Chapter 1 Key Terms

Accountable care organization (ACO):

A group of health care providers who provide coordinated care to target patient populations, with the
intent of tying financial incentives to quality outcomes and lowered costs.

Capitation:

A system that pays providers a specific amount in advance to care for the health care needs of a
population over a specific time period. Providers are usually paid on per member per month (PMPM)
basis. The provider then assumes the risk that the cost of caring for the population may exceed the
aggregate PMPM amount received

Care mapping:

A process that specifies in advance the preferred treatment regimen for patients with particular
diagnoses. This is also referred to as a clinical pathway, clinical protocol, or practice guideline.

Electronic health record (EHR):

Also called an electronic medical record (EMR), this online version of patients’ charts can include patient
demographics, insurance information, dictations and notes, medication and immunization histories,
ancillary test results, and the like. Under strict security permissions, the information can be accessed
either in-house or in private office settings.

Evidence-based medicine:

Health care based on the best evidence currently available from both individual clinical expertise and
research-based clinical findings.

Group purchasing organization (GPO):

A network of health care organizations and a third-party vendor who are able to acquire large volumes
of supplies from manufacturers at negotiated discounted rates owing to economies of scale.

Health insurance exchange:

A state-level, competitive insurance marketplace, authorized by the ACA. In each state, there will be one
for individuals and one for small businesses needing insurance.

Health Insurance Portability and Accountability Act (HIPAA):

A set of federal compliance regulations enacted in 1996 to ensure standardization of billing, privacy, and
reporting practices as institutions convert to electronic systems.
ICD-10:

The World Health Organization’s International Statistical Classification of Diseases and Related Health
Problems (ICD) is a coding system for diseases that is used in the United States for health insurance
claim reimbursement. Currently, the United States uses the ninth version of these codes. Other
countries use the tenth version, ICD-10. U.S. implementation of ICD-10 has been delayed until October
1, 2014

Malpractice reform:

The ACA addresses medical liability in two ways: (1) extension of federal malpractice protections to
nonmedical personnel working in free clinics, and (2) authorization of $50 million over the next five
years for HHS to award demonstration project grants. These grants would be provided to states to
develop, implement, institute, and evaluate alternatives to the present system used in the United States
to resolve charges against physicians and other health care providers of wrongdoing to patients.

Medical tourism:

Travel to a foreign country to obtain normally expensive medical services at a steep discount. Even with
a family member escorting the patient (and getting the added benefit of foreign travel), the total cost is
typically less than it would be at home.

Medicare severity-adjusted diagnosis related groups (MS-DRGs):

The basis for the CMS payment system that replaced the DRG payment system and is designed to better
correlate payments with patient severity. See diagnosis related groups (DRGs).

Patient-centered medical home o. Patient Protection and Affordable Care Act (ACA):

A partnership between primary care providers (PCPs), the patients, and patients’ families to deliver
coordinated and comprehensive care over the long term in a variety of settings.

Pay for performance (P4P):

A recent alternative payment arrangement that makes a portion of provider reimbursement dependent
on adherence to predefined standards for quality of care and/or creates additional reimbursement
incentives for providers based on such adherence. Indicators include various patient outcomes and the
frequency and types of tests ordered and services performed.

Pay for reporting (P4R):

Before value-based purchasing was instituted, CMS was requiring hospitals to submit Hospital Quality
Data for their adult inpatient populations, reporting on a variety of clinical performance measures, in
order to avoid a 2 percent reduction in their Medicare payments.
Prospective payment system (PPS):

A payment system used by Medicare to reimburse providers a predetermined amount; rates, prices, or
budgets are established before services are rendered and costs are incurred. Several payment methods
fall under the PPS umbrella, including methods based on DRGs (for inpatient admissions), APCs (for
outpatient visits), a resource-based relative value scale (RBRVS) (for professional services), and resource
utilization groups (RUGs) (for skilled nursing home care). Use of DRGs was the first method that fell
under this type of predetermined payment arrangement. Providers retain or absorb at least a portion of
the difference between established revenues and actual costs.

Recovery audit contractor (RAC) program:

A program created under the Medicare Modernization Act of 2003 to identify and recover improper
Medicare payments to health care providers.

Retail health care:

Walk-in medical services for basic preventive health care provided in a retail outlet, such as a pharmacy,
by a licensed care provider.

Shared savings:

A payment strategy that encourages providers to reduce health care spending for a defined patient
population by offering them a percentage of the net savings realized as a result of their efforts.

Value-based purchasing (VBP):

A payment methodology designed to provide incentives to providers for delivering quality health care at
a lower cost. The financial rewards come from funds being withheld by the payor; these funds are then
redistributed on providers’ achievement of and improvement on specific performance measures,
including patient satisfaction.