GLOSSARY OF COMMONLY USED HEALTH CARE TERMS AND

Vermont Health Care Resources 1 Health Care Terms

GLOSSARY OF

COMMONLY USED

HEALTH CARE TERMS

AND

ACRONYMS

Vermont Health Care Resources 2 Health Care Terms

academic medical center A group of

related institutions including a teaching

hospital or hospitals, a medical school and

its affiliated faculty practice plan, and other

health professional schools.

access An individual’s ability to obtain

appropriate health care services. Barriers to

access can be financial (insufficient

monetary resources), geographic (distance to

providers), organizational (lack of available

providers) and sociological (e.g.,

discrimination, language barriers). Efforts to

improve access often focus on

providing/improving health coverage.

accident insurance A policy that provides

benefits for injury or sickness directly

resulting from an accident.

accreditation A process whereby a program

of study or an institution is recognized by an

external body as meeting certain

predetermined standards. For facilities,

accreditation standards are usually defined

in terms of physical plant, governing body,

administration, and medical and other staff.

Accreditation is often carried out by

organizations created for the purpose of

assuring the public of the quality of the

accredited institution or program. The State

or Federal governments can recognize

accreditation in lieu of, or as the basis for

licensure or other mandatory approvals.

Public or private payment programs often

require accreditation as a condition of

payment for covered services. Accreditation

may either be permanent or may be given

for a specific period of time.

activities of daily living (ADL) An index or

scale which measures a patient’s degree of

independence in bathing, dressing, using the

toilet, eating, and moving from one place to

another.

actuary A person trained in the insurance

field who determines policy rates, reserves

and dividends, as well as conducted other

statistical studies.

acute care Medical treatment rendered to

individuals whose illnesses or health

problems are of short-term or episodic

nature. Acute care facilities are those

hospitals that mainly serve persons with

short-term health problems.

acute disease A disease characterized by a

single episode of a relatively short duration

from which the patient returns to his/her

normal or pervious state of level of activity.

While acute diseases are frequently

distinguished from chronic diseases, there is

no standard definition or distinction. It is

worth noting that an acute episode of a

chronic disease (for example, an episode of

diabetic coma in a patient with diabetes) is

often treated as an acute disease.

adjusted average per capita cost

(AAPCC) The basis for HMO or CMP

(Competitive Medical Plan) reimbursement

under Medicare-risk contracts. The average

monthly amount received per enrollee is

currently calculated at 95 percent of the

average costs to deliver medical care in the

fee-for-service sector.

adjusted community rate (ACR) An

HMO’s estimate of the premium it would

charge to Medicare beneficiaries if these

beneficiaries were enrolled as commercial

enrollees and not covered by Medicare. The

ACR is intended to gauge the

appropriateness of CMS’s (Center for

Medicare and Medicaid Services)

reimbursements to plans. If CMS’s payment

is higher than a plan’s ACR, the plan is

required by law to provide the difference to

Medicare enrollees through lower premiums

or higher benefits or to return it to the

Medicare program (see also

Medicare+Choice).

administrative costs Costs the insurer

incurs for utilization review, insurance

marketing, medical underwriting, agents’

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commissions, premium collection, claims

processing, insurer profit, quality assurance

activities, medical libraries, and risk

management.

Administrative Services Organization

(ASO) An arrangement under which an

insurance carrier or an independent

organization will, for a fee, handle the

administration of claims, benefits and other

administrative functions for a self-insured

group.

adverse selection A tendency for utilization

of health services in a population group to

be higher than average. From an insurance

perspective, adverse selection occurs when

persons with poorer-than-average health

status apply for, or continue, insurance

coverage to a greater extent than do persons

with average or better health expectations.

affiliated provider A health care

professional or facility that is part of the

Managed Care Organization’s (MCO)

network and has a contractual arrangement

to provide services to the MCO’s covered

members.

affiliation agreement An agreement

(usually formal) between two or more

otherwise independent entities or individuals

that defines how they will relate to each

other. Affiliation agreements between

hospitals may specify procedures for

referring or transferring patients from one

facility to another, joint faculty and/or

medical staff appointments, teaching

relationships, sharing of records or services,

or provision of consultation between

programs.

Agency for Health Care Policy and

Research (AHCPR) The Agency’s primary

goal is to enhance the quality,

appropriateness and effectiveness of health

care services by conducting and sponsoring

credible and timely research. It is the federal

government’s focal point for health services

research, AHCPR’s predecessor, the

National Center for Health Services

Research and Health Care Technology

Assessment. AHCPR is now AHRQ

Agency for Healthcare Research and Quality

www.ahcpr.gov

The Agency for Healthcare Research and

Quality's (AHRQ) mission is to improve the

quality, safety, efficiency, and effectiveness

of health care for all Americans. Information

from AHRQ's research helps people make

more informed decisions and improve the

quality of health care services. AHRQ was

formerly known as the Agency for Health

Care Policy and Research.

aggregate The maximum amount of money

an insurance company will pay on an

insured’s policy per year, regardless of the

number of claims.

Aid to Families with Dependent Children

(AFDC) A state-based federal cash

assistance program for low-income families.

In all states, AFDC recipiency may be used

to establish Medicaid eligibility.

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all patient diagnosis related groups

(APDRG) An enhancement of the original

DRGs (diagnosis related groups), designed

to apply to a population broader than that of

Medicare beneficiaries, who are

predominately older individuals. The

APDRG set includes groupings for pediatric

and maternity cases as well as of services for

HIV- related conditions and other special

cases.

allowable costs Charges for services

rendered or supplies furnished by a mental

health professional that qualify as covered

expenses.

all payer contract An arrangement

allowing for payment of health services

delivered by a contracted clinician

regardless of product type (e.g., HMO, PPO,

indemnity) or revenue source (e.g., premium

or self-funded)

all-payer system A system in which prices

for health services and payment methods are

the same, regardless of who is paying. For

instance, in an all-payer system, federal or

state government, a private insurer, a self-

insured employer plan, an individual or any

other payer could pay the same rates. The

uniform fee bars health care providers from

shifting costs from one payer to another. See

cost shifting.

allied health personnel Specially trained

and licensed (when necessary) health

workers other than physicians, dentists,

optometrists, chiropractors, podiatrists, and

nurses. The term has no constant or agreed-

upon detailed meaning; sometimes used

synonymously with paramedical personnel,

sometimes meaning all health workers who

perform tasks that must otherwise be

performed by a physician, and at other times

referring to health workers who do not

usually engage in independent practice.

allowable costs Items or elements of an

institution’s costs that are reimbursable

under a payment formula. Both Medicare

and Medicaid reimburse hospitals on the

basis of only certain costs. Allowable costs

may exclude, for example, luxury

accommodations, costs that are not

reasonable expenditures that are unnecessary

for the efficient delivery of health services

to persons covered under the program in

question, or depreciation on a capital

expenditure that was disapproved by a

health-planning agency.

alternative delivery systems A phrase used

to describe all forms of health care delivery

except traditional fee-for-service, private

practice and inpatient hospitalization. The

term may also include HMOs, PPOs, IPAs,

and other systems of providing health care.

American Association of Health Plans

(AAHP) The trade organization that

represents managed care organizations

(HMOs and PPOs).

ambulatory care All types of health

services that are provided on an outpatient

basis, in contrast to services provided in the

home or to persons who are inpatients.

While many inpatients may be ambulatory,

the term ambulatory care usually implies

that the patient must travel to a location to

receive services that do not require an

overnight stay. See also ambulatory setting

and outpatient.

ambulatory setting A type of institutional

organized health setting in which health

services are provided on an outpatient basis.

Ambulatory care settings may be either

mobile (when the facility is capable of being

moved to different locations) or fixed (when

the person seeking care must travel to a

fixed service site).

amendment A formal document changing

the provisions of an insurance policy signed

jointly by the insurance company and by the

policyholder or his authorized representative

See also endorsement.

Vermont Health Care Resources 5 Health Care Terms

ancillary services Supplemental services,

including laboratory, radiology, physical

therapy and inhalation therapy, which are

provided in conjunction with medical or

hospital care.

annual out of pocket maximum The most

you will have to pay in any given year for all

services received under an insurance policy.

This amount includes co-payments,

coinsurance and deductibles. If you exceed

this amount, the insurance company will pay

all other expenses for the remainder of that

year.

antitrust A legal term encompassing a

variety of efforts on the part of government

to assure that sellers do not conspire to

restrain trade or fix prices for their goods or

services in the market.

any willing provider laws Laws that

require managed care plans to contract with

all health care providers that meet their

terms and conditions.

appropriateness Appropriate health care is

care for which the expected health benefit

exceeds the expected negative consequences

by a wide enough margin to justify

treatment.

Area Health Education Center (AHEC)

An organization or organized system of

health and educational institutions whose

purpose is to improve the supply,

distribution, quality, use and efficiency of

health care personnel in specific medically

underserved areas. AHEC’s objectives are to

educate and train the health personnel

specifically needed by the underserved areas

and to decentralize health workforce

education, thereby increasing supply and

linking the health and educational

institutions in scarcity areas.

assignment A process in which a Medicare

beneficiary agrees to have Medicare’s share

of the cost of a service paid directly

(“assigned”) to a doctor or other provider,

and the provider agrees to accept the

Medicare approved charge as payment in

full. Medicare pays 80 percent of the cost

and the beneficiary 20 percent, for most

services. See participating physician.

authorization The process of receiving

approval from an insurance company for a

specific service from a specific provider

before you get that service. See referral.

average manufacturer price (AMP) The

price at which the manufacturer sells drugs

to purchasers. There is an AMP for

wholesalers and an AMP for pharmacies.

For sales to wholesalers, AMP represents

the Wholesale Acquisition Cost after all

discounts. For sales directly to pharmacies,

AMP represents the price pharmacies pay

for drugs after all the discounts they receive.

average wholesale price (AWP) The AWP

is the price that pharmaceutical

manufacturers suggest that wholesalers

charge retail pharmacies. Manufacturers

generally offer lower prices or rebates to

favored customers that have purchasing

power, such as large insurance companies or

governments, meaning that those customers

pay significantly less than the AWP.

avoidable hospital condition Medical

diagnosis for which hospitalization could

have been avoided if ambulatory care had

been provided in a timely and efficient

manner.

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bad debt Income lost to a provider because

of failure of patients to pay amounts owed.

Bad debt may sometimes be recovered by

increasing charges to paying patients. Some

cost-based reimbursement programs

reimburse certain bad debt. The impact of

the loss of revenue from bad debt may be

partially offset for proprietary institutions by

the fact that income tax is not payable on

income not received.

balance billing In Medicare and private fee-

for-service health insurance, the practice of

billing patients for charges that exceed the

amount that the health plan will pay. Under

Medicare, the excess amount cannot be

more than 15 percent above the approved

charge. See approved charge and

participating physician.

Balanced Budget Act of 1997 (BBA) 1)

created the Children’s Health Insurance

Program, which expanded coverage to poor

children not covered under Medicaid; 2)

added a new part to Medicare, called

Medicare+Choice, which includes an array

of private health plan options among which

beneficiaries may choose; 3) gave states

greater authority to structure their Medicaid

programs, including the authority to

mandatorily enroll beneficiaries without a

waiver from HHS; and 4) added new

beneficiary protections to both Medicaid and

Medicare.

basic health services Benefits that all

federally qualified HMOs must offer, as

defined under Subpart A, 100.112 of the

federal HMO regulations.

beneficiary An individual who receives

benefits from or is covered by an insurance

policy or other health care financing

program.

benefit cap A dollar limit placed on the

assistance that can be provided to an

individual in a given time period, which is

usually one year.

benefit package A group of guaranteed

services provided by a health plan to its

members.

benefits The health care services provided

under terms of a contract by an MCO or

other benefits administrator.

Blue Cross plan A non-profit, tax-exempt

insurance plan providing coverage for

hospital care and related services. (the

individual plans should be distinguished

from their national association, the Blue

Cross Association.) Historically, the plans

were largely the creation of the hospital

industry and designed to provide hospitals

with a stable source of revenue. A Blue

Cross plan should be a nonprofit community

service organization with a governing body

whose membership includes a majority of

public representatives.

Blue Shield plan A nonprofit, tax-exempt

insurance plan, which provides coverage for

physicians’ services. Blue Shield coverage is

sometimes sold in conjunction with Blue

Cross coverage, although this is not always

the case.

board certified Status granted a medical

specialist who completes a required course

of training and experience (residency) and

passes an examination in his/her specialty.

Individuals who have met all requirements

except examination are referred to as “board

eligible.”

Vermont Health Care Resources 7 Health Care Terms

Boren Amendment Part of the Medicaid

law, known by the name of its principle

Congressional sponsor. It provides that state

payment for hospitals and nursing facilities

must be reasonable and adequate to meet the

costs incurred by efficiently and

economically operated facilities to provide

care and services meeting state and federal

standards.

bulk-purchasing programs Single or

multi-state programs that combine various

groups or programs—such as state

employees, the Medicaid program, the

pharmacy assistance program—to create a

larger group that can negotiate better drug

prices from manufacturers. Bulk-purchasing

programs may include people without

prescription drug insurance.

capital Fixed or durable non-labor inputs or

factors used in the production of goods and

services, the value of such factors, or the

money specifically allocated for their

acquisition or development. Capital costs

include, for example, the buildings, beds and

equipment used in the provision of hospital

services. Capital assets are usually thought

of as permanent and durable as distinguished

from consumable such as supplies.

capital costs Depreciation, interest, leases

and rentals, taxes and insurance on tangible

assets like physical plant and equipment.

capital expenditure review A review of

proposed capital expenditures of hospitals

and/or other health facilities to determine the

need for, and appropriateness of, the

proposed expenditures. The review is done

by a designated regulatory agency and has a

sanction attached which prevents or

discourages unneeded expenditures.

capitation A method of payment for health

services in which an individual or

institutional provider is paid a fixed amount

for each person served, without regard to the

actual number or nature of services provided

to each person in a set period of time.

Capitation is the characteristic payment

method in certain health maintenance

organizations. It also refers to a method of

Federal support of health professional

schools. Under these authorizations, each

eligible school receives a fixed payment,

called a “capitation grant” from the Federal

government for each student enrolled.

care management A process by which

providers work to improve the quality of

care by analyzing variations in and

outcomes for current practice in the care of

specific health conditions. An intervention

(quality improvement) is designed to reduce

the variations in care, optimize the use of

generalists and specialists, and to measure

and improve the outcome, while reducing

costs if possible.

carrier A private organization, usually an

insurance company that finances health care.

carve in A model of delivering and

financing healthcare services in which

mental health and/or substance abuse

services are provided under the same

delivery system as physical health care; the

integration of behavioral health care with

physical health care.

carve out Regarding health insurance, an

arrangement whereby an employer

eliminates coverage for a specific category

of services (e.g., vision care, mental

health/psychological services and

prescription drugs) and contracts with a

separate set of providers for those services

according to a predetermined fee schedule or

capitation arrangement. Carve out may also

refer to a method of coordinating dual

coverage for an individual.

carve-out service A “carve-out” is typically

a service provided within a standard benefit

package but delivered exclusively by a

designated provider or group. Mental health

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services are a typical carve-out within many

insurance plans.

case management The monitoring and

coordination of treatment rendered to

patients with specific diagnosis or requiring

high-cost or extensive services.

case manager A clinician who works with

consumers, providers and insurers to

coordinate services.

case-mix A measure of the mix of cases

being treated by a particular health care

provider that is intended to reflect the

patients’ different needs for resources. Case

mix is generally established by estimating

the relative frequency of various types of

patients seen by the provider in question

during a given time period and may be

measured by factors such as diagnosis,

severity of illness, utilization of services and

provider characteristics.

catastrophic health insurance Health

insurance that provides protection against

the high cost of treating severe of lengthy

illnesses or disability. Generally such

policies cover all, or a specified percentage

of, medical expenses above an amount that

is the responsibility of another insurance

policy up to a maximum limit of liability.

catchment area A geographic area defined

and served by a health program or

institution, such as a hospital or community

mental health center that is delineated on the

basis of such factors as population

distribution, natural geographic boundaries

and transportation accessibility. By

definition, all residents of the area needing

the services of the program are usually

eligible for them, although eligibility may

also depend on additional criteria.

categorically needy Persons whose

Medicaid eligibility is based on their family,

age or disability status. Persons not falling

into these categories cannot quality, no

matter how low their income. The Medicaid

statute defines over 50 distinct population

groups as potentially eligible, including

those for whom coverage is mandatory in all

states and those that may be covered at a

state’s option. The scope of covered services

that states provide to the categorically needy

is much broader than the minimum scope of

services for the other, optional groups

receiving Medicaid benefits. See medically

needy.

Centers for Disease Control and

Prevention (CDC) The Centers for Disease

Control and Prevention, based in Atlanta,

Georgia is charged with protecting the

nations’ public health by providing direction

in the prevention and control of

communicable and other diseases and

responding to public health emergencies.

Within the U.S. Public Health Service, CDC

is the agency that led efforts to prevent such

diseases as malaria, polio, small pox, toxic

shock syndrome, Legionnaire’s disease, and

more recently, acquired immunodeficiency

syndrome (AIDS), and tuberculosis. CDC’s

responsibilities evolve as the agency

addressed contemporary threats to health,

such as injury, environmental and

occupational hazards, behavioral risks and

chronic diseases.

Centers for Medicare and Medicaid

Services (CMS) CMS is the new name for

the agency within the U. S. Department of

Health and Human Services (HHS) that

oversees Medicare and Medicaid. Formerly

known as the Health Care Financing

Administration (HCFA).

certificate The formal document received

by an employee that describes the specific

benefits covered by the policyholder’s

health care contract with the insurer. The

certificate contains co-payment and/or

deductible requirements, specific coverage

details, exclusions, and the responsibilities

of both the certificate holder and the

insurance company.

Vermont Health Care Resources 9 Health Care Terms

Certificate of Need (CON) A certificate

issued by a governmental body to an

individual or organization proposing to

construct or modify a health facility, acquire

major new medical equipment, modify a

health facility, or offer a new or different

health service. Such issuance recognizes that

a facility or service, when available, will

meet the needs of those for whom it is

intended. CON is intended to control

expansion of facilities and services by

preventing excessive or duplicate

development of facilities and services.

certification The process by which a

governmental or nongovernmental agency or

association evaluates and recognizes an

individual, institution, or educational

program as meeting predetermined

standards. One so recognized is said to be

“certified.” It is essentially synonymous

with accreditation, except that certification

is usually applied to individuals, and

accreditation to institutions. Certification

programs are generally nongovernmental

and do not exclude the uncertified from

practice as do licensure programs.

CHAMPUS (Civilian Health and Medical

Program of the Uniformed Services) A

Department of Defense program supporting

private sector care for military dependents.

chronic care Care and treatment rendered to

individuals whose health problems are of a

long-term and enduring nature.

Rehabilitation facilities, nursing homes and

mental hospitals may be considered chronic

care facilities.

chronic disease A disease which has one or

more of the following characteristics: is

permanent, leaves residual disability; is

caused by nonreversible pathological

alternation, requires special training of the

patient for rehabilitation, or may be

expected require a long period of

supervision, observation or care.

clinic A facility, or part of one, devoted to

diagnosis and treatment of outpatients.

“Clinic” is irregularly defined. It may either

include or exclude physicians’ offices; may

be limited to describing facilities that serve

poor or public patients; and may be limited

to facilities which graduate or graduate

medical education is done.

clinical criteria Criteria by which managed

care organizations (MCOs) decide whether a

specific treatment setting is the appropriate

level of care for a given consumer.

closed access A managed health care

arrangement in which covered persons are

required to select providers only from the

plan’s participating providers. Also called an

Exclusive Provider Organization (EPO).

CMS Center for Medicare and Medicaid

Services (formerly CHFA the Health Care

Financing Administration)

COBRA (Consolidated Omnibus Budget

Reconciliation Act of 1986) This federal

law allows employees (and their

dependents) who had health insurance

coverage through their employer to purchase

and continue the coverage under certain

circumstances for a limited period of time

after their employment ends.

coinsurance 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 all, or certain

specified, covered medical expenses in

Vermont Health Care Resources 10 Health Care Terms

excess of deductible amounts payable by the

insured. The insured is then liable for the

remainder of the costs until their maximum

liability is reached.

community-based care The blend of health

and social services provided to an individual

or family in their place of residence for the

purpose of promoting, maintaining, or

restoring health or minimizing the effects of

illness and disability.

Community Health Accreditation

Program (CHAP) Similarly to JCAHO,

CHAP is a national, private, not-for profit

agency that accredits home health care

organizations. CHAP is a subsidiary of the

National League of Nursing. CHAP

establishes guidelines for the operation of

home health agencies.

community health center An ambulatory

health care program (defined under Section

330 of the Public Health Service Act)

usually serving a catchment area that has

scarce or nonexistent health services or a

population with special health needs;

sometimes known as “neighborhood health

center.” Community health centers attempt

to coordinate Federal, State and local

resources in a single organization capable of

delivering both health and related social

services to a defined population.

While such a center may not directly

provide all types of health care, it usually

takes responsibility to arrange all health care

services needed by its patient population.

See also Federally Qualified Health Center

or FQHC

Community Health Management

Information Systems (CHMIS) An

automated communication network

supporting the transfer of clinical and

financial information, currently under

development with the support of the John A.

Hartford Foundation.

Community Mental Health Center

(CMHC) An entity that provides

comprehensive mental health services

(principally ambulatory), primarily to

individuals residing or employed in a

defined catchment area.

community rating A method of calculating

health plan premiums using the average cost

of actual or anticipated health services for

all subscribers within a specific geographic

area. The premium does not vary for

different groups or subgroups of subscribers

on the basis of their specific claims

experience.

community rating by class (class rating)

(CRC) For federal qualified HMOs, the

Community Rating by Class (CRC)

adjustment of community-rated premiums

on the basis of such factors as age, sex,

family size, marital status and industry

classification. These health plan premiums

reflect the experience of all enrollees of a

given class within a specific geographic

area, rather than the experience of any one

employer.

Community Medical Plan (CMP) A state-

licensed entity, other than a federally

qualified HMO, that signs a Medicare Risk

Contract and agrees to assume financial risk

for providing care to Medicare eligible on a

prospective, prepaid basis.

comprehensive medical A health insurance

policy designed to cover a broad range of

hospital, doctor and other related services

(for example, lab or radiology services).

Consumer Price Index (CPI) A

measurement of inflation at the consumer

level. Many state programs use the CPI as a

measure of changes in consumer buying

power and increase the level of benefit

provided through pharmacy assistance

programs to reflect those changes. The

Bureau of Labor Statistics within the

Department of Labor tracks the CPI.

continuing medical education (CME)

Formal education obtained by a health

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professional after completing his/her degree

and full-time postgraduate training. For

physicians, some states require CME

(usually 50 hours per year) for continued

licensure, as do some specialty boards for

certification.

continuum of care The availability of a

broad range of treatment services so that

care can be flexible and customized to meet

a consumer’s needs.

contract The formal legal document, also

known as the “policy,” that describes the

agreement between the policyholder and the

insurance carrier. This document contains

the specific responsibilities of the

policyholder and the insurance carrier in

relation to the benefits provided under the

contract.

contract discounts An economic incentive

offered to consumers to encourage them to

use providers belonging to a group or

organization preferred by a health plan.

Usually, the out-of-pocket expenses incurred

by the patient are reduced.

coordination of benefits (COB) Procedures

used by insurers to avoid duplicate payments

for losses insured under more than one

insurance policy. A coordination of benefits,

or “nonduplication,” clause in either policy

prevents double payment by making one

insurer the primary payer, and assuring that

not more than 100 percent of the cost is

covered. Standard rules determine which of

two or more plans, each having COB

provisions, pay its benefits in full and which

becomes the supplementary payer on a

claim.

co-payment or co-pay A form of cost

sharing in which a fixed amount of money is

paid by the insured for each health care

service provided.

cost-benefit analysis An analytic method in

which a program’s cost is compared to the

program’s benefits for a period of time,

expressed in dollars, as an aid in

determining the best investment of

resources. For example, the cost of

establishing an immunization service might

be compared with the total cost of medical

care and lost productivity that will be

eliminated as a result of more persons being

immunized. Cost-benefit analysis can also

be applied to specific medical tests and

treatments.

cost cap A predetermined ceiling, above

which costs are not reimbursed. Providers

are only reimbursed for their costs up to the

cost limit; providers assume the risk for any

costs above the limit. Note that “cost caps”

are not the same as “capitation”—the two

terms are often confused and used

interchangeably when, in fact, their

meanings are completely different.

cost center An accounting device whereby

all related costs attributable to some

“financial center” within an institution, such

as department or program are segregated for

accounting or reimbursement purposes.

cost containment Control or reduction of

inefficiencies in the consumption, allocation

or production of health care services that

contribute to higher than necessary costs.

(Inefficiencies in consumption can occur

when health services are inappropriately

utilized; inefficiencies in allocation exist

when health services could be delivered in

less costly settings without loss of quality;

and inefficiencies in production exist when

the costs of producing health services could

be reduced by using a different combination

of resources.

cost contract An arrangement between a

managed health care plan and CMS under

Section 1876 or 1833 of the Social Security

Act, under which the health plan provides

health services and is reimbursed its costs.

The beneficiary can use providers outside

the plan’s provider network.

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cost sharing Any provision of a health

insurance policy that requires the insured

individual to pay some portion of medical

expenses. The general term includes

deductibles, co-payments and coinsurance.

cost shifting The condition that occurs when

health care providers are not reimbursed or

not fully reimbursed for providing health

care so charges to those who pay must be

increased. This typically results from

providing health care to the medically

indigent or Medicare patients.

covered expenses Hospital, medical and

other health care expenses incurred by

consumers that entitle them to a payment of

benefits under a health insurance policy.

covered services Health care services

covered by an insurance plan.

credentialing The recognition of

professional or technical competence. The

credentialing process may include

registration, certification, licensure,

professional association membership, or the

award of a degree in the field. Certification

and licensure affect the supply of health

personnel by controlling entry into practice

and influence the stability of the labor force

by affecting geographic distribution,

mobility, and retention of workers.

Credentialing also determines the quality of

personnel by providing standards for

evaluating competence and by defining the

scope of functions and how personnel may

be used.

Critical Access Hospital (CAH) Created by

Congress in the Balanced Budget Act of

1997, the CAH program is designed to

support limited-service hospitals located in

rural areas. To be designated a CAH, a

hospital must be located in a rural area,

provide 24-hour emergency care services,

have an average patient length of stay of 96

hours or less, be more than 35 miles from a

hospital or another CAH or more than 15

miles in areas with mountainous terrain or

only secondary roads OR certified by the

State as being a “necessary provider” of

healthcare services to residents in the area.

Current Procedural Terminology, fourth

edition (CPT-4) A manual that assigns five-

digit codes to medical services and

procedures to standardize claims processing

and data analysis.

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.

customary, prevailing and reasonable

(CPR) Current method of paying physicians

under Medicare. Payment for a service is

limited to the lowest of (1) the physician’s

billed charge for the service, (2) the

physician’s customary charge for the

service, or (3) the prevailing charge for that

service in the community. Similar to the

Usual, Customary, and Reasonable system

used by private insurers.

daily care Medicare and Medicaid rules

limit the amount of service a home health

agency can provide. In order to qualify for

these home care benefits a patient must be in

need of “intermittent” as opposed to daily,

24-hour care. Medicare usually defines

intermittent care as care needed five times a

week or less.

deductible The amount of loss or expense

that must be incurred by an insured or

otherwise covered individual before an

insurer will assume any liability for all or

part of the remaining cost of covered

services. Deductibles may be either fixed-

dollar amounts or the value of specified

services (such as two days of hospital care

or one physician visit). Deductibles are

usually tied to some reference period over

which they must be incurred, e.g., $100 per

calendar, benefit period, or spell of illness.

Vermont Health Care Resources 13 Health Care Terms

defined benefit Funding mechanisms for

pension plans that can also be applied to

health benefits. Typical pension approaches

include: (1) pegging benefits to a percentage

of an employee’s average compensation

over his/her entire service or over a

particular number of years; (2) calculation of

a flat monthly payment; (3) setting benefits

based upon a definite amount for each year

of service, either as a percentage of

compensation for each year of service or as

a flat dollar amount for each year of service.

defined contribution Funding mechanism

for pension plans that can also be applied to

health benefits based on a specific dollar

contribution, without defining the services to

be provided.

deinstitutionalization Policy that calls for

the provision of supporting care and

treatment for medically and socially

dependent individuals in the community

rather than an institutional setting.

dental insurance A contract that reimburses

an insured for some or all of the costs of

caring for teeth, oral surgery and gums.

developmental disability A severe, chronic

disability which is attributable to a mental or

physical impairment or combination of

mental and physical impairments; is

manifested before the person attains age 22;

is likely to continue indefinitely; results in

substantial functional limitations in three or

more of the following areas of major life

activity: self-care, receptive an expressive

language, learning, mobility, self-direction,

capacity of independent living, economic

self-sufficiency; and reflects the person’s

needs for a combination and sequence of

special, interdisciplinary or generic care

treatments or services that are of lifelong or

extended duration and are individually

planned and coordinated.

Diagnosis Related Groups (DRGs)

Groupings of diagnostic categories drawn

from the International Classification of

Diseases and modified by the presence of a

surgical procedure, patient age, presence or

absence of significant comorbidities or

complications, and other relevant criteria.

DRGs are the case-mix measure used in

Medicare’s prospective payment system.

direct contracting A contractual

relationship in which health services are

provided by a provider or group of providers

contracting directly with an employer or

public sector client. Finances go directly

from an employer or the public system to the

provider without passing through a middle

entity, such as managed care organization or

third party insurance carrier.

disability Any limitation of physical, mental

or social activity of an individual as

compared with other individuals of similar

age, sex and occupation. Frequently refers to

limitation of a person’s usual or major

activities, most commonly vocational. There

are varying types (functional, vocational,

learning), degrees (partial, total) and

durations (temporary, permanent) of

disability. Public programs often provide

benefits for specific disabilities, such as total

and permanent.

Vermont Health Care Resources 14 Health Care Terms

disability insurance A type of insurance

that provides the policyholder with

replacement income when he or she is

unable to perform the major duties of his or

her regular occupation, or an occupation for

which the policyholder is qualified by

reason of education, training or experience.

discharge The release of a patient from a

provider’s care, usually referring to the date

at which a patient checks out of a hospital.

discounted fee for service A contracted

payment rate that is discounted from the

provider’s customary fee. This agreement

may be between the Managed Care

Organization (MCO) and the provider or

between the consumer and the provider.

disenrollment The process of voluntary or

involuntary termination of coverage.

Voluntary termination includes a member

quitting because s/he prefers to leave.

Involuntary termination includes a member

leaving the plan because of switching jobs

or when the plan terminates a member’s

coverage against a member’s will.

disease May be defined as a failure of the

adaptive mechanisms of an organism to

counteract adequately, normally or

appropriately to stimuli and stresses to

which it is subjected, resulting in a

disturbance in the function or structure of

some part of the organism. This definition

emphasizes that disease is multifactorial and

may be prevented or treated by changing

any or a combination of the factors. Disease

is a very elusive and difficult concept to

define, being largely socially defined.

dispensing fee A transaction fee that

pharmacists charge to process and fill a

prescription.

Disproportionate Share Hospital (DSH)

Adjustment (pronounced “dish”) Medicare

makes special payments to hospitals that

treat a disproportionately high share of low-

income patients. The DSH payment

adjustment was designed to compensate

hospitals that treat a greater proportion of

low-income persons. Such patients were

believed to incur higher-than-average costs,

so hospitals that served many of them would

likely encounter greater costs for their

Medicare patients than would other

facilities. These hospitals often have higher

uncompensated care costs and fewer patients

with private insurance than other hospitals.

In recent years, DSH payments have been

increasingly viewed as serving the broader

purpose of ensuring continued access to

hospital care for Medicare beneficiaries and

low-income populations.

drug formulary A listing of prescription

medications that are preferred or required

for use within a health plan. Often, the

medications tend to be the cheapest rather

than the most effective. A plan that has

adopted an open or voluntary formulary

allows coverage for both formulary and non-

formulary medications. A plan that has

adopted a closed, select or mandatory

formulary limits coverage to those drugs in

the formulary unless an exception is made

through a prior authorization process.

drug treatment protocols Documents that

outline the clinical decision-making

processes related to prescribing drugs.

Protocols typically include a detailed

clinical decision-making tree and generally

recommend initiating therapy with the

lowest-cost alternative.

drug utilization review (DUR) Review of

physician prescribing, typically used to

control costs and monitor quality of care.

DUR programs are based on prescribing

information collected electronically. They

can be used prospectively to alert

pharmacists when a patient might be taking

drugs that could adversely interact. They can

be used retrospectively to review physician

prescribing practices.

dually eligible To be eligible for health

benefits under the federal Medicare program

Vermont Health Care Resources 15 Health Care Terms

and the federal/state Medicaid programs

simultaneously.

durable medical equipment Prescribed

medical equipment (e.g., wheelchair,

respirator) that can be used for an extended

period of time.

Early and Periodic Screening, Diagnosis

and Treatment Program (EPSDT) A

program mandated by law as part of the

Medicaid program. The law requires that all

states have in effect a program for eligible

children under age 21 to ascertain their

physical or mental defects and to provide

such health care treatments and other

measures to correct or ameliorate defects

and chronic conditions discovered. The State

programs also have active outreach

components to inform eligible persons of the

benefits available to them, to provide

screening and, if necessary, to assist in

obtaining appropriate treatment.

effectiveness The net health benefits

provided by a medical service or technology

for typical patients in community practice

settings.

efficacy The net health benefits achievable

under ideal conditions for carefully selected

patients.

electronic claim A digital representation of

a medical bill generated by a provider or by

the provider’s billing agent for submission

using telecommunications to a health

insurance payer.

electronic data interchange (EDI) The

mutual exchange of routine information

between businesses using standardized,

machine-readable formats.

emergency medical services (EMS)

Services utilized in responding to the

perceived individual need for immediate

treatment for medical, physiological, or

psychological illness or injury.

Employee Retirement Income Security

Act (ERISA) A Federal act, passed in 1974

that established new standards and

reporting/ disclosure requirements for

employer-funded pension and health benefit

programs. To date, self-funded health

benefit plans operating under ERISA have

been held to be exempt from state insurance

laws.

encounter A contract between an individual

and the health care system for a health care

service or set of services related to one or

more medical conditions.

endorsement A formal document that

changes the provisions of an insurance

policy. See also amendment.

Enrollment The total number of covered

persons in a health plan. The term also refers

to the process by which a health plan signs

up groups and individuals for membership

or the number of enrollees who sign up in

any one group.

epidemic A group of cases of a specific

disease or illness clearly in excess of what

one would normally expect in particular

geographic area. There is no absolute

criterion for using the term epidemic; as

standards and expectations change, so might

the definition of an epidemic, e.g., an

epidemic of violence.

epidemiology The study of the patterns of

determinants and antecedents of disease in

human populations. Epidemiology utilizes

biology, clinical medicine and statistics in

an effort to understand the etiology (causes)

of illness and/or disease. The ultimate goal

of the epidemiologist is not merely to

identify underlying causes of a disease but

to apply findings to disease prevention and

health promotion.

Vermont Health Care Resources 16 Health Care Terms

exclusions Specific conditions or

circumstances listed in the policy that the

health insurer will not pay for.

exclusive provider arrangement (EPA) An

indemnity or service plan that provides

benefits only if care is rendered by the

institutional and professional providers with

which it contracts (with some exceptions for

emergency and out-of-area services).

Exclusive Provider Organization (EPO)

See closed access.

exclusivity clause A clause in a contract

which prohibits healthcare providers from

participating in more than one MCO

(Managed Care Organization) network.

expenditure target (ET) A mechanism to

adjust fee updates (for the fees themselves)

based on how actual expenditures in an area

compare to a target for those expenditures.

expense Funds actually spent or incurred

providing goods, rendering services, or

carrying out other mission related activities

during a period. Expenses are computed

using accrual accounting techniques that

recognize costs when incurred and revenues

when earned and include the effect of

accounts receivables and accounts payable

on determining annual income.

experience rating A method of adjusting

health plan premiums based on the historical

utilization data and distinguishing

characteristics of a specific subscriber

group.

explanation of benefits (EOB) The

statement sent to an insured by the health

plan listing services provided, the amount

billed and the payment made.

External Quality Review Organization

(EQRO) States are required to contract with

an entity that is external to and independent

of the State and its managed care contractors

to perform an annual review of the quality of

services.

family practice A form of specialty practice

in which physicians provide continuing

comprehensive primary care within the

context of the family unit.

favorable selection A tendency for

utilization of health services in a population

group to be lower than expected or

estimated.

federal poverty level (FPL) Guidelines

established by the U.S. Department of

Health and Human Services that are used to

determine an individual’s or family’s

eligibility for various federal and non-

federal programs. Federal poverty thresholds

vary by family size and, to a small extent,

location (Alaska and Hawaii have higher

rates than the 48 contiguous states and the

District of Columbia). In 2004, in the

contiguous United States, the federal

poverty level is $9,310 for an individual and

$12,490 for a family of two and $18,850 for

a family of four.

Federal Medicaid Managed Care Waiver

Program The process by which states

obtain permission to implement managed

care programs for their Medicaid or other

categorically eligible beneficiaries.

federal qualification A status defined by

the HMO Act, conferred by HCFA after

conducting an extensive evaluation of the

HMO’s organization and operations. An

organization must be federally qualified or

be designated as a CMP (competitive

medical plan) to be eligible to participate in

Medicare cost and risk contracts. Likewise,

an HMO must be federally qualified or State

plan defined to participate in the Medicaid

managed care program.

federal supply schedule (FSS) The price

available to all federal government

Vermont Health Care Resources 17 Health Care Terms

purchasers. FSS prices are intended to equal

or better the prices manufacturers charge

their “most favored” non-federal customers

under comparable terms.

Federally Qualified HMO An HMO that

has satisfied certain federal qualifications

pertaining to organizational structure,

provider contracts, health service delivery

information, utilization review/quality

assurance, grievance procedures, financial

status, and marketing information as

specified in Title XIII of the Public Health

Service Act.

Federally Qualified Health Center

(FQHC) A federal payment option that

enables qualified providers in Medically

Underserved Areas (MUA/MUP) to receive

cost-based Medicare and Medicaid

reimbursement and allows for the direct

reimbursement of nurse practitioners,

physician assistants and certified nurse

midwives. Federal legislation creating the

FQHC category was enacted in 1989. See

also CHC

fee-for-service Method of billing for health

services under which a physician or other

practitioner charges separately for each

patient encounter or service rendered; it is

the method of billing used by the majority of

U.S. physicians. Under a fee-for-service

payment system, expenditures increase if the

fees themselves increase, if more units of

service are provided, or if more expensive

services are substituted for less expensive

ones. This system contrasts with salary, per

capita, or other prepayment systems, where

the payment to the physician is not changed

with the number of services actually used.

fee schedule An exhaustive list of physician

services in which each entry is associated

with a specific monetary amount that

represents the approved payment level for a

given insurance plan.

fiduciary Relating to, or founded upon, a

trust or confidence. A fiduciary relationship

exists where an individual or organization

has an explicit or implicit obligation to act in

behalf of another person or organization’s

interests in matters that affect the other

person or organization. A physician has such

a relation with his/her patient, and a hospital

trustee has one with a hospital.

fiscal intermediary A private organization,

usually an insurance company, that has a

contract with CMS to process claims under

Parts A of Medicare.

fiscal soundness The requirement that

managed care organizations have sufficient

operating funds, on hand or available in

reserve, to cover all expenses associated

with services for which they have assumed

financial risk. This term also refers to an

MCO’s (Managed Care Organization)

ability to remain solvent.

formulary A list of drugs covered by a

health plan or pharmacy assistance program.

In some cases, the payers will only cover

formulary drugs. More commonly, non-

formulary drugs are available to consumers,

but the consumer must pay a higher co-

payment (see “Tiered Formulary”).

freedom of choice A Medicaid provision

that requires states to allow recipients the

freedom to choose providers. States can seek

CMS Section 1915 and 1115 waivers of the

freedom of choice requirement.

fully capitated A stipulated dollar amount

established to cover the cost of all health

care services delivered to a person.

gag clause A clause within a contract that

restricts the ability of a provider to discuss

treatment options with a consumer that may

benefit the consumer but are not covered by

the health plan.

gatekeeper The primary care practitioner in

managed care organizations that determine

Vermont Health Care Resources 18 Health Care Terms

whether the presenting patient needs to see a

specialist or requires other non-routine

services. The goal is to guide the patient to

appropriate services while avoiding

unnecessary and costly referrals to

specialists.

general practice A form of practice in

which physicians without specialty training

provide a wide range of primary health care

services to patients.

generalists Physicians who are

distinguished by their training as not

limiting their practice by health condition or

organ system, who provide comprehensive

and continuous services, and who make

decisions about treatment for patients

presenting with undifferentiated symptoms.

Generalists typically include family

practitioners, general internists and general

pediatricians, and many believe it also

includes Obstetrician-Gynecologists.

generic drug A drug product that is no

longer covered by patent protection and thus

may be produced and/or distributed by many

firms.

global budgeting A method of hospital cost

containment in which participating hospitals

must share a prospectively set budget.

Method for allocating funds among hospitals

may vary but the key is that the participating

hospitals agree to an aggregate cap on

revenues that they will receive each year.

Global budgeting may also be mandated

under a universal health insurance system.

global fee A total charge for a specific set of

services, such as obstetrical services that

encompass prenatal, delivery and post-natal

care.

grace period The period of time after a

premium becomes due in which you can still

pay for the insurance and keep it in force.

Vermont law requires health insurers to

provide at least 14 days’ notice before

canceling a policy because you failed to

make the payment by the regular due date. If

you pay within the 14-day period, the

company cannot cancel the policy.

Graduate Medical Education (GME)

Medical education after receipt of the

Doctor of Medicine (MD) or equivalent

degree, including the education received as

an intern, resident (which involves training

in a specialty) or fellow, as well as

continuing medical education. CMS partly

finances GME through Medicare direct and

indirect payments.

grievance procedure Defined process in a

health plan for consumers or health care

providers to use when there is disagreement

about a plan’s services, billing, or general

procedures.

group-model HMO An HMO that pays a

medical group a negotiated, per capita rate,

which the group distributes among its

physicians often under a salaried

arrangement. (See “Health Maintenance

Organization” and “Staff—Model HMO”).

group or network HMO An HMO that

contracts with one or more independent

group practices to provide services to its

members.

group practice A formal associate of three

or more physicians or other health

professionals providing health services.

Income from the practice is pooled and

redistributed to the members of the group

according to some prearranged plan (often,

but not necessarily, through partnership).

Groups vary a great deal in size,

composition and financial arrangements.

guaranteed eligibility A defined period of

time (3-6 months) that all patients enrolled

in prepaid health programs are considered

eligible for Medicaid, regardless of their

actual eligibility for Medicaid. A State may

apply to HCFA for a waiver to incorporate

this into their contracts.

Vermont Health Care Resources 19 Health Care Terms

guaranteed issue Requirement that health

plans offer coverage to all businesses or

individual who wish to purchase coverage,

during some period each year.

guaranteed renewable policy A health

insurance policy that must be continued in

force, and must be renewed regularly, if the

premium is paid on time.

guidelines Systematic sets of rules for

choosing among alternate drug therapies.

Treatment guidelines, or protocols, generally

require that the drug therapy with the fewest

side effects (often the oldest and cheapest

therapy) be tried first, before more potent

therapies are recommended. Administrative

guidelines generally focus more on cost and

may require that the least expensive therapy

be used first; only if that fails should more

expensive therapies be used.

handicapped As defined by Section 504 of

the Rehabilitation Act of 1973, any person

who has a physical or mental impairment

that substantially limits one or more major

life activity, has a record of such

impairment, or is regarded as having such an

impairment.

health The state of complete physical,

mental and social well-being and not merely

the absence of disease or infirmity. It is

recognized, however, that health has many

dimensions (anatomical, physiological, and

mental) and is largely culturally defined.

The relative importance of various

disabilities will differ depending upon the

cultural milieu and the role of the affected

individual in that culture. Most attempts at

measurement have been assessed in terms of

morbidity and mortality.

Health Care Financing Administration

(HCFA) The government agency within the

Department of Health and Human Services

that directs the Medicare and Medicaid

programs (Titles XVIII and XIX of the

Social Security Act) and conducts research

to support those programs. (The agency has

been renamed CMS—Centers for Medicare

and Medicaid Services)

health care provider An individual or

institution that provides medical services

(e.g., a physician, hospital, laboratory). This

term should not be confused with an

insurance company that “provides”

insurance.

Health Insurance Portability and

Accountability Act (HIPAA) A federal law

to help workers maintain coverage when

they change jobs. Limits the ability of plans

to refuse to pay for “pre-existing

conditions.” Additionally, privacy and

security provisions regulate personal health

information and electronic transactions.

Covered entities under HIPAA include most

health plans, health care clearing houses and

those health care providers who conduct

certain financial and administrative

transactions electronically.

health education Any combination of

learning opportunities designed to facilitate

voluntary adaptations of behavior (in

individuals, groups or communities)

conducive to health.

health facilities Collectively, all physical

plants used in the provision of health

services; usually limited to facilities built for

the purpose of providing health care, such as

hospitals and nursing homes. They do not

include an office building that includes a

physician’s office. Health facility

classifications include: hospitals (both

general and specialty), long-term care

facilities, kidney dialysis treatment centers

and ambulatory surgical facilities.

health insurance Financial protection

against the medical care costs arising from

disease or accidental bodily injury. Such

insurance usually covers all or part of the

medical costs of treating the disease or

Vermont Health Care Resources 20 Health Care Terms

injury. Insurance may be obtained on either

an individual or a group basis.

Health Plan Employer Data and

Information Set (HEDIS) The Health Plan

Employer Data and Information Set is a set

of performance measures developed to

access the quality of managed care across

public and private sectors. It is a product of

the National Committee on Quality

Assurance.

Health Insuring Organization (HIO) An

entity that contracts on a prepaid, capitated

risk basis to provide comprehensive health

services to recipients.

health insurance purchasing cooperatives

(HIPCs) Public or private organizations that

secure health insurance coverage for the

workers of all member employers. The goal

of these organizations is to consolidate

purchasing responsibilities to obtain greater

bargaining clout with health insurers, plans

and providers, to reduce the administrative

costs of buying, selling and managing

insurance policies. Private cooperatives are

usually voluntary associations of employers

in a similar geographic region who band

together to purchase insurance for their

employees. Public cooperatives are

established by state governments to

purchase insurance for public employees,

Medicaid beneficiaries and other designated

populations.

Health Maintenance Organization

(HMO) An entity with four essential

attributes: (1) an organized system providing

health care in a geographic area, which

accepts the responsibility to provide or

otherwise assure the delivery of (2) an

agreed-upon set of basic and supplemental

health maintenance and treatment services to

(3) a voluntarily enrolled group of persons

and (4) for which services the entity is

reimbursed through a predetermined fixed,

periodic prepayment made by, or on behalf

of, each person or family unit enrolled. The

payment is fixed without regard to the

amounts of actual services provided to an

individual enrollee. Individual practice

associations involving groups or

independent physicians can be included

under the definition.

Health Manpower Shortage Area

(HMSA) An area or group that the U.S.

Department of Health and Human Services

designates as having an inadequate supply of

health care providers. HMSAs can include:

(1) an urban or rural geographical area, (2) a

population group for which access barriers

can be demonstrated to prevent members of

the group from using local providers, or (3)

medium and maximum-security correctional

institutions and public or non-profit private

residential facilities.

health personnel Collectively, all persons

working in the provision of health services,

whether as individual practitioners or

employees of health institutions and

programs whether or not professionally

trained, and whether or not subject to public

regulation. Facilities and health personnel

are the principal health resources used in

producing health services.

health plan An organization that provides a

defined set of benefits including private and

governmental plans, high-risk pools and

HMOs.

Health Plan Employer Data and

Information Set (HEDIS) National

Committee for Quality Assurance See above

health policy An insurance contract

consisting of a defined set of benefits. See

health insurance.

Health Professional Shortage Area

(HPSA) A federal designation of shortage

similar to the MUA/MUP. An area can be

designated as a HPSA based on the ratio of

clinical service providers to the population

of a specific geographic area or of a special

population within a geographic area. A

health care organization in a HPSA is

Vermont Health Care Resources 21 Health Care Terms

eligible to have the services of health care

professionals who receive loan forgiveness

or scholarships through the National Health

Service Corps.

health promotion Any combination of

health education and related organizational,

political and economic interventions

designed to facilitate behavioral and

environmental adaptations that will improve

or protect health.

Health Resources and Services

Administration (HRSA) One of eight

agencies of the U.S. Public Health Service,

HRSA has responsibility for addressing

resource issues relating to access, equity and

quality of health care, particularly to the

disadvantaged and underserved. HRSA

provides leadership assures the support and

delivery of primary health care services,

particularly in underserved areas and the

development of qualified primary care

health professionals and facilities to meet

the health needs of the nation. HRSA

focuses on support of states and

communities in their efforts to plan,

organize and delivery primary health care,

as well as strengthen the overall public

health system.

health service area (HSA)Geographic area

designated on the basis of such factors as

geography, political boundaries, population

and health resources, for the effective

planning and development of health

services.

health status The state of health of a

specified individual, group or population. It

may be measured by obtaining proxies such

as people’s subjective assessments of their

health; by one or more indicators of

mortality and morbidity in the population,

such as longevity or maternal and infant

mortality; or by sing the incidence or

prevalence of major diseases

(communicable, chronic or nutritional).

Conceptually, health status is the proper

outcome measure for the effectiveness of a

specific population’s medical care system,

although attempts to relate effects of

available medical care to variations in health

status have proved difficult.

Health Systems Agency (HSA) A health

planning agency created under the National

Health Planning and Resources

Development Act of 1974. HSAs were

usually nonprofit private organizations and

served defined health service areas as

designated by the States.

Hill-Burton Coined from the names of the

principal sponsors of the Public Law 79-725

(the Hospital Survey and Construction Act

of 1946); this program provided Federal

support for the construction of

modernization of hospitals and other health

facilities. Hospitals that have received Hill-

Burton funds incur an obligation to provide

a certain amount of charity care.

hold-harmless A contractual requirement

prohibiting a provider from seeking payment

from an enrollee for services rendered prior

to a health plan solvency.

holism Refers to the integration of mind,

body and spirit of a person and emphasizes

the importance of perceiving the individual

(regarding physical symptoms) in a “whole”

sense. Holism teaches that the health care

system must extend its focus beyond solely

the physical aspects of disease and particular

organ in question, to concern itself with the

whole person and the interrelationships

between the emotional, social, spiritual, as

well as physical implications of disease and

health.

home health care Health services rendered

in the home to the aged, disabled, sick or

convalescent individuals who do not need

institutional care. The services may be

provided by a visiting nurse association

(VNA) home health agency, county public

health department, hospital, or other

organized community group and may be

specialized or comprehensive. The most

Vermont Health Care Resources 22 Health Care Terms

common types of home health care are the

following—nursing services; speech,

physical, occupational and rehabilitation

therapy; homemaker services; and social

services.

homebound Medicare eligibility definition

that sometimes restricts coverage. In order

to be eligible for certain Medicare services,

the law requires that a physician certify the

client is confined to his/her home.

home health care Health services rendered

in the home to the aged, disabled, sick or

convalescent individuals who do not need

institutional care. The services may be

provided by a visiting nurse association

(VNA), home health agency, county public

health department, hospital or other

organized group and may be specialized or

comprehensive. The most common types of

home health care services include nursing

services; speech, physical and occupational

therapy; homemaker services; and social

services.

horizontal integration Merging of two or

more firms at the same level of production

in some formal, legal relationship. See

vertical integration.

hospice A program that provides palliative

and supportive care for terminally ill

patients and their families, either directly or

on a consulting basis with the patients’

physician or another community agency.

Originally a medieval name for a way

station of crusaders where they could be

replenished, refreshed and care for, hospice

is used her for an organized program of care

for people going through life’s “last station.”

The whole family is considered the unit of

care, and care extends through their period

of mourning.

hospital An institution whose primary

function is to provide inpatient diagnostic

and therapeutic services for a variety of

medical conditions, both surgical and

nonsurgical. In addition, most hospitals

provide some outpatient services,

particularly emergency care. Hospitals may

be classified by length of stay (short term or

long term), as teaching or non-teaching, by

major type of service (psychiatric,

tuberculosis, general and other specialties,

such as maternity, pediatric or ear, nose and

throat), and by type of ownership or control

(federal, state or local government; for-profit

and nonprofit). The hospital system is

dominated by the short-term, general,

nonprofit community hospital, often called a

voluntary hospital.

hospital affiliation A contract between an

HMO and a hospital in which the hospital

agrees to provide inpatient benefits to HMO

members according to terms negotiated and

a (usually discounted) payment schedule.

incidence In epidemiology, the number of

cases of disease, infection or some other

event having their onset during a prescribed

period of time in relation to the unit of

population in which they occur. Incidence

measures morbidity or other events as they

happen over a period of time. Examples

include the number of accidents occurring in

a manufacturing plant during a year in

relation to the number of employees in the

plant, or the number of cases of mumps

occurring in a school during a month in

relation to the number of pupils enrolled in

the school. It usually refers only to the

number of new cases, particularly of chronic

diseases.

incurred but not reported (IBNR) Claims

that have not been reported to the insurer as

of some specific date for services that have

been provided. The estimated value of these

claims is a component of an insurance

company’s current liabilities.

indemnity Health insurance benefits

provided in the form of cash payments

rather than services. An indemnity insurance

Vermont Health Care Resources 23 Health Care Terms

contract usually defines the maximum

amounts that will be paid for covered

services.

independent practice association (IPA) An

organized form of prepaid medical practice

in which participating physicians remain in

their independent office settings, seeing both

enrollees of the IPA and private-pay

patients. Participating physicians may be

reimbursed by the IPA on a fee-for-service

basis or a capitation basis.

indigent care Health services provided to

the poor or those unable to pay. Since many

indigent patients are not eligible for federal

or state programs, the costs that are covered

by Medicaid are generally recorded

separately from indigent care costs.

individual (nongroup) insurance Health

insurance bought directly by an individual

not eligible for group coverage through an

employer or association.

inlier A patient whose course or cost of

treatment resembles those of most other

patients in a diagnosis-related group.

in-network A provider, hospital, pharmacy

or other facility is “in network” when it has

contractually accepted the health insurance

company’s terms and conditions for

payments of services.

inpatient A person who has been admitted

at least overnight to a hospital or other

health facility (which is therefore

responsible for his/her room and board) for

the purpose of receiving diagnostic

treatment or other health services.

insolvency A legal determination occurring

when a managed care plan no longer has the

financial reserves or other arrangements to

meet its contractual obligations to patients

and subcontractors.

institution for mental disease A facility of

more than 16 beds in which at least 50

percent of the residents have a primary

diagnosis of a mental illness at the time of

admission. IMDs cannot receive Medicaid

services for persons ages 22-64.

institutional health services Health

services delivered on an inpatient basis in

hospitals, nursing homes, or other inpatient

institutions. The term may also refer to

services delivered on an outpatient basis by

departments or other organizational unites

of, or sponsored by, such institutions.

instrumental activities of daily living An

index or scale that measures a patient’s

degree of independence in aspects of

cognitive and social functioning including

shopping, cooking, doing housework,

managing money and using the telephone.

insured A participant in a health care plan

who makes up part of the plan’s enrollment.

Insureds may be the subscriber, the

subscriber’s spouse, or other eligible

dependents. In managed care plans, often

called “member.”

integrated delivery system (IDS) An entity

that usually includes a hospital, a large

medical group, and an insurance vehicle

such as HMO or PPO. Typically, all

provider revenues flow through the

organization.

integrated services network (ISN) A

network of organizations usually including

hospitals and physician groups, that provides

or arranges to provide a coordinated

continuum of services to a defined

population and is held both clinically and

fiscally accountable for the outcomes of the

populations served.

interim payment system (IPS) The

Medicare home care payment system that

started in October 1998 and was replaced

October 2000 by the Prospective Payment

System (PPS). IPS replaced the former fee-

for-service system. Under IPS agencies were

Vermont Health Care Resources 24 Health Care Terms

paid either on a per visit basis, or cost per

year for their patients, whichever is less.

intermediate care facility (ICF) An

institution that is licensed under State law to

provide on a regular basis, health-related

care and services to individuals who do not

require the degree of care or treatment that a

hospital or skilled nursing facility is

designed to provide. Public institutions for

care of the mentally retarded or people with

related conditions are also included in the

definition. The distinction between “health-

related care and services” and “room and

board” has often proven difficult to make

but is important because ICFs are subject to

quite different regulations and coverage

requirements than institutions, which do not

provide health-related care and services.

international medical graduate (IMG) A

physician who graduated from a medical

school outside of the United States, usually

Canada. U.S. citizens who go to medical

school abroad are classified as international

medical graduates just as are foreign-born

persons who are not trained in a medical

school in this country. U.S. citizens

represent only a small portion of the IMG

group.

intervention strategy A generic term used

in public health to describe a program or

policy designed to have an impact on an

illness or disease. Hence a mandatory seat

belt law is an intervention designed to

reduce automobile- related fatalities.

Joint Commission on Accreditation of

Healthcare Organizations (JCAHO) A

national private, nonprofit organization

whose purpose is to encourage the

attainment of uniformly high standards of

institutional medical care. Establishes

guidelines for the operation of hospitals and

other health facilities and conducts survey

and accreditation programs.

Katie Beckett children Disabled children

who qualify for home care coverage under a

special provision of Medicaid, named after a

girl who remained institutionalized solely to

continue Medicaid coverage.

large group insurance Health insurance

provided to employer or association groups

of 51 or more persons.

legal reserves The minimum reserve that a

company must keep to meet future claims

and obligations as they are calculated under

the state insurance code. The reserve amount

is usually determined by an actuary.

license/licensure Permission granted to an

individual or organization by a competent

authority, usually public, to engage lawfully

in a practice, occupation or activity.

Licensure is the process by which the

license is granted. It is usually granted on

the basis of examination and/or proof of

education rather than on measures of

performance. A license is usually permanent

but may be conditioned on annual payment

of a fee, proof of continuing education or

proof of competence.

lifetime benefit maximum The total

amount an insurance company will pay for

health care services over your lifetime. If the

cost of the benefits you receive since

enrolling in a plan exceeds this amount, your

coverage ends and no additional services

will be covered.

limited benefit policy An insurance policy

that provides benefits only for certain

specific diseases or accidents.

Vermont Health Care Resources 25 Health Care Terms

limited service hospital A hospital, often

located in rural areas, that provides a limited

set of medical and surgical services.

lock-in A contractual provision by which

members are required to receive all their

care from the network health care providers

except in cases of urgent or emergency need.

long-term care A set of health care,

personal care and social services required by

persons who have lost, or never acquired,

some degree of functional capacity (e.g., the

chronically ill, aged, disabled or retarded) in

an institution or at home, on a long-term

basis. The term is often used more narrowly

to refer only to long-term institutional care

such as that provided in nursing homes,

homes for the retarded and mental hospitals.

Ambulatory services such as home health

care, which can also be provided on a long-

term basis, are seen as alternatives to long-

term institutional care.

long-term care insurance This type of

insurance is designed to help pay for some

or all long-term care costs, including care in

a nursing home, adult day care facility or at

home. Benefits are paid when the insured

person needs assistance with activities of

daily living, or when the insured person

suffers from a cognitive impairment.

Managed Behavioral Healthcare

Organization (BHO) An MCO (Managed

Care Organization) that specializes in the

management, administration, and/or

provision of behavioral healthcare benefits.

managed care Health care

financing/delivery systems that coordinate

the use of services by its members to contain

costs and improve quality. These systems

have arrangements (employment or

contractual) with selected physicians,

hospitals and others to provide services and

include incentives for members to use

network providers.

Managed Care Organization (MCO) A

system of health service delivery and

financing that coordinates the use of health

services by its members, designates covered

health services, provides a specific provider

network, and influences use of medical care

services.

managed care plan A health plan that uses

managed care arrangements and has a

defined system of selected providers that

contract with the plan. Enrollees have a

financial incentive to use participating

providers that agree to furnish a broad range

of services to them. Providers may be paid

on a pre-negotiated basis. (See also “Health

Maintenance Organization,” “Point of

Service Plan,” and “Preferred Provider

Organization.”

magnetic resonance imaging (MRI) This

relatively new form of diagnostic radiology

is a method of imaging body tissues that

uses the response or resonance of the nuclei

of the atoms of one of the bodily elements,

typically hydrogen or phosphorus, to

externally applied magnetic fields.

malpractice Professional misconduct or

failure to apply ordinary skill in the

performance of a professional act. A

practitioner is liable for damages or injuries

caused by malpractice. For some professions

like medicine, malpractice insurance can

cover the costs of defending suits instituted

against the professional and/or any damages

assessed by the court, usually up to a

maximum limit. To prove malpractice

requires that a patient demonstrate some

injury and that the injury be caused by

negligence.

managed care The body of clinical,

financial and organizational activities

designed to ensure the provision of

appropriate health care services in a cost-

efficient manner. Managed care techniques

are most often practiced by organizations

and professionals that assume risk for a

Vermont Health Care Resources 26 Health Care Terms

defined population (e.g., health maintenance

organizations).

management services organization The

management services organization provides

administrative and practice management

services to physicians. An MSO may

typically be owned by a hospital, hospitals

or investors. Large group practices may also

establish MSOs to sell management services

to other physician groups.

mandate A state or federal statute or

regulation that requires coverage for certain

health care services.

maximum allowable actual charge

(MAAC) A limitation on billed charges for

Medicare services provided by

nonparticipating physicians. For physicians

with charges exceeding 115 percent of the

prevailing charge for nonparticipating

physicians, MAACs limit increases in actual

charges to 1 percent a year. For physicians

whose charges are less than 115 percent of

the prevailing, MAACs limit actual charge

increases so they may not exceed 115

percent.

McCarran-Ferguson Act A 1945 Act of

Congress exempting insurance business

from federal commerce laws and delegating

regulatory authority to the states.

Medicaid (Title XIX) A federally aided,

state-operated and administered program

that provides medical benefits for certain

indigent or low-income persons in need of

health and medical care. The program,

authorized by Title XIX of the Social

Security Act, is basically for the poor. It

does not cover all of the poor, however, but

only persons who meet specified eligibility

criteria. Subject to broad federal guidelines,

states determine the benefits covered,

program eligibility, rates of payment for

providers, and methods of administering the

program.

medical audit Detailed retrospective review

and evaluation of selected medical records

by qualified professional staff. Medical

audits are used in some hospitals, group

practices, and occasionally in private,

independent practices for evaluating

professional performance by comparing it

with accepted criteria, standards, and current

professional judgment. A medical audit is

usually concerned with the care of a given

illness and is undertaken to identify

deficiencies in that care in anticipation of

educational programs to improve it.

medically indigent Persons who cannot

afford needed health care because of

insufficient income and/or lack of adequate

health insurance.

medical management information system

(MMIS) A data system that allows payers

and purchasers to track health care

expenditure and utilization patterns.

medical necessity The eligibility

requirements for Medicaid, Medicare or

third party insurers to qualify for specific

healthcare interventions.

medical savings account (MSA) An

account in which individuals can accumulate

contributions to pay for medical care or

insurance. Some states give tax-preferred

status to MSA contributions, but such

contributions are still subject to federal

income taxation. MSAs differ from Medical

reimbursement accounts, sometimes called

flexible benefits of Section 115 accounts, in

that they need not be associated with an

employer. MSAs are not currently

recognized in federal statute.

medically needy Persons who are

categorically eligible for Medicaid and

whose income, less accumulated bills, are

below income limits for the Medicaid

program.

medically underserved area/population

(MUA/MUP) MUAs and MUPs are

Vermont Health Care Resources 27 Health Care Terms

geographic areas and population groups that

have inadequate access to primary health

care, as determined by a federally approved

formula. Areas seeking MUA designation

must be consistent throughout the defined

service area in terms of distance from

population centers, characteristics of its

population, and geographic barriers to

access. The criteria for an MUP focus on the

needs of specific population groups within a

geographic area.

Medicare (Title XVIII) A U.S. health

insurance program for people aged 65 and

over for persons eligible for social security

disability payments for two years or longer,

and for certain workers and their dependents

who need kidney transplantation and

dialysis. Monies from payroll taxes and

premiums from beneficiaries are deposited

in special trust funds for use in meeting the

expenses incurred by the insured. It consists

of two coordinated programs: hospital

insurance (Part A) and supplementary

medical insurance (Part B).

Medicare + Choice A program created by

the Balanced Budget Act of 1997 to replace

the existing system of Medicare risk and

cost contracts. Beneficiaries have the choice

during an open season each year to enroll in

a Medicare+Choice plan or to remain in

traditional Medicare. Medicare+Choice

plans may include coordinated care plans

(HMOs, PPOs or plans offered by provider-

sponsored organizations); private fee-for-

service plans; or plans with medical savings

accounts.

Medicare approved charge The amount

Medicare approves for payment to a

physician. Typically, Medicare pays 80

percent of the approved charge and the

beneficiary pays the remaining 20 percent.

Physicians may bill beneficiaries for the

additional amount (not balance) not to

exceed 15 percent of the Medicare approved

charge. See balance billing.

Medicare risk contract An agreement by

an HMO or competitive medical plan to

accept a fixed dollar reimbursement per

Medicare enrollee, derived from costs in the

fee-for-service sector, for delivery of a full

range of prepaid health services.

Medigap insurance (Medicare

Supplement Policy) Privately purchased

individual or group health insurance policies

designed to supplement Medicare coverage.

Benefits may include payment of Medicare

deductibles, coinsurance, and balance bills,

as well as payment for services not covered

by Medicare. Medigap insurance must

conform to one of ten federally standardized

benefit packages.

mental health services Comprehensive

mental health services, as defined under

some state laws and federal statutes, include:

inpatient care, outpatient care, day care and

other partial hospitalization and emergency

services; specialized services for the mental

health of children; specialized services for

the mental health of the elderly; consultation

and education services; assistance to courts

and other public agencies in screening

catchment area residents; follow-up for

catchment area residents discharged from

mental health facilities or who would require

inpatient care without such halfway house

services; and specialized programs for the

prevention, treatment and rehabilitation of

alcohol and drug abusers.

Mental Health Statistics Improvement

Program (MHSIP) A project, funded and

coordinated through the U.S. Center for

Mental Health Services, in which a group of

individuals, organizations, state government

agencies and associates are working to

improve information management capacity

to support decision making in meeting the

needs of persons with mental health

disorders. The goal of MHSIP is to

implement uniform, integrated mental health

data collection systems.

Vermont Health Care Resources 28 Health Care Terms

mental illness All forms of illness in which

psychological, emotional, or behavioral

disturbances are the dominating feature. The

term is relative and variable in different

cultures, schools of thought and definitions.

It includes a wide range of types and

severities.

morbidity The extent of illness, injury or

disability in a defined population. The rate,

incidence or prevalence of disease.

mortality Death. Used to describe the

relation of deaths to the population in which

they occur. The mortality rate (death rate)

expresses the number of deaths in a unit of

population within a prescribed time and may

be expressed as crude death rates (e.g., total

deaths in relation to total population during

a year) or as death rates for specific diseases

and, sometimes, for age, sex or other

attributes (e.g., number of deaths from

cancer in white males in relation to the white

male population during a given year).

multiple employer trust (MET)

Arrangement through which two or more

employers can provide benefits, including

health coverage, for their employees.

Arrangements formed by associations of

similar employers were exempt from most

state regulations. Redefined as a MEWA by

the Multiple Employer Welfare

Arrangement Act of 1982.

multiple employer welfare arrangement

(MEWA) As defined in 1983 Erlenborn

ERISA (Employee Retirement Income

Security Act) Amendment, an employee

welfare benefit plan or any other

arrangement providing any of the benefits of

an employee welfare benefit plan to the

employees of two or more employers.

MEWAs that do not meet the ERISA

definition of employee benefit plan and are

not certified by the U.S. Department of

Labor may be regulated by states. MEWAs

that are fully insured and certified must only

meet broad state insurance laws regulating

reserves.

National Committee for Quality

Assurance (NCQA) A national organization

founded in 1979 composed of 14 directors

representing consumers, purchasers and

providers of managed health care. It

accredits quality assurance programs in

prepaid managed health care organizations

develops and coordinates programs for

assessing the quality of care and service in

the managed care industry.

National Health Services Corps (NHSC)

A program administered by the U.S. Public

Health Service that places physicians and

other providers in health professions

shortage areas by providing scholarship and

loan repayment incentives. Since 1970, the

Corps members have worked in community

health centers, migrant centers, and Indian

health facilities and in other sites targeting

underserved populations.

network An affiliation of providers through

formal and informal contracts and

agreements. Networks may contract

externally to obtain administrative and

financial services.

network model HMO A health care model

in which the HMO contracts with more than

one physician group or IPA, and may

contract with single and multi-specialty

groups that work out of their own facilities.

The network may or may not provide care

exclusively for the HMO’s members.

nurse An individual trained to care for the

sick, aged or injured. A nurse can be defined

as a professional qualified by education and

authorized by law to practice nursing. There

are many different types, specialties and

grades of nurses.

nurse practitioner A registered nurse

qualified and specially trained to provide

primary care, including primary health care

in homes and in ambulatory care facilities,

long-term care facilities and other health

Vermont Health Care Resources 29 Health Care Terms

care institutions. Nurse practitioners

generally function under the supervision of a

physician but not necessarily in his/her

presence. They are usually salaried rather

than reimbursed on a fee-for-service basis,

although the supervision physician may

receive fee-for-service reimbursement for

their services.

nursing home Includes a wide range of

institutions that provide various levels of

maintenance and personal or nursing care to

people who are unable to care for

themselves and who have health problems

that range from minimal to very serious. The

term includes freestanding institutions, or

identifiable components of other health

facilities that provide nursing care and

related services, personal care and

residential care. Nursing homes include

skilled nursing facilities and extended care

facilities, but not boarding homes.

occupancy rate A measure of inpatient

health facility use, determined by dividing

available bed days by patient days. It

measures the average percentage of a

hospital’s beds occupied and may be

institution-wide or specific for one

department or service.

occupational health services Health

services concerned with the physical, mental

and social well-being of an individual in

relation to his/her work environment and the

adjustment of individuals to their work. The

term applies to more than the safety of the

workplace and includes health and job

satisfaction. In the U.S. the principal Federal

statute concerned with occupational health is

the Occupational Safety and Health Act

administered by the Occupational Safety and

Health Administration (OSHA) and the

National Institute of Occupational Safety

and Health (NIOSH).

Olmstead Decision U.S. Supreme Court

1999 decision interpreting ADA anti-

discrimination provisions which led the

federal government to direct State Medicaid

authorities to provide services in the most

integrated setting appropriate for those in or

at risk of institutionalization. Each state is

required to develop an Olmstead plan with

the active involvement of individuals with

disabilities.

Ombudsman A person responsible for

investigating and seeking to resolve

consumer complaints.

open access A term describing a consumer’s

ability to self-refer for specialty care. Open

access arrangements allow a consumer to

see a participating provider without a

referral from a gatekeeper. All called open

panel.

open enrollment A method for assuring that

insurance plans, especially prepaid plans, do

not exclusively select good risks. Under an

open enrollment requirement, a plan must

accept all who apply during a specific period

each year.

open enrollment period A period during

which consumers have an opportunity to

select among health plans, usually without

evidence of insurability or waiting periods.

organized delivery system (ODS) See

integrated services network (ISN).

out-of-network Any provider, hospital,

pharmacy or other facilitator who has not

contracted with the health insurance plan to

provide services to the plan’s members.

out-of-pocket expense Payments made by

an individual for medical services. These

may include direct payments to providers as

well as payments for deductibles and

coinsurance for covered services, for

services not covered by the plan, for

provider charges in excess of the plan’s

limits and for enrollee premium payments.

Vermont Health Care Resources 30 Health Care Terms

outcome The consequence of an

intervention on a patient.

outcome measurement A process of

systematically measuring individual or

collective response to treatment services

typically focusing on functioning issues.

outcomes research Research on measures

of changes in patient outcomes, that is,

patient health status and satisfaction

resulting from specific interventions.

Attributing changes in outcomes to care

requires distinguishing the effects of care

from the effects of the many other factors

that influence patients’ health and

satisfaction.

outlier A hospital admission requiring either

substantially more expense or a much longer

length of stay than average. Under DRG

(diagnosis related groups) reimbursement,

outliers are given exceptional treatment

(subject to peer review and organizational

review).

outline of coverage The document given to

each health plan member that summarizes

the benefits, co-payment, coinsurance,

deductibles, and other requirements for

obtaining services covered by the health

plan that are listed in full detain in the

contract.

outpatient A patient who is receiving

ambulatory care at a hospital or other

facility without being admitted to the

facility.

participating provider A provider who has

agreed to accept a certain level of payment

from an indemnity plan for treating the

plan’s insureds. The provider may be a

hospital, pharmacy, other facility or a

physician who has contractually accepted

the terms and conditions as set forth by the

health plan. Insureds may not be required to

use participating providers, but usually pay

more if they do not.

passive intervention Health promotion and

disease prevention initiatives that do not

require the direct involvement of the

individual (e.g., water system fluoridation

programs) are termed “passive.” Most often

these types of initiatives are government