Acceptable/warranted variation

Variation in care related to aspects of health status or population demographics. This variation is expected in an efficient health system since it is driven by genuine health needs and is beyond the control of both providers and patients.

Accountable care organization (ACO)

Groups of doctors, hospitals, and other healthcare providers, who come together voluntarily to give coordinated care to a population. ACOs are characterized by a payment and care delivery model that seeks to tie reimbursements to metrics of quality and reduced costs for an assigned population.

Balancing measures

Measures that ensure changes designed to improve one part of the system or disease process do not cause new problems in other parts of the system or disease process.

Beneficiary

The person that receives any of the benefits of the insurance coverage.

Bundled Payment

A reimbursement method based on expected costs for a clinically defined episode of care that includes multiple services.

Capitation

The payment of a fee to a healthcare provider providing services to a number of people, such that the amount paid is determined by the number of total patients.

Charge

For purposes of this book, “charge” is used to signify the price asked for a healthcare good or service. The charge is the amount that would appear on a medical bill.

Chargemaster

A comprehensive listing of items billable to a hospital patient or a patient’s health insurance provider.

Choosing Wisely

A campaign led by the ABIM Foundation seeking to improve doctor-patient communication related to overutilization of medical resources.

Coinsurance

The amount a beneficiary must pay for medical care after they have met their deductible. For instance, the insurance company may pay for 80% of an approved amount, and the patient’s coinsurance will be for 20%.

Consumer-driven health plans (CDHPs)

Health insurance plans that allow members to use specific accounts, such as health savings accounts or health reimbursement accounts or similar models, to pay directly for routine health expenses.

Copayment

The flat fee that a beneficiary must pay each time they receive medical care. For example, a patient may pay a $10 copayment (“copay”) for every doctor visit, while the insurance plan covers the rest of the cost.

Cost

To providers: costs are the expense incurred to deliver healthcare services to patients.

To payers: costs are the amount they pay to the provider for services rendered.

To patients: costs are the amount they pay out-of-pocket for healthcare services.

COST framework

Framework developed by Costs of Care to categorize and guide educational and operational efforts to improve healthcare value. The acronym stands for: culture, oversight, systems, and training.

Cost-effectiveness analysis

A method of quantifying the value of care by comparing the relative costs and effects (clinicial outcomes, patient experience, or both) of two different courses of action.

Cost-effectiveness acceptability curve (CEAC)

Graph of the probability that a technology will be cost-effective given different willingness to pay thresholds.

Coverage limits

The maximum amount that a health insurance plan may pay for certain healthcare services. Some health insurance policies may also have a maximum annual or lifetime coverage amount. After any of these limits are reached, then the policy-holder may have to pay for all remaining costs.

Deductible

The amount the beneficiary must pay each year before their health insurance coverage plan begins paying.

Defensive medicine

The practice of clinicians utilizing technology (ordering tests or providing treatments) to reduce malpractice liability.

Diagnosis-related group (DRG)

Payment categories used to classify patients based on their diagnosis for the purpose of reimbursing hospitals a fixed fee based on the diagnosis (known as a prospective payment). DRGs have been used by Medicare for hospital reimbursements since 1983. The classifications used to determine Medicare payments for inpatient care include primary and secondary diagnosis, primary and secondary procedures, age, and length of hospitalization.

Effective care

Medical interventions that provide clear net benefit for patients (the benefits far outweigh the risks).

e-Patients

A term coined by physician author Tom Ferguson in reference to patients who are “equipped, enabled, empowered, and engaged” in their health and healthcare decisions.

Exclusions/Limitations

Services that are not covered by a plan. These must be clearly defined in the plan literature.

Extrinsic motivation

Motivation that arises outside the individual. Typically refers to monetary incentives.

False-negatives

A negative test result obtained in a case where the person does actually have the disease.

False-positives

A positive test result obtained in a case where the person does not actually have the disease.

Fee-for-service (FFS)

A payment system where healthcare services are unbundled and each paid for separately.

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