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Glossary of Managed Care Terms

Additional Glossary of Terms are available.

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



A person who determines insurance policy rates, reserves and dividends, as well as conducts various other statistical studies. You don't develop capitated rates, or agree to a capitated contract without one of these working for you in some capacity.. (See Capitation below.)

Admissions Per 1,000

An indicator calculated by taking the total number of inpatient and/or outpatient admissions from a specific group, e.g., employer group, HMO population at risk, for a specific period of time (usually one year), dividing it by the average number of covered members in that group during the same period, and multiplying the result by 1,000. This indicator can be calculated for behavioral health or any disease in the aggregate and by modality of treatment, e.g., inpatient, residential, and partial hospitalization, etc. Such measures are commonly used by managed care entities to evaluate utilization management performance.

Adverse Selection

Attracting members as enrollees into a health plan who are sicker than the general population (specifically, members who are sicker than was anticipated when the budget for medical costs was developed). Such members tend to use services at higher rates than other member populations. Can quickly put you out of business in a capitated environment, unless you can re-negotiate rate or figure out why such a plan enrollment pattern is occurring and are able to do something about it. Traditionally, this has been the problem of the plan sponsor or its insurance company, as opposed to providers within the plan. With the advent of AHPs below, and a number of other risk-sharing strategies, however, the provider may be significantly impacted by this phenomenon.

AHP Accountable Health Plan

A regional (geographic) joint venture between practitioners and institutions (insurance companies, HMOs, or hospitals) that would assume responsibility and risk for delivering medical care to a specific population or group. Physicians and other providers would either own, work for, or contract with these health plans. Note that this concept includes both payers and providers in a linked system. These plans generally have some incentive to develop preventive programs and to emphasize wellness. Is publicly accountable for the impact of its services on the health status of a population. This was a major concept in Clinton health reform package, but is being picked up in the marketplace. Florida, for instance, uses this term explicitly in recent state law. Often referred to as community care network, organized system of care, and IDS (Integrated Delivery System) or IHDS (Integrated Health Delivery System). Also known as Community Accountable Healthcare Networks (CAHNs) or Health Purchasing Alliances.

Alternate Delivery Systems

Health services provided in other than an inpatient, acute-care hospital. Examples within general health services include skilled and intermediary nursing facilities, hospice programs, and home health care. Alternate delivery systems are designed to provide needed services in a more cost-effective manner. Most of the services provided by community mental health centers fall into this category.

Application Integrators

Software that transparently provides application-to-application functionality, primarily through data conversion and transmission, while eliminating the need for custom programming. Also referred to as application integration gateway, application interface gateway, integration engine, intelligent gateway. This type of software is key to developing networks of information systems, making client-specific information available in real time to all members of an IHDS.

ASO Administrative Services Only

A relationship between an insurance company or other management entity and a self-funded plan or group of providers in which the insurance company or management entity performs administrative services only, such as billing, practice management, marketing, etc., and does not assume any risk.

ATM Asynchronous Transfer Mode

A type of cell switching LAN/WAN technology which transfers information in a compressed mode at speeds of gigabits (billions of bits) per second. Is most useful for transmission of high resolution images and real time video images, as well as voice, data, video, and other types of information. Viewed as the future network of choice because of its many advanced capabilities. An operational definition of "broad bandwidth."Could be the means to link the full continuum of care in a real time, "Hi, how are you?" mode. Would permit specialists to treat patients hundreds of miles away; would permit "on call" accessibility to scarce specialists, including behavioral health specialists.

Audit of Provider Treatment or Charges

A qualitative or quantitative review of services rendered or proposed by a health provider. The review can be carried out in a number of ways: a comparison of patient records and claim form information, a patient questionnaire, a review of hospital and practitioner records, or a pre- or post-treatment clinical examination of a patient. Some audits may involve fee verification. Something we had better get used to being subjected to since this is usually first type or "first generation" managed care approach.



A method for payment to providers, common or targeted in most managed care arenas. Unlike the older fee-for-service arrangement, in which the provider is paid per procedure, capitation involves a prepaid amount per month to the provider per covered member (PMPM). The provider is then responsible for providing all contracted services (such as behavioral health) required by members of that group during that month for the fixed fee, regardless of the amount of charges incurred. In such an arrangement, the provider is now at risk, picking up risk that the payer or employer used to have exclusively in fee-for-service or indemnity arrangements. Management services, too, may be capitated. In such contracts, the contracting party is required to provide all management services (precertification, utilization review, case management, discharge planning, etc.) required for the fixed fee, while the costs of treatment services are paid separately. This last model relating to management services is the way much managed behavioral healthcare is handled presently. A Managed Care Organization (MCO) will contract with an HMO or a major insurer to manage a behavioral health "carve out." (See below.) The MCO these management services for a fixed charge per member per month (PMPM) and subcontracts with providers, usually at a discounted fee-for-service, to serve the covered members.


A payer strategy in which a payer separates ("carves-out") a portion of the benefit, such as behavioral health, and hires a managed behavioral health program (MBHP) or managed care organization (MCO) to provide these benefits. This permits the payer to create a behavioral health benefits package, get to market quicker with such a package, and greater control of their costs. Many HMOs and insurance companies adopt this strategy because they do not have in-house expertise related to behavioral health or the service "carved out."

Case Rate

Flat fee paid for a client's treatment based on their diagnosis and/or presenting problem. For this fee the provider covers all of the services the client requires for a specific period of time. Also bundled rate, or Flat Fee-Per-Case. Very often used as an intervening step prior to Capitation. In this model, the provider is accepting some significant risk, but does have considerable flexibility in how it meets the client's needs. Keys to success in this mode: (1) properly pricing case rate, if provider has control over it, and (2) securing a large volume of eligible clients.

Character-based Terminal

A type of data terminal that displays only alphanumeric or text characters and character-based graphics-- :) like this. Lacks the ability to display bit-mapped graphics that are required by GUI programs and operating systems such as Windows and X-Windows which runs on Unix-based systems. A primitive type of hardware, one best avoided, if costs permit. Real time access of client data and conferencing will require more sophisticated (and expensive) hardware.

CHIN Community Health Information Network

An integrated collection of computer and telecommunication capabilities that permit multiple providers, payers, employers, and related healthcare entities within a geographic area to share and communicate client, clinical, and payment information. Also known as community health management information system.

Clinic Without Walls (CWW)

Similar to an independent practice association (See IPA below.), this type of physician or provider grouping represents a legal and formal entity. Under such arrangements, the legal entity provides administrative and support services to each physician/provider and the provider continues to practice in his/her own facility. The provided services can include marketing, billing and collection, staffing, management, and the like. This arrangement permits providers to present a single "face" to the managed care marketplace with a minimum of day-to-day disruption. Key to its success, however, is its ability to really impose or create common billing and support services. This type of arrangement is often a transitional stage to more integrated arrangements.

Clinical Data Repository

That component of a computer-based patient record (CPR) which accepts, files, and stores clinical data over time from a variety of supplemental treatment and intervention systems for such purposes as practice guidelines, outcomes management, and clinical research. May also be called a data warehouse.

Clinical Decision Support

The capability of a data system to provide key data to physicians and other clinicians in response to "flags" or triggers which are functions of embedded, provider-created rules. A system that would alert case managers that a client's eligibility for a certain service is about to be exhausted would be one example of this type of capacity. Also a key functional requirement to support clinical or critical pathways. (See below.)

Clinical or Critical Pathways

A "map" of preferred treatment/intervention activities. Outlines the types of information needed to make decisions, the timelines for applying that information, and what action needs to be taken by whom. Provides a way to monitor care "in real time." These pathways are developed by clinicians for specific diseases or events. Proactive providers are working now to develop these pathways for the majority of their intervention s and developing the software capacity to distribute and store this information...

Closed Panel

A type of benefit plan in which plan members are permitted to receive services only through a specific limited number of providers. Usually not applicable to emergency care. The provider's nightmare: the panel closes and they are on the outside looking in... The consumer's nightmare: their favorite or long-time physician or provider is not in the panel under their healthcare plan...

Collections Per 1,000

An indicator calculated by taking the total collections for services received by a specific group, e.g., employer group, or group for which payer or provider are at risk, for a specific period of time, dividing it by the average number of covered members or lives in that group during that period, and multiplying the result by 1,000. This indicator may be calculated for behavioral health care in aggregate, and/or by treatment modality of treatment, e.g., inpatient, residential, partial hospitalization, and outpatient. A measure used to evaluate utilization management performance. Proactive providers should be developing the capacity to measure their performance along such dimensions...

Community Rating

The practice of some prepayment plans whereby rates are calculated using a broad range of populations in a community or region. Result is that net rate of premiums for plan subscribers are reasonably uniform and not dependent on individual claim experience or the experience of any group. This is the rating methodology required of federally qualified HMOs and of HMOs under the laws of many states, and occasionally indemnity plans under certain circumstances. Under such a rating system, the HMO is permitted to factor in differences for age, sex, mix (average contract size), and industry factors; not all factors are necessarily allowed under state laws. By averaging costs of treatment over large populations, this method is probably fairest. Can raise rates for plans serving low use beneficiaries such as young, healthy people. Can lower rates for plans with adverse selection, those whose members may be older and more dependent upon receiving health care. (See experience rating below for alternative way of arriving at rates.)

Concurrent Review

A routine review by an internal or external utilization reviewer, during the course of a patient's treatment, to determine if continued treatment is medically necessary. (See below.) This usually occurs for inpatient, residential, and partial hospitalization treatment, though it is becoming more frequent for outpatient as well.

Continued Stay Review

A review conducted by an internal or external auditor to determine if the current place of service is still the most appropriate to provide the level of care required by the client.

Computer-based Patient Record (CPR)

A term for the process of replacing the traditional paper-based chart through automated electronic means; generally includes the collection of patient-specific information from various supplemental treatment systems, i.e., a day program and a personal care provider; its display in graphical format; and its storage for individual and aggregate purposes. Also called Electronic Medical Record, On-Line Medical Record, Paperless Patient Chart.

Cost Shifting

The practice by some providers of redistributing the (negative) difference between normal charges and amounts received from certain payers by increasing charges made to other payers. Should really be called "Charge Shifting." Is fairly endemic in a fee-for-service environment; becomes nearly impossible as the environment moves to managed care. Best means to eliminate this practice: universal coverage of all consumers.


Days (Or Visits) Per 1,000

. An indicator calculated by taking the total number of days (for inpatient, residential, or partial hospitalization) or visits (for outpatient) received by a specific group for a specific period of time (usually one year). This number is then divided by the average number of covered members or lives in that group during the same period and multiplied by 1,000. A measure used to evaluate utilization management performance.

Database Management System ( DBMS)

An information processing concept introduced in the late 1970s which separated data from the computer applications that created or processed that data, thus making data more accessible and minimizing the amount of programmer time needed to maintain computer programs. Important concept because most CHINs or large-scale computer-based record systems will depend upon this crucial separation between data and systems that generate or process it.

Direct Contracting

Providing health services to members of a health plan by a group of providers contracting directly with an employer, thereby butting out the middleman or third party insurance carrier. This can be provider heaven, since middleman-MCO-is cut out and provider gets some portion of the money usually made by it. Key is to price services correctly, since provider is usually at full risk in this situation. Takes a strong IDS or AHP to pull this off..

Discounted Fee-For-Service

An agreed upon rate for service between the provider and payer that is usually less than the provider's full fee. This may be a fixed amount per service, or a percentage discount. Providers generally accept such contracts because they represent a means to increase their volume or reduce their chances of losing volume.

Disease Management

A type of product or service now being offered by many large pharmaceutical companies to get them into broader healthcare services. Bundles use of prescription drugs with physician and allied professionals, linked to large databases created by the pharmaceutical companies, to treat people with specific diseases. The claim is that this type of service provides higher quality of care at more reasonable price than alternative, presumably more fragmented, care. The development of such products by hugely-capitalized companies should be all the indicator necessary to convince a provider of how the healthcare market is changing. Competition is coming from every direction--other providers of all types, payers, employers (who are developing their own in-house service systems), the drug companies...

DRGs Diagnosis-Related Groups

Payment system that reimburses health care providers a fixed amount for all care in connection with a standard diagnostic category. Instituted by Medicare for the payment for hospital services and now used by many insurance companies. A form of case rate payment system.

Drug Utilization Review (DUR)

Either concurrent and retrospective management of an insured population's drug utilization. The goal of such management is to reduce the cost of drug therapies. Methods used include substitution of generic drugs for name brands, using a formulary to limit the universe of drugs that can be prescribed, use of co-payments for prescriptions, and encouraging the use of drugs that will trigger rebates or discounts.


Electronic Data Interchange (EDI)

The electronic exchange of business information in a standardized, structured, machine-processable format; electronically communicating business-to-business information, including client-related data.

Electronic Fund Transfers (EFT)

The transfer of money between businesses and individuals by use of computer-generated debit and credit entries rather than checks or cash. How progressive behavioral health entities should bill for Medicaid and how they should get paid by them and by Federal agencies with whom they have grants..

Enrolled Group

Persons with the same employer or with membership in an organization in common, who are enrolled collectively in a health plan. Often, there are stipulations regarding the minimum size of the group and the minimum percentage of the group that must enroll before the coverage is available. Same as Contract group.


Any person eligible, as either a subscriber or a dependent, in an employee benefit plan. (Synonyms: beneficiary, eligible individual, member, participant)

Exclusive Provider Organization (EPO)

A type of provider organization similar to an HMO. Such entities often use PCPs as gatekeepers, often capitate providers, have a limited provider panel, and use an authorization system, etc. These entities are "exclusive" because the member must remain within the network to receive benefits. The main difference from an HMO is that EPOs are generally regulated under insurance regulations rather than HMO regulations. Many states refuse to permit the development of EPOs, claiming that they are really HMOs.

ERISA -- Employee Retirement Income Security Act of 1974

Also called the Pension Reform Act, this act regulates the majority of private pension and welfare group benefit plans in the U.S.. It sets forth requirements governing, among many areas, participation, crediting of service, vesting, communication and disclosure, funding, and fiduciary conduct. Key legislative battleground now, because ERISA exempts most large self-funded plans from State regulation and, hence, from any reform activities undertaken at state level--which is now the arena for much healthcare reform.


A term used to describe the relationship of premium to claims for a plan, coverage, or benefits for a stated time period. Usually expressed as a percent or ratio. See also Medical Loss Ratio (MLR).

Experience Rating

Determining the premium rate for a group risk, wholly or partially, on the basis of that group's experience or previous use of health benefit compared to premiums paid. The opposite of community rating above.



A traditional means of billing by health providers for each service performed, with payment in specific amounts for specific services rendered (as opposed to retainer, salary, or other contract arrangements). Both third party payers and direct pay patients are billed in this manner. Though much beloved by most providers, this is a dying practice...

Fee Schedule

A listing of fees or allowances for specified medical or health procedures, which usually represents the maximum amounts the program or plan will pay for specified procedures. (Synonym: table of allowances)

Flat Fee-Per-Case

Flat fee paid for a client's treatment based on their diagnosis and/or presenting problem. For this fee the provider covers all of the services the client requires for a specific period of time. See case rate, above. Often characterizes "second generation" managed care systems. After the MCOs squeeze out costs by discounting fees, they often come to this method. If provider is still standing after discount blitz, this approach can be good for provider and clients, since it permits a lot of flexibility for provider in meeting client needs.

Formatting and Protocol Standards

Data exchange standards which are needed between CPR systems, as well as the CPR and other provider systems, to ensure uniformity in how data is collected, stored, and presented. Proactive providers are current in their knowledge of these standards and are working to make sure that their data systems conform to these standards, where possible...



An individual, usually a clinician, who controls the access to healthcare services for members of a specific group. In many HMO settings, this gatekeeper is the primary care physician (PCP) or his/her staff. In other health care delivery systems (and in HMOs in which behavioral health services are contracted out), the gatekeeper is often a case manager of the (behavioral) health organization.

Gross Charges Per 1,000

An indicator calculated by taking the gross charges incurred by a specific group for a specific period of time, dividing it by the average number of covered members or lives in that group during the same period, and multiplying the result by 1,000. This is calculated for behavioral health care in the aggregate and by modality of treatment, e.g., inpatient, residential, partial hospitalization, and outpatient. A measure used to evaluate utilization management performance.

Gross Costs Per 1,000

An indicator calculated by taking the gross costs incurred for services received by a specific group for a specific period of time, dividing it by the average number of covered members or lives in that group during the same period, and multiplying the result by 1,000. This is calculated for behavioral health care in the aggregate and by modality of treatment, e.g. inpatient, residential, partial hospitalization, and outpatient. A measure used to evaluate utilization management performance. This is the key concept for the provider. What matters is our cost and, in managed care, we must control this indicator and make sure it is below our Collections per 1,000.

Group Model

A type of HMO. In this model, an HMO contracts with a medical group for the provision of healthcare services. The relationship between the HMO and the medical group is generally very close, although there are wide variations in the relative independence of the group from the HMO. A form of closed panel health plan.

GUI Graphical User Interface

A software or operating system interface that displays "real" pictures on the screen. These pictures may represent other things--icons. GUIs permit the use of screen elements such as windows, scrollbars, buttons, pointers, etc. Think of Windows, which you undoubtedly have on your desktop...


HCFA 1500

The Health Care Finance Administration's standard form for submitting physician service claims to third party (insurance) companies.

Health Level Seven (HL7)

An existing Formatting and Protocol Standard, it is an interface specification that operates at the application level for transmitting health-related data. This standard has largely been used for transmission of data among departments within institutions for orders, clinical observations, test results, etc. Specific parts of HL7 have applicable CHIN use where such data needs to be transmitted between institutions and systems.

HIPC Health Insurance Purchasing Cooperative

A government or quasi-government entity established to purchase bulk health insurance for businesses and individuals. Not too different from a wholesaler in the retail business. Its intent is to purchase health insurance for the cooperative's members at prices and terms more favorable than would generally be available to the participants. Was a key concept in Clinton health plan and died with that legislation. The market is developing somewhat similar entities, however, some even with governmental participation... See Health Plan Purchasing Cooperatives below.

HMO Health Maintenance Organization

The definition of an HMO has evolved constantly. Originally, an HMO was defined as a prepaid organization that provided health care to voluntary enrolled members in return for a preset amount of money on a PMPM (per member per month) basis. With the increase of self-insured business and of other arrangements that might not involve prepayment, that definition is no longer accurate. Presently, the definition needs to encompass two key elements: a health plan that places at least some of the providers at risk for medical expenses, and a health plan that utilizes PCPs (primary care physicians) as gatekeepers (although there are some HMOs that do not). Obtaining care without a primary care physician's referral, or obtaining care from a non-network member, usually results in no payment for services by the payer organization.

HPPC Health Plan Purchasing Cooperatives

Critical piece of Clinton plan. Now being developed in market with demise of proposed legislation. Permits creation of purchasing agent for large groups of employers in a region. This "purchasing agent" would shop for best price and best outcomes. Would provide small employers some market muscle and might encourage them to provide health coverage. Because small business was one of most vociferous opponents of federal health plan, it remains to be seen how active it shall be in using this mechanism.


IBNR Incurred but not Reimbursed

Refers to claims which reflect services already delivered, but, for whatever reason, have not yet been reimbursed. These are bills "in the pipeline." This is a crucial concept for proactive providers who are beginning to explore arrangements that put them in the role of adjudicating claims--as the result, perhaps, of operating in a sub-capitated system (see below). Failure to account for these potential claims could lead to some very bad decisions. Good administrative operations have fairly sophisticated mathematical models to estimate this amount at any given time...

IDS/I(H)DS Integrated (Health) Delivery System

This is the "Holy Grail" right now of healthcare providers. Linkage of all regional services--vertical and horizontal--into one legal entity able to negotiate with the marketplace. In its most integrated form, even includes insurance or financing function, so that there is no division between provider and payer. See Accountable Health Plan (AHP). Also called Integrated Medical System.

Indemnity Health Insurance

A traditional health insurance plan with little or no benefit management, a fee-for-service reimbursement model, and few restrictions on provider selection. Think of a dinosaur...


A point or means of interaction between two systems. Your keyboard is an interface, as is your monitor screen. Common interactions between systems in the healthcare environment include patient/client demographic, claims/accounts receivable, and clinical orders. These large volume interactions require system-to-system interfaces. Such interactions can occur in "real time" or in batch mode. In real time or inter-active mode, interaction directly impacts database, you and data base are in "Hi, how are ya?" mode; in batch mode, interactions are "batched" for later processing. In a managed care system, real time interaction is almost always required. A case manager must know what resources a client has expended, to make resource allocation decisions about a client.

IPA Independent Physician Association; Individual Practice Association; Independent Provider Association

This set of initials is one of the most fluid now in circulation. Originally, it meant a type of health maintenance organization allowing physicians to work out of their own offices instead of a central facility. These HMOs typically are formed and operated by physicians and marketed to employers. Under this arrangement, physicians still see their individual patients, as well as patients from the HMO.

Today, this set of initials also includes entities that contract with groups of providers, including corporate providers such as behavioral health centers. Each provider agrees to see patients/clients from plans who contract with the HMO of which the IPA is a part and to serve these clients for agreed-upon fees. Such IPAs often are not associated with a single HMO, but serve a number of them under contract. This is especially the case in specialty services such as behavioral health. This model is another example of entities that are in the "wholesale" as opposed to the retail business, since IPAs tend to contract with payers who market their own plans to employers

ISDN Integrated Services Digital Network

Communication protocols developed by telephone companies to permit telephone networks to carry data, voice, video, and other source material digitally. Has large bandwidth, permitting fast and accurate transmission of large amounts of data. Usually a fairly large one-time cost to get each workstation ISDN-able and fairly large costs to use on an ongoing basis. Yet, potential to transmit so much data reliably makes this mode very attractive for entities developing CHINs or networks. As cost comes down, this may be the preferred way to develop communication networks for providers.


LATA Local Access Transport Area

A defined region in which a telephone and long distance carrier operates. Important concept for those CHINs that depend upon phone lines. When creating communications networks, you try to avoid crossing boundaries of these, if possible, since costs escalate dramatically when there is a need to communicate over more than one LATA.

Legacy Systems

Computer applications -- both hardware and software -- which have been inherited through previous acquisition and installation. Most often, these systems run business applications which are not integrated with each other. Newer systems which stress open design and distributed processing capacity are gradually replacing such systems.

Local Exchange Carrier LEC

The telephone company that provides and supports the local connection to the public switched telephone network. In many areas of the US, the LEC is one of the seven Regional Bell Operating Companies (RBOCs) or "Baby Bells." These LECs become crucial partners for any organization or group of organizations seeking to develop a CHIN or, more conservatively, simply seeking to integrate their information system across many sites.


Managed Behavioral Health Program (MBHP)

An organization that assumes the responsibility for managing the behavioral health benefit for an employer or payer organization under a "carve out" arrangement. The management may range from utilization management services to the actual provision of the services through its own organization or provider network. Reimbursement may be on a fee-for-service, shared risk, or full-risk basis. Also called a Managed Care Organization or an MCO, though this is a specialty MCO.

Managed Health Care

A system that uses financial incentives and management controls to direct patients to providers who are responsible for giving appropriate care in cost-effective treatment settings. Such systems are created to control the cost of health care. Note that there is no direct reference to quality in this definition...

Master Patient/Member Index

An index or file with a unique identifier for each patient or member that serves as a key to a patient's or member's health record.

Medically Necessary

Services or supplies which meet the following tests:

  • they are appropriate and necessary for the symptoms, diagnosis, or treatment of the medical condition;

  • they are provided for the diagnosis or direct care and treatment of the medical condition;

  • they meet the standards of good medical practice within the medical community in the service area;

  • they are not primarily for the convenience of the plan member or a plan provider; and

  • they are the most appropriate level or supply of service which can safely be provided.

This standard is becoming the most important one for providers to focus upon. Note that many of the rehabilitation services common to behavioral healthcare, especially to severely disabled populations, may not meet such a test, or do so only by stretching their meaning...

MLR Medical Loss Ratio

The amount of revenues from health insurance premiums that is spent to pay for the medical services covered by the plan. Usually referred to by a ratio, such as 0.96--which means that 96% of premiums were spent on purchasing medical services. The goal is to keep this ratio below 1.00--preferably in the 0.80 range, since the MCO's or insurance company's profit comes from premiums. Currently, successful HMOs do have MLRs in the 0.70-0.80 range.


One of the following:

  • Medical Staff Organization An organized group of physicians, usually from one hospital, into an entity able to contract with others for the provision of services, or

  • Management (or Medical) Services Organization An entity formed by, for example, a hospital, a group of physicians or an independent entity, to provide business-related services such as marketing and data collection to a grouping of providers like an IPA, PHO or CWW. This second definition is becoming the almost exclusive usage.

Multiple Employer Trust (MET)

A legal trust established by a plan sponsor that brings together a number of small, unrelated employers for the purpose of providing group medical coverage on an insured or self-funded basis. Not quite a Health Plan Purchasing Cooperative, but along the same lines. More market-oriented and usually smaller in scale.


Network Model

A health plan that contracts with multiple physician groups or other providers to deliver health care to members. Generally limited to large single or multi-specialty groups. Distinguished from group model plans that contract with a single medical group, from IPAs that contract through an intermediary, and from direct contract plans that contract with individual physicians in the community. Many current behavioral healthcare networking efforts are attempts to create service systems along this line, or to integrate behavioral healthcare practices into such entities.


Object Oriented Database

Database organized around an object model, as opposed to relational or flat databases. "Objects" are anything: video clips, files, reports, etc. This model seeks to group many different types and sources of data as objects and to create a common way to deal with them. Allows modular development of software and better reflects the way people really think. This is the latest generation of software. See Relational Data Model below.

Out-of-Area Benefits (HMO)

Benefits supplied by a plan to its subscribers or enrollees when they need services outside the geographic limits of the HMO. These benefits usually include emergency care benefits, plus low fee-for-service payments for nonemergency care.


PCP Primary Care Provider

A Primary Care Provider such as a family practitioner, general internist, pediatrician and sometimes an ob/gyn. Generally, a PCP supervises, coordinates, and provides medical care to members of a plan. The PCP may initiate all referrals for specialty care. Within behavioral health, case managers are often the PCP; role often done by outpatient therapist. Alternatively, it is possible to conceive of a system in which behavioral health services are integrated into the PCP practice directly...

PCP Capitation

A reimbursement system for health care providers of primary care services who receive a pre-payment every month. The payment amount is based on age, sex and plan of every member assigned to that physician for that month. Specialty capitation plans also exist, but are little used. PCPs contract with specialists to get their service. When pay to specialist is also capitated, this is a sub-capitation system. This model is the specialists' nightmare; makes their income completely dependent upon the PCP. In this context, behavioral health providers are usually viewed as specialists. Suggests a need to be very close to primary care physicians, and another reason to seek integration with them...

PHO Physician-Hospital Organization

An arrangement among physicians and hospital(s) wherein a single entity, the PHO, agrees to provide services to insurers' subscribers for a single price. Formerly called a MeSH or medical staff-hospital organization. Often superseded by a medical foundation, which carries out similar role, but which is more integrated in its governance and operation. One of the most common and active structural developments in healthcare. Just about every hospital is seeking to develop one of these with its medical staff--or a portion of it--so that together they can provide a single "face" to the managed care market...

PMPM Per Member Per Month

Specifically applies to a revenue to or cost by a provider for each enrolled member each month.

PMPY Per Member Per Year

Same as above, as applies to year.

PPO Preferred Provider Organization

A variation of traditional fee-for- service care arrangements. A group of physicians, dentists, and/or hospitals and other practitioners contracts with a payer to provide employees with services at competitive rates. The employee is not penalized or prevented from using his or her regular physician, even if that physician does not participate in the PPO; in such cases, however, the participant usually pays a higher fee or co-payment. PPOs usually provide incentives for provider participation, such as a competitive rate structure or the implication of increased volume. In addition, PPOs generally use primary care physicians to assure that hospitalization occurs only when absolutely necessary, with extensive concurrent utilization review.

Point-of-Care Technology

Those technologies which enable physicians and other clinicians to electronically record findings, enter orders, and review information from the location at which care is provided. A good example of "real time" interaction. Input from clinician directly changes database. At the heart of "tele-medicine."

POS Point-of-Service

A type of benefit plan in which the insured person can choose to use a non-participating provider at a reduced coverage level and with more out-of-pocket cost. Such POS plans combine both HMO-like systems with indemnity systems. Often known as open-ended HMOs or PPOs, these plans permit insured to choose providers outside the plan, yet are designed to encourage the use of network providers. One of the most popular plans with consumers and employers. Represents area of greatest HMO growth.


The prior authorization required by some payers before health benefit payments will be authorized.


An administrative procedure whereby a health provider submits a treatment plan to a third party before treatment is initiated. The third party usually reviews the treatment plan, monitoring one or more of the following: patient's eligibility, covered service, amounts payable, application of appropriate deductibles, copayment factors and maximums. Under some programs, for instance, predetermination by the third party is required when covered charges are expected to exceed a certain amount. Similar processes: pre-authorization, precertification, pre-estimate of cost, pretreatment estimate, prior authorization.

Prepaid Group Practice Plan

A plan under which contractually-specified health services are rendered by participating physicians to an enrolled group of persons, with a fixed periodic payment in advance made by or on behalf of each person or family.


Aggregated data in formats that display patterns of health care services over a defined period of time.

Profile Analysis

Review and analysis of profiles to identify and assess patterns of health care services.

Provider Organization

A practice, clinic, mental health center, hospital, or other organization that is employed by managed health programs to provide treatment services.

PTMPY Per Thousand Members Per Year

A common way of reporting utilization. The most common example is hospital utilization, expressed as days PTMPY. For outpatient-oriented providers, this indicator would reflect VISITS PTMPY.


Relational Data Model

A database management scheme that permits reports to be pulled from many different files, provided there is a common--or related--element linking all the files. This is currently most powerful way of developing databases. Slowly being supplanted by Object-oriented Databases noted earlier.

Resource-Based Relative Value Scale (RBRVS)

A Medicare weighting system to assign units of value to each CPT code (procedure) performed by physicians and other providers. The number of units or value for each procedure includes a portion for physician skill, expenses associated with the procedure, and geographic area. Loved by "process" docs such as PCPs, since adoption of this scale by Medicare increased their pay; despised by "transaction" docs such as specialists and surgeons, since they lost money per transaction...

Retrospective Review Process

A review that is conducted after services are provided to a patient. The review focuses on determining the appropriateness, necessity, quality, and reasonableness of health care services provided. Becoming seen as least desirable method; supplanted by CONCURRENT reviews...

Risk Sharing

A method by which medical insurance premiums are shared by plan sponsors and participants. In contrast to traditional indemnity plans in which insurance premiums belonged solely to insurance company that assumed all risk of using these premiums. Key to this approach is that the premiums are ONLY payment providers receive; provides powerful incentive to be parsimonious with care..


Self-Funded Health Plans

Plans that provide for the reimbursement of medical expenses incurred by an employee, his/her spouse, or his/her dependents by the employer or a group of employers, as opposed to an insurance company. In such arrangements, the employer assumes all the risk, unless it can share some of it with a managed care entity or a group of providers. Many variations of this approach are possible. It is possible to insure some benefits and self-insure others; to self-insure or self-fund all benefits up to a certain aggregate claim level; or to set certain individual claim limits for self-funding and insure above that level. See self-insurance below.


A program for providing group insurance with benefits financed entirely through the internal means of the policyholder, as opposed to purchasing coverage from commercial carriers. These plans and those directly above are exempt from ERISA and from most regulation. Thus, they are much used by large employers.


An arrangement that exists when an organization being paid under a capitated system contracts with other providers on a capitated basis, sharing a portion of the original capitated premium. Can be done under Carve Out, with the providers being paid on a PMPM basis.



The TCP/IP (Internet) standard high-level protocol for establishing terminal connections to a host computer over a network. Allows users to access a remote host (computer) as if their terminal were directly connected to it. A must for "real time" networks.

TPA Third-Party Administrator

Usually an out-of-house professional firm providing administrative services, such as paying claims, collecting premiums, and carrying out other administrative support services, for employee benefit plans. (Synonyms: administrative agent, carrier, insurer, underwriter)

Treatment Episode

The period of treatment between admission and discharge from a modality, e.g., inpatient, residential, partial hospitalization, and outpatient. Many healthcare statistics and profiles use this unit as a base for comparisons.


UB-92 Uniform Bill 1992

Bill form used to submit hospital insurance claims for payment by third parties. Similar to HCFA 1500, but reserved for the inpatient component of health services.


Can be expressed in a variety of ways:

  • The extent to which a given group uses specified services in a specified period, expressed as the number of services used per year per 1,000 or per 1,000 persons eligible for the services. Utilization rates may be expressed in other types of ratios, e.g., per eligible persons covered.

  • The extent to which the members of a covered group use specified services over a specific period, in the aggregate. Usually expressed as the number of services used per year. Utilization rates are established to help in comprehensive health planning, budget review, and cost containment.


Value Added Networks (VANs)

Integrated networks that combine transmission and applications on a single network, offering enhanced services that change the data in some desirable way upon entry and/or exit from the Permit data communications between similar or dissimilar equipment. These services--packet assembly/disassembly, protocol/speed/code conversions--permit the communication across different hardware and software. Thus, the value-added. When you hear about the Information Highway, these VANs are a critical component of it. The biggest companies in America and abroad are working to develop these value-added capacities, so that communications can occur relatively transparently across all types of hardware and software. CHINs and the development of any integrated information systems will be greatly enhanced as these giants develop and deliver these services.


Withhold Pool

The amount withheld from a PCP's capitation payment or a specialist's payment amount to cover expenditures greater than budgeted or expected in serving a specified enrollee group. This is one of the most common ways to incentivize specialists--read "behavioral health providers"--under managed care. If utilization is less than withhold pool, or if pool relatively unused, specialists get some portion of that pool back as payment.

Italicized font is used to signal directions, market preference, and editorial comment about concepts. This Glossary should be used as a "work in progress" rather than the "end of the road". 










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