COMMUNITY RATING

The intent of community rating is to spread the cost of illness evenly over all subscribers rather than charging the sick more than the healthy for coverage.  Under the HMO Act, community rating is defined as a system of fixing rates of payment for health services which may be determined on a per person or per family basis and may vary with the number of persons in a family, but must be equivalent for all individuals and for all families of similar composition. With community rating, premiums do not vary for different groups of subscribers or with such variables as the group’s claims experience, age, sex or health status.  Generally, federally-qualified HMOs must use community rating.

DIAGNOSIS RELATED GROUPS (DRGs)

A statistical system of classifying any inpatient stay into groups for purposes of payment.  DRGs may be primary or secondary; an outlier classification also exists.  Classification system that groups patients according to diagnosis, age, presence of comorbidity or complications, and other relevant data. Used by Medicare and some private insurers to set reimbursement rates.

EXPERIENCE RATING

The process of setting rates based partially or in whole on evaluating previous claims experience and then projecting required revenues for a future policy year for a specific group of pool of groups.

NOTE: Understand the difference between: Experience Rating as compared to Community Rating.

FEE SCHEDULE

A comprehensive listing of fee maximums used to reimburse a physician and/or other provider on a fee-for-services basis.

GLOBAL CAPITATION

A capitation payment that covers all medical expenses, including professional and institutional expenses.  May not necessarily cover optional benefits (ex. pharmacy).

PEER REVIEW

Evaluation of the quality and effectiveness of a health care professional’s services performed by physicians or other professionals who have comparable (equivalent) training to those being reviewed.

PREVENTIVE CARE

Comprehensive care emphasizing priorities for prevention, early detection and early treatment of conditions, generally including routine physical examinations, immunization and well person care.

PRE-EXISTING CONDITION

Any medical condition that has been diagnosed or treated within a specified period immediately preceding the covered person’s effective date of coverage under the master group contract.

PROSPECTIVE PRICING

Prospective Pricing is a system of determining fee structure prior to rendering of services, for example: bundling of services for a package rate, fee schedules, discounted fee rates.

“Prospective Pricing” – pricing services prior to rendering services as compared to “Retrospective Pricing” – pricing services after services are rendered

QUALITY ASSURANCE PROGRAMS:

  • Total Quality Management (“TQM”) – involves establishing quality standards and educating providers and patients about them
  • Continuous Quality Improvement (“CQI”) – not only utilizes standards but also has defined goals of ongoing increases in level of quality of care given and outcomes

A formal set of activities to review and affect the quality of services provided.  Quality assurance includes quality assessment and corrective actions to remedy any deficiencies identified in the quality of direct patient, administrative and support services.  At first, quality assurance type programs were used for identification and avoidance of lack of quality medical care. These types of programs have progressed through several stages to Total Quality Management (“TQM”) which involves establishing quality standards and educating providers and patients about them; to Continuous Quality Improvement (“CQI”) which not only utilizes standards but also has defined goals of ongoing increases in the level of quality of care given and outcomes.

Lack of quality care must, in some cases, result in punitive action, including reporting to the National Practitioner Data Bank (“NPDB”)

Lack of quality care must, in some cases, result in punitive action, including reporting to the National Practitioner Data Bank (“NPDB”). The focus of quality assurance programs has been increasingly on education of the involved provider and ongoing efforts to raise every provider’s knowledge and behavior to a level that ensures consistent excellent outcomes.

RETROSPECTIVE REIMBURSEMENT

Retrospective Reimbursement is a method of paying for services after they have been rendered. Typically, providers charge their cost for rendering the services along with a profit margin.

RISK SHARING ARRANGEMENTS

Risk sharing arrangements typically consist of percentage of payment the plan withholds from physicians and returns if target costs are met. Managed Care Organizations may use certain risk sharing arrangements such as risk sharing pools in which money is set aside by the Managed Care Organization to pay for certain designated services. After a defined period of time this pool might be distributed to the participating providers in accordance with the terms in the written agreement between the parties. The money to create these pools may come from “withholds” or potential “bonus” money set aside by the Managed Care Organization for such designated purpose. These pools of money may be created from the combination of all of the participating providers of the Managed Care Organization or defined in some other fashion.

USUAL, CUSTOMARY AND REASONABLE (UCR) CHARGES

A method of profiling prevailing fees in an area and reimbursing providers on the basis of that profile.  Charges for medical services that are based on community-wide charges for such services. Typically, these type of charges take into account the type of service rendered, geographic location, and perhaps level of training required to perform such service. At times, the standard may be “usual and customary”. The addition of “reasonable” is to encourage fairness of cost.

UTILIZATION MANAGEMENT (UM) or  UTILIZATION REVIEW (UR)

The process of evaluating the necessity, appropriateness and efficiency of healthcare services.  A review coordinator gathers information about the proposed hospitalization, service or procedure from the patient and/or provider, then determines whether it meets established guidelines and criteria.  Systematic means for reviewing and controlling patients’ use of health services and providers’ use of health care resources. Usually involves data collection, review and/or authorization, especially for services such as a specialist referrals and emergency room use, and particularly costly services such as hospitalization.

UTILIZATION REVIEW (UR)

Also, known as utilization management. A formal review of patient utilization or of the appropriateness of health care services, on a prospective, concurrent or retrospective basis.  There are three basic kinds of utilization review used to confirm the appropriateness and necessity of medical care. Retrospective review is for review of services after they have been rendered. Concurrent review is for review of services while they are being rendered such as requesting an extended length of stay for inpatient services. Prospective review is for review of services before they have been rendered.

WITHHOLDS OR BONUSES

Withholds used by Managed Care Organizations might be a sum of money set aside by the Managed Care Organization to help pay for certain services such as specialists or inpatient costs. Subject to the terms of the written agreement between the parties, any amount left after a defined period of time, might be paid to the participating provider(s) as a “bonus”. Managed Care Organization’s may use these kind of incentives to encourage certain behavior by providers, such as appropriate use of specialists and avoidance of duplication or unnecessary tests.

AFFORDABLE CARE ACT:

ACCOUNTABLE CARE ORGANIZATIONS (ACOs)

The Affordable Care Act creates new Accountable Care Organizations (ACOs) that incentivize doctors and other providers to work together to provide more coordinated care to their patients.  ACOs agree to take responsibility for the cost and quality of their patients’ care, to improve care coordination and safety, and to promote appropriate use of preventive health services.  And when this new care model saves the Medicare program money, that savings is shared with the ACO.

OUTCOME MEASURES OR EFFICIENCY MEASURES

The Affordable Care Act under Title X, “Strengthening Quality, Affordable Health Care for All Americans” has provisions for the “Development of outcome measures” and “Selection of efficiency measures”.

PAY-FOR PERFORMANCE

“Pay-for-performance” refers to initiatives that provide financial incentives to health care providers to carry out improvements focused on achieving optimal patient outcomes.

VALUE-BASED PURCHASING (VBP)

Under the Hospital Value-Based Purchasing (VBP) Program required by the Affordable Care Act, Medicare will reward hospitals and other entities when they meet certain standards for delivering high-quality care to patients.

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