals, and sometimes used more broadly to include physicians and other types of practitioners.
PRRB: Provider Reimbursement Review Board. The PRRB affords Part A providers who are dissatisfied with the amount of program payment an independent forum where disputes can be fairly and justly settled.
Reimbursement: Refers to the actual payments received by providers for services rendered, based on benefits covered under an insurance plan.
Relative Weight: An assigned weight for each MS-DRG that is intended to reflect the estimated relative cost of hospital resources used with respect to charges associated with a specific MS-DRG compared to discharges classified to other MS-DRGs. The higher the relative weight the greater the payment.
Retrospective Payment: After-the-fact reimbursement for health care products and services based on actual cost.
SCH: Sole Community Hospital. These are hospitals that meet certain criteria set forth under the Medicare program, and they may be paid differently than other hospitals.
Secondary Payers: Insurance organizations that are responsible for patient medical bills once a primary insurer has paid its share. For example, Medicaid plans are secondary payers to any other health plan such as Tricare or Medicare.
SMSA: Standard Metropolitan Statistical Area
SNF: Skilled Nursing Facility
Supplier: A health care product manufacturer, or an entity that handles health products, such as a DME dealer. Physicians are also considered suppliers under Medicare Part B, but often are referred to as providers.
Supplementary Medical Insurance (SMI): Also known as Medicare Part B, SMI is a voluntary insurance program that provides insurance benefits for physician services and other professional services in accordance with the provisions of Title XVIII of the Social Security Act. The program is financed from premium payments by enrollees, together with federal funds.
TEFRA: Tax Equity and Fiscal Responsibility Act of 1982
Third Party Payer: Any organization, public or private, that pays for health or medical expenses on behalf of beneficiaries or recipients. The individual usually pays a premium for such coverage.
UB 92 (also called CMS 1450): This is a standard claim form for health care services provided by a hospital.
Unbundling: The breaking down of an integrated major surgical package or other service into various components for the purpose of differential coding and potentially obtaining higher reimbursement. Unbundling typically is prohibited by payers.
UR: Utilization Review. A process used by insurers and hospitals to monitor and control patients' utilization of health care services. Review can be performed both prospectively (through prior authorization) or retrospectively for hospital admissions, diagnostic tests, and drug therapies.