The Care Equation · Appendix C

Healthcare glossary

43 terms, defined the way the book uses them.

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340B: A federal programme requiring drug manufacturers to sell outpatient drugs at steep discounts to eligible hospitals and clinics, which may bill insurers at higher rates.

ACO: Accountable care organisation: a group of providers that shares in savings, and sometimes losses, against a spending benchmark for a population.
Anti-Kickback Statute: The federal criminal law that prohibits paying or receiving anything of value to induce referrals of business paid by federal health programmes.
ASO: Administrative services only: an arrangement in which a self-insured employer pays claims and an insurer is paid a fee for network and administration.
AWP: Average wholesale price: a list-based benchmark used to set pharmacy reimbursement.

CAC: Customer acquisition cost: the cost of winning and launching a customer.
Capitation: A fixed payment per person per period to cover a defined set of services, transferring cost risk to the recipient.
Coding intensity: The tendency of risk scores in Medicare Advantage to rise faster than underlying morbidity because of more complete or more aggressive diagnosis coding.
Corporate practice of medicine: State doctrines that prohibit lay-owned companies from employing physicians or controlling medical decisions.
CPT: Current Procedural Terminology: the codes for services billed by physicians and other clinicians.

DRG: Diagnosis-related group: the classification Medicare uses to pay a fixed amount per hospital admission.

ERISA: The federal law governing employer benefit plans, which pre-empts most state insurance regulation for self-funded plans.

False Claims Act: The federal law imposing liability for false claims to the government, enforced by the Justice Department and by whistleblowers.
Fee-for-service: Payment for each service delivered.
FHIR: Fast Healthcare Interoperability Resources: a standard for exchanging health data through modern application interfaces.

HCC: Hierarchical condition category: a group of diagnoses used in Medicare's risk-adjustment model.
HEDIS: Healthcare Effectiveness Data and Information Set: standard quality measures for health plans.
HIPAA: The Health Insurance Portability and Accountability Act, whose privacy, security and breach-notification rules govern health information held by providers, plans and their business associates.

ICHRA: Individual coverage health reimbursement arrangement: an employer-funded, tax-free allowance employees use to buy individual insurance.

Medical loss ratio (MLR): Medical claims and quality spending divided by premium; federal floors are 80% or 85% depending on the market.
Medicare Advantage: Private plans paid by Medicare a risk-adjusted monthly amount per member to provide Medicare benefits.
MSO: Management services organisation: a company that provides non-clinical services to a physician-owned practice under a management agreement.

No Surprises Act: The federal law, passed in December 2020 and effective from 2022, that protects patients from most surprise out-of-network bills and sets a dispute process between providers and plans.

Payer mix: The shares of a provider's patients or revenue paid by each type of payer.
Payment-to-cost ratio: What a payer pays per dollar of a provider's cost of care.
Payvider: An organisation that is both payer and provider.
PBM: Pharmacy benefit manager: a company that builds formularies, negotiates rebates and processes prescription claims for plan sponsors.
PEPM: Per employee per month: a price charged on every eligible employee, whether or not they use the service.
PMPM: Per member per month.
Prior authorisation: A plan's approval required before a service or drug will be covered.

Rebate: A payment from a drug manufacturer to a PBM or plan after the sale, usually a share of the list price, in return for formulary position.
Regression to the mean: The tendency of extreme measurements to move toward the average on remeasurement, which makes patients enrolled at a peak appear to improve.
Risk adjustment: Adjusting payments to a plan or provider for the expected cost of the people it covers.
RVU: Relative value unit: Medicare's measure of the resources a physician service requires, used to set fees and often to pay physicians for volume.

Scope of practice: The services a licensed profession may legally perform in a state.
Selection: Differences between people who choose a programme and those who do not, which can masquerade as a programme's effect.
Spread pricing: A PBM practice of billing a plan more for a drug than it pays the pharmacy and keeping the difference.
Stark law: The federal law restricting physician referrals for certain services to entities with which the physician has a financial relationship.
Star ratings: CMS's one-to-five-star quality ratings for Medicare Advantage and Part D plans; plans at four stars or more receive bonus payments.

V28: Version 28 of the CMS hierarchical condition category model, phased in for Medicare Advantage from 2024 to 2026.
Vendor-managed inventory: An arrangement in which a supplier places, owns or finances and replenishes stock at a customer's premises.

WAC: Wholesale acquisition cost: a drug manufacturer's list price to wholesalers.