A  B  C  D  E  F  G  H  I  J  K  L  M  N  O  P  Q  R  S  T  U  V  W  X Y Z


Actual charge – The amount of money a doctor or supplier charges for a certain medical service or supply.  This amount may be more than the allowable charge by a health plan.

ADR – Adverse Drug Reaction – The reaction to an administered drug that results in a health or life threatening condition.

ADS – Alternate Delivery System - All forms of healthcare delivery other than traditional fee-for-service.  This would include just about all managed care organizations (MCOs).

Allowable charge – The maximum amount that a third party will reimburse a provider for a given service.  An allowable charge may not be the same as a usual, customary or reasonable charge.

Allowable costs – Charges for services rendered or supplies furnished by a health provider that qualify for a health plan reimbursement.

Ambulatory care – All types of healthcare services rendered on an outpatient basis or that do not require overnight hospitalization.

Ancillary services – Auxiliary or supplemental professional services provided by a hospital or other healthcare facility, such as radiology, pharmacy, and laboratory services.

Any willing provider – often the result of legislation requiring a managed care organization to accept as part of their network any provider who wishes to participate and is willing to meet  provisions outlined in the plan.

Assignment – The payment of medical benefits directly to the provider rather than to the member or individual, usually at some pre-designated fee.

AWP – Average Wholesale Price – The published suggested wholesale price of a drug.  It is often used by pharmacies as a cost basis for pricing prescriptions.  While a reliable pricing reference for brand-name drugs, it can be misleading in the case of generic drugs, since each manufacturer establishes its own AWP for the same generic drug.  This can result in a broad range of prices for the identical product.  Few, if any, wholesalers consider AWP, today, when pricing for their pharmaceutical products; however, it is commonly used by retailers and others who dispense medications as the basis for many pricing decisions.  Published prices are based primarily upon information provided by manufacturers and supplemented by other data sources, such as Drug Topics’ Red Book.  Because of its availability from many sources, AWP is used as a surrogate for actual prices when studying prescription-pricing trends.

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Benchmarking – The process of comparing a health plan’s own data with industry averages or top performers for the purpose of improving  plan economics or  quality of care.

Beneficiary – An individual who is designated as eligible for healthcare benefits under some type of insurance or health plan contract.

Benefit design – the process of determining what types and what level of coverage should be included in a specific health plan product.

Best price – In the context of OBRA ’90, the most favorable price offered by a pharmaceutical company to customers in the United States.

Brand-brand interchange – The substituting of one brand-name prescription drug for another based on them being chemically equivalent.

Brand-name drug – The trademarked name of a drug identifying it as a product of a specific pharmaceutical company.

Buying group – An organization of multiple independent buying sources which uses the leverage of its members’ collective buying power to gain preferred pricing and terms from manufacturers and wholesalers.

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Capitation – A reimbursement system covering a specified time period, usually monthly, in which healthcare providers receive a fixed fee for every patient served regardless of how many or how few services the patient uses.

Cardholder – The primary person in whose name a health plan identification card is issued.

Cardholder number – The number assigned to the cardholder for identification purposes.  Most often health plans use the cardholder’s Social Security number.

Carrier – The organization or entity which is the insurer or administrator responsible for paying for or reimbursing claims for allowed healthcare services under a group insurance policy or some other health plan structure.

Carve out – The separate purchase of a service that is normally a part of an indemnity or managed care health plan.  This could include areas like behavioral programs, radiological services, or prescription drug programs, etc.

Case management – A process used by a doctor, nurse, or other health professional to manage a patient’s healthcare requirements so that needed healthcare resources are utilized appropriately, efficiently and economically.

Claim – A request for payment by a healthcare provider for services rendered to a  patient.  The claim can be directed to an insurance company, a health plan, or an individual depending on whom is the responsible payor.

Claims processor – A company whose primary business is the processing of third-party claims for health plans, most commonly associated with on-line prescription claims.

Closed panel – generally refers to a restricted or exclusive group of providers of services to a managed care organization who usually are required to meet narrow criteria or grant concessions in order to participate as a member of the closed panel.

COB – Coordination of Benefits – A provision in a contract that applies when a person is covered under more than one group medical program, for example under both a husband’s and a wife’s programs.  It requires that payment of benefits will be coordinated by the programs involved in such a way as to avoid over insurance or double payment of benefits.

COBRA – Consolidated Omnibus Budget Reconciliation Act of 1985 – Requires employers to permit employees or family members to continue their group health insurance coverage for a period of time at their own expense, but at group rates, if they lose coverage because of job loss, reduced hours, divorce, death of supporting spouse, or other designated events.

Coinsurance – The amount the insured member must pay when he or she receives a covered service, usually calculated as a percentage of the cost of the service.  Unless a plan is first dollar coverage, usually applies after a predetermined out-of-pocket deductible has been met by the member.  (See copay/copayment.)

Community rating – A method of determining a premium structure based on the community as a whole…often the entire population of a metropolitan statistical area (MSA)…rather than a specific group or groups.

Compliance – How well a patient adheres to following a specific drug regimen or to treatment instructions.

Copay or Copayment – The amount that the insured member must pay for a covered service, usually expressed as a fixed-dollar amount and payable at the time of the service.  (See coinsurance.)

Cost sharing – The part of the cost for medical care that an insured member must pay for  himself or herself.  (See coinsurance; copayment; and deductible.)

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DAW – Dispense as Written – Directions from the physician to the dispensing pharmacist that the prescription, especially the drug indicated, should not be altered in any way.  For health plans that have mandatory generic and/or therapeutic substitution programs, DAW, either at the request of the physician or the patient, may result in the patient having to pay the usual retail price for the prescription.

Deductible – The amount of eligible expenses a health plan member must pay each year from his/her own pocket before the plan will begin to make payments for its share of a covered expense.

Dependent coverage – Coverage for health care services allowed by a health plan for the spouse, children, or other specified dependents of a plan member.

Disease management – An arrangement where a health plan takes on the responsibility for managing or coordinating all the functions associated with the treatment of a particular disease state…may include diagnosis, preventive measures, therapeutic guidance, and patient compliance.

DRG – Diagnosis Related Group – A system of classification of hospital inpatient services corresponding to a particular patient condition rated in terms of diagnosis, age, sex, and complicating factors.  This system is used as the basis for reimbursement to hospitals and selected other providers for services rendered.

Drug formulary – A listing of prescription medications that is preferred for use by a health plan and which will be dispensed through participating pharmacies to plan members.  Usually only those drugs listed in a formulary will be reimbursed by a health plan.  A patient may still obtain a non-formulary drug by seeking an exception from the health plan or paying for the drug out-of-pocket.

DUR – Drug Utilization Review – A mechanism that uses peers to evaluate prescription drug use, physician prescribing patterns or patient utilization to determine the appropriateness of drug therapy.

Durable medical equipment – Reusable medical equipment intended for use in the home or on an outpatient basis such as crutches, walkers, wheelchairs, and hospital beds.

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EDI – Electronic Data Interchange – The electronic transfer of claims data or other information between providers, claims processors, health plans, and/or payors.

Eligible employee/person – An employee or person who meets the eligibility requirements specified in a particular health plan contract.  In the case of employees, may be affected by whether they are employed on a full-time, part-time, or seasonal basis.

EOB – Explanation of Benefits – A description of provided services sent to a covered person including the amount billed and payment made.

ESRD – End-Stage Renal Disease – Permanent kidney failure with dialysis or a transplant.

EPO – Exclusive Provider Organization – An organization made up of only those providers who have been contracted by a health plan for services…similar to a PPO but without the option of plan reimbursement for some services outside the exclusive provider group.  Usually involves concessionary pricing for the opportunity to be an exclusive service provider.

ERISA – Employee Retirement Income Security Act of 1974 – This law mandates reporting and disclosure requirements for group life and health plans.  It removes self-insured health plans from certain state regulations regarding health insurance.

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FFS – Fee-For-Service – The traditional non-contracted, non-discounted method of billing for professional services.  This is the system used for billing to and reimbursement by conventional indemnity health plans.

Formulary – See Drug Formulary.

Freedom of Choice – Legislation passed by some states that permits a health plan enrollee to choose his/her source of care.

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Gatekeeper – A doctor who provides basic medical services and coordinates necessary medical care and referrals for health plan members…another name for a primary care physician.

Generic drug – A commonly used term for a chemically equivalent copy of a brand-name drug for which the patent has expired.  Equivalent in strength, dosage form, and concentration, generic drugs are often sold at a lower price than their brand-name counterparts.

Generic substitution – Dispensing a generic drug in place of a brand-name medication.

GPO – Group Purchasing Organization – a shared service by organizations, e.g. hospitals, that combines their purchasing power to obtain lower prices for equipment, supplies, and services.

Group model HMO – A health plan that contracts with one or more group practices of doctors at negotiated rates for medical services.

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HCFA – Health Care Financing Administration – The federal agency that administers Medicare and oversees states’ Medicaid, and Children’s Health Insurance Program.

HCFA 1500 – a standardized claim form developed by HCFA for providers to bill fees for professional services to health plans.

HCPCS – HCFA Common Procedural Coding System – A code listing of services, procedures, and supplies provided by physicians or other health care providers.  This is a five-digit alpha-numeric code consisting of a single letter followed by four numerals.  Codes beginning with A through V are national and those beginning with W through Z are local.

HEDIS® – Health Plan Employer Data and Information Set – A group of performance measures developed to assist employers and other purchasers of healthcare services in evaluating the quality of a health plan’s performance.  (HEDIS® is a registered trademark of the National Committee for Quality Assurance [NCQA].)

HMO – Health Maintenance Organization – An organized healthcare system that provides, offers, or arranges for the coverage of designated healthcare services for plan members for a fixed, prepaid premium.  Originally, four basic models of HMOs evolved…group model, individual practice association (IPA), network model, and staff model.  IPAs are the most common, with many of today’s HMOs being some sort of blend.  Under the federal HMO Act an entity must have three characteristics to be called an HMO:

(1)  An organized system for providing healthcare or otherwise ensuring healthcare delivery within a geographic area.

(2)  An agreed-upon set of basic and supplemental health maintenance and treatment services.

(3)  A voluntarily enrolled group of people.

Hospice – A facility and/or program that provides palliative treatment and supportive care to the terminally ill.

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ICD-9 – International Classification of Diseases – A listing of diagnoses and identifying codes used by physicians for reporting the diagnosis of health plan members.  The coding and accompanying terminology provide a common language that can accurately describe both primary and secondary diagnoses and provides a method for consistent documentation on claim forms.

Incurred claims – The actual carrier liability for all claims with dates of service within a specified period.

Indemnity insurance – Traditional fee-for-service healthcare insurance.  This type of insurance usually contains deductibles and copayments to help control unnecessary utilization.

Integrated healthcare system – An organizational structure created to provide a continuum of care from the primary care physician through appropriate levels of specialization and ancillary services to provide desired outcomes, optimize efficiencies, and reduce plan costs.

IPA – Independent Practice Association – An HMO model that contracts directly with independent physicians and/or independent practitioner or specialist group associations at negotiated rates for their services.

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JCAHO – Joint Commission on Accreditation of Healthcare Organizations (usually pronounced jay’ co) – A private, non-profit organization that evaluates and accredits hospitals, clinics, and other healthcare organizations providing home care, mental health care, ambulatory care and long-term care services..  Many health plans require JCAHO accreditation for participation in their programs.

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Legend drug – A drug that bears the label, “Caution: federal law prohibits dispensing without a prescription” and can only be legally obtained with a physician’s prescription.

Long-term care – Custodial care for persons with chronic disabilities and lengthy illnesses who require assistance with activities of daily living.

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MAC – Maximum Allowable Cost – The maximum cost that will be reimbursed for a specific multi-source generic drug.  Originally MAC was instituted by the federal government in 1977 as a means to control the cost of drug reimbursement under Medicaid and Medicare.  Today the practice of establishing MAC prices for multi-source drugs has been adopted by most health plans as a means to control the costs of their prescription drug programs.

Mail-order pharmacy – A pharmacy that dispenses medications directly to the patient by means of the U.S. Postal Service or some other package delivery system.  Because of economies of scale, mail-order pharmacy operations are often able to offer lower cost prescription services to health plans.  Many health plans/employers offer financial incentives for their members to use mail-order pharmacies where appropriate, especially for maintenance medications.

Managed care – A system of healthcare delivery designed to control utilization of services to minimize cost while maintaining quality care.  The objective of managed care is to provide both cost-effective and care-effective services.

Maximum out-of-pocket costs – The limit on the total amount of member copayments, deductibles, and coinsurance a health plan member must pay under a benefit contract.

MCO – Managed Care Organization – a generic term applied to any managed healthcare plan whether it is an HMO, PPO, EPO, or some hybrid of these.

Medicaid – A federal program of healthcare for low-income individuals that is administered by state and territorial governments under federal guidelines.  The state and federal governments share program costs.

Medicare – Created by Title XVIII of the Social Security Act of 1965, Medicare is a federally administered health insurance program for those persons 65 years of age or older and including younger people with disabilities and people with End-Stage Renal Disease (ESRD).  It covers some of the costs of hospitalization, medical care, and certain related services.  Medicare is composed of two parts.  Part A covers inpatient costs including pharmaceuticals used while hospitalized.  It is a mandatory program included as part of SS payroll deductions.  Part B is a voluntary program that covers certain outpatient services including the costs of doctor visits.  Its cost is deducted from a person’s monthly SS income support payment.

Medicare + Choice -   A Medicare program that gives an eligible recipient (must have both Medicare Parts  A and B and not have ESRD) more choices among health plans.

MSO – Management Service Organization – A legal entity that offers practice management and administrative support services to individual physicians or group practices.  An MSO can be a direct subsidiary of a hospital or may be owned by investors including physicians or group practices.

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NCQA – National Committee for Quality Assurance – A non-profit organization that accredits and measures the quality of care of health plans.  This is done through using a standardized data reporting system, the Health Plan Employer Data and Information Set (HEDIS), which reviews everything from credentialing and record keeping to quality assurance practices.

NDC – National Drug Code – A national classification system for identification of drugs (identifies manufacturer/distributor, drug name, strength and dosage form).

Network model HMO – An HMO type that contracts with multiple physician groups and hospitals to provide an adequate network for its health plan members.

Nurse practitioner (NP) – A nurse who has two or more years of advanced training and has passed a special exam.  NPs may work as primary care providers, usually under the supervision of a physician.

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OBRA ’90 – Omnibus Budget Reconciliation Act of 1990 – A federal law that requires manufacturers to pay rebates to federal and state governments for products used by Medicaid recipients.

OOP – Out-of-Pocket – That portion of costs for healthcare services to be paid by the member including: coinsurance, copayments, and deductibles.

Open formulary – Virtually, the reasonable use of any drug is permitted by a health plan or medical institution.

OTC – Over-the-counter – A drug product that does not require a prescription under either federal or state law.

Outcomes measurement – A systematic assessment of the results of treatment for a particular disease or condition.  Used as a basis for evaluating current treatment effectiveness and establishing future treatment protocols.

Outpatient care – Medical or surgical care that does not require an overnight hospital stay.

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Participating provider – Doctors or other healthcare suppliers, e.g. pharmacies, hospitals, nurses, other healthcare professionals, that have contracted with a health plan to deliver their services to plan members.

P&T Committee – Pharmacy and Therapeutics Committee – A panel of physicians from varying practice specialties and pharmacists who act as an advisory council to a hospital or health plan regarding the effective use of medications.  Usually charged with the responsibility of developing and managing an institution’s or health plan’s drug formulary.

PA – Physician Assistant – A person who has two or more years of advanced training and has passed a special exam.  Under a physician’s supervision a PA may perform many basic tasks usually performed by a doctor including, in some states, limited prescribing authority.

Patient profile – A term usually used by pharmacists to refer to the record of patient information maintained by a pharmacy to assist the pharmacist to correctly dispense a prescription.  These profiles usually include such information as patient age, sex, family relationship, allergies to drugs, special health conditions, and health plan identification data.

PBM – Pharmacy Benefit Manager – An organization that manages and administers the prescription benefit for health plan sponsors.

PCP – Primary Care Physician – A physician trained in the basic care specialties…family practice, pediatrics, internal medicine…and sometimes ob/gyn who is the first person a health plan member would access.  A PCP often serves as the gatekeeper for coordinating any additional medical interventions needed by a plan member.

PharmD – Doctor of Pharmacy – Recently established as the entry-level degree for pharmacists by the American Council for Pharmaceutical Education (ACPE) and now required by all U.S. colleges of pharmacy.

Plan sponsor – The company or organization that assumes financial responsibility for an insured group.

PMPM – Per Member Per Month – The cost of a service, or services, for each member of a health plan for each month in which the person was an active participant in the plan.

POS – Point of Service – A health plan that allows a member to choose to receive services from either participating or non-participating providers, but at different benefit and/or cost levels.

PPO – Preferred Provider Organization – A managed care plan that provides an incentive differential to use contracted providers (preferred providers) rather than non-panel or non-participating providers.

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QA – Quality Assurance – In healthcare, the process of looking at how well a medical service is provided measured against established standards to provide assurance that the service satisfies those standards.

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RBRVS (or RVS) – Resource-based Relative Value Scale – A Medicare fee schedule for physician reimbursement based on the amount of time and resources expended in providing a particular medical service, with adjustments for overhead costs and regional differences.

RFP – Request for Proposal – A formal solicitation for bids from interested parties in providing specified services, functions, or products.  The request is usually accompanied by a specific format for submission of the proposal.

Risk sharing – An agreement between parties to share, at some pre-determined percentage, in the increased cost or savings resulting from either the over-utilization or under-utilization of a specified service at an agreed-upon rate.

RPh – Registered Pharmacist – A person who has completed the necessary academic requirements and passed a national qualifying examination.  In order to maintain his/her license to dispense, a RPh must be current with the continued education requirements of the state(s) in which he/she is registered.

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Second opinion – The opinion from a second healthcare professional prior to the performance of some medical service or surgical procedure.  This is often a mandatory process utilized by managed healthcare plans to confirm the necessity of a service or procedure and/or to educate the patient regarding treatment alternatives.

Self-insurance (self-funding) – A risk strategy adopted by some, usually larger, employers to fund employee healthcare benefits from their own resources rather than purchasing some type of insurance or healthcare plan.   The employer may choose to self-administer the plan or employ the services of a third-party administrator (TPA).  Employers often will limit their liability through the purchase of stop-loss insurance.

“Shoebox” effect – A term applied to the reimbursement method used in “major medical” insurance programs where the insured pays the usual and customary price for services and saves the receipts for later submission to the insurer for reimbursement.  Often these receipts are stored in a shoebox and forgotten or the amount is not significant enough for the insured to make the effort to submit the receipts resulting in savings to the insurer…hence the term “shoebox effect.”

SNF – Skilled Nursing Facility – A facility that provides skilled nursing or rehabilitation services to help patients recover after a hospital stay.

SPIN – Standard Prescriber Identification Number – A standard number for a prescriber, under development by the National Council of Prescription Drug Programs (NCPDP), in conjunction with other professional organizations, that could be used for prescriber identification purposes.

Staff model HMO – A healthcare model that employs its own physicians and professional staff to provide services to its members.

Step therapy – A procedure involving the use of lower cost drug/treatment alternatives before moving on to more expensive drug or treatment protocols.

Stop-loss insurance – Insurance coverage available to health plans or self-funded employers to provide protection against exceptional claims experience.  This type of insurance can be on a specific or individual basis in which a claim would be paid after an individual and/or family exceeded a predetermined deductible, such as $20,000 or $35,000; or in the aggregate where the employer/health plan would be reimbursed when total claims for the company exceeded some predetermined amount, such as 125% of anticipated costs.

Subrogation – A procedure whereby an insurance company can recover from third parties all or a proportionate part of claims amounts paid to an insured.  This usually applies where more than one insurer is billed for the same service or procedure.

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Tertiary care – Healthcare services that are rendered by highly specialized providers, such as neurosurgeons, thoracic surgeons and intensive care units, often requiring highly sophisticated technologies and facilities.

Therapeutic alternatives – Drug products, with different chemical structures, that should produce comparable pharmacological action when administered to patients in therapeutically equivalent doses.

Therapeutic substitution - Dispensing one therapeutic alternative for another.  Substitution  requires  physician authorization.

Third-party payer – An entity or organization that underwrites or pays for healthcare expenses on behalf of employer/group and/or individual health plans.

TPA – Third Party Administrator – Any third-party entity that administers the healthcare claims/payment process for third-party payers…primarily employer group or self-insured health plans.  TPAs are not the risk underwriters.

TPN – Total Parenteral Nutrition – Protein, fat, glucose, and other nutrients are administered intravenously.

Triple option – An employer health plan that allows employees to choose from either an HMO, PPO, or indemnity plan depending on how much of his/her healthcare cost an employee is willing to assume.

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U&C – Usual and Customary – The usual (non-contracted/private pay) fee for professional services or prescriptions charged by a healthcare provider or pharmacy.

UR – Utilization Review – A formal assessment of the medical necessity, appropriateness, and/or cost effectiveness of healthcare services.

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WAC – Wholesale Acquisition Price – A term used within the medical/pharmaceutical wholesaling industry to denote the price a wholesaler would pay for a product before any special or term discounts.

WEDI – Workgroup for Electronic Data Interchange – a special task force established by the Secretary of Health and Human Services in 1991 to explore means and develop recommendations for advancing the transmission of electronic health data.

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