Cafeteria Plan

An arrangement under which employees may choose their own benefit structure. Sometimes these are varying benefit plans or add-ons provided through the same insurer or 3rd party administrator, other times this refers to the offering of different plans or HMOs provided by different managed care or insurance companies.

Capital Cost Report

Similar to the above review but normally produced retrospectively rather than prospectively.

Capital Costs

Capital costs usually involve equipment and physical plant costs, not consummable supplies. Included in these costs can be interest, leases, rentals, taxes and insurance on physical assets like plant and equipment. Capital costs are usually reimbursed to cost based facilities through submission of these costs on annual cost reports to the HCFA intermediaries. Depreciation schedules apply.

Capital Expenditure Review

A review of proposed capital expenditures of hospitals or providers to determine the need for, and appropriateness of, the proposed expenditures. The review is usually done by a designated regulatory agency and has a sanction attached that prevents or discourages unneeded expenditures. Often this is related to HCFA or Medicare and the willingness of the federal government to provide allowances for capital costs.

Capitation – Cap, Capped, Capitate

Specified amount paid periodically to health provider for a group of specified health services, regardless of quantity rendered. Amounts are determined by assessing a payment “per covered life” or per member. The method of payment in which the provider is paid a fixed amount for each person served no matter what the actual number or nature of services delivered. The cost of providing an individual with a specific set of services over a set period of time, usually a month or a year. A payment system whereby managed care plans pay health care providers a fixed amount to care for a patient over a given period. Providers are not reimbursed for services that exceed the allotted amount. The rate may be fixed for all members or it can be adjusted for the age and gender of the member, based on actuarial projections of medical utilization.


An insurer; an underwriter of risk, that finances health care. Also refers to any organization which underwrites or administers life, health or other insurance programs.

Carve Outs

Practice of excluding specific services from a managed care organization’s capitated rate. In some instances, the same provider will still provide the service, but they will be reimbursed on a fee-for-service basis. In other instances, carved out services will be provided by an entirely different provider. A payer strategy in which a payer separates (“carves-out”) a portion of the benefit and hires an MCO to provide these benefits. Common carve outs include such services as psychiatric, rehab, chemical dependency and ambulatory services. Increasingly, oncology and cardiac services are being carved out. This permits the payer to create a seperate health benefits package and assume greater control of their costs. Many HMOs and insurance companies adopt this strategy because they do not have in-house expertise related to the service “carved out.” A “carve-out” is typically a service provided within a standard benefit package but delivered exclusively by a designated provideror group. This process may or may not seem transparent to the subscriber, but, it often means that seperate UR and pre-certification entities are involved as well as different payers and providers. Carve-outs are also called sub-contractors, sub-capitators or junior capitation contracts.

Case Management

Method designed to accomodate the specific health services needed by an individual through a coordinated effort to achieve the desired health outcome in a cost effective manner. The monitoring and coordination of treatment rendered to patients with specific diagnosis or requiring high-cost or extensive services. The process by which all health-related matters of a case are managed by a physician or nurse or designated health professional. Physician case managers coordinate designated components of health care, such as appropriate referral to consultants, specialists, hospitals, ancillary providers and services. Case management is intended to ensure continuity of services and accessibility to overcome rigidity, fragmented services, and the misutilization of facilities and resources. It also attempts to match the appropriate intensity of services with the patient’s needs over time.

Case Mix

The mix of patients treated within a particular institutional setting, such as the hospital. Patient classification systems like DRGs can be used to measure hospital case mix. (See also DRGs and Case-Mix Index). Measurement reflecting servicing needs, uses of hospital capabilities, and the general rate of hospital admissions. The types of inpatients a hospital or post acute facility treats. The more complex the patients’ needs, the greater the amount spent for patient care. Case mix is generally established by estimating the relative frequency of various types of patients seen by the provider in question during a given time period and may be measured by factors such as diagnosis, severity of illness, utilization of services, and provider characteristics.

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.

Case Severity

A measure of intensity or gravity of a given condition or diagnosis for a patient. May have direct correlation with the amount of service provided and the associated costs or payments allowed.

Case-Mix Index – CMI

The mix of patients treated within a particular institutional setting, such as the hospital. Patient classification systems like DRGs can be used to measure hospital case mix. (See also DRGs and Case-Mix Index). Measurement reflecting servicing needs, uses of hospital capabilities, and the general rate of hospital admissions. The types of inpatients a hospital or post acute facility treats. The more complex the patients’ needs, the greater the amount spent for patient care. Case mix is generally established by estimating the relative frequency of various types of patients seen by the provider in question during a given time period and may be measured by factors such as diagnosis, severity of illness, utilization of services, and provider characteristics.

Catastrophic Coverage for Drugs

A specific term used in the Medicare Part D plans that refers to the event of a beneficiary’s total drug costs reaching a certain maximum (in 2006 that maximum was $5451.25, for example), after which the beneficiary pays a small coinsurance (like 5%) or a small co-payment for covered drug costs until the end of that calendar year.

Catastrophic Health Insurance

Policy that provides protection primarily against the higher costs of treating severe or lengthy illnesses or disabilities. Normally these are “add on” benefits that begin coverage once the primary insurance policy reaches its maximum.

Categorically Needy

Medicaid eligibility based on defined indicators of financial need by families with children and pregnant women, and to persons who are aged, blind, or disabled. Persons not falling into these categories cannot qualify, no matter how low their income. The Medicaid statute defines over 50 distinct population groups as potentially eligible, including those for which coverage is mandatory in all states and those that may be covered at a state’s option. The scope of covered services that states must provide to the categorically needy is much broader than the minimum scope of services for other groups receiving Medicaid benefits.

Centers for Medicare and Medicaid Service – CMS

The Centers for Medicare & Medicaid Services (CMS) is a Federal agency within the U.S. Department of Health and Human Services. Programs for which CMS is responsible include Medicare, Medicaid, State Children’s Health Insurance Program (SCHIP), HIPAA and CLIA. Formerly was HCFA.

Certificate of Authority – COA

Issued by state governments, it gives a health maintenance organization or insurance company its license to operate within the state.

Certificate of Coverage – COC

Outlines the terms of coverage and benefits available in a carrier’s health plan.

Certificate of Need – CON

In some states, a state agency must review and approve certain proposed capital expenditures, changes in health services provided, and purchases of expensive medical equipment. Before the request goes to the state, a local review panel (the health systems agency or HSA) must evaluate the proposal and make a recommendation. CON is intended to control expansion of facilities and services by preventing excessive or duplicative development of facilities and services.

Certified Health Plan

A managed health care plan, certified by the Health Services Commission and the Office of the Insurance Commissioner to provide coverage for the Uniform Benefits Package to state residents. Regulations vary by state since some states require only HMOs to certify but not PPOs, IPAs or MSOs. Increasingly these regs are becoming more consistent state by state.


Civilian Health and Medical Program of the Uniformed Services.


These are the published prices of services provided by a facility. CMS requires hospitals to apply the same schedule of charges to all patients, regardless of the expected sources or amount of payment. Controversy exists today because of the often wide disparity between published prices and contract prices. The majority of payers, including Medicare and Medicaid, are becoming managed by health plans that negotiate rates lower than published prices. Often these negotiated rates average 40% to 60% of the published rates and may be all-inclusive bundled rates.

Chronic Care

Long term care of individuals with long standing, persistent diseases or conditions. It includes care specific to the problem as well as other measures to encourage self-care, to promote health, and to prevent loss of function.

Claims Review

The method by which an enrollee’s health care service claims are reviewed prior to reimbursement. The purpose is to validate the medical necessity of the provided services and to be sure the cost of the service is not excessive.


See Clinical Laboratory Improvement Amendments

Clinic Without Walls – CWW

Similiar to an independent practice association and identical to a practice without walls (PWW). Practitioners form CWWs and PWWs when they want the economies of scale and bargaining power offered by centralizing some administrative functions, but, still choosing to practice seperately. Many of these were formed to allow practitioners the ability to effectively contract with managed care.

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.

Clinical Laboratory Improvement Amendment – CLIA

CMS regulates all laboratory testing (except research) performed on humans in the U.S. through the Clinical Laboratory Improvement Amendments (CLIA). In total CLIA covers approximately 175,000 laboratory entities. The Division of Laboratory Services, within the Survey and Certification Group, under the Center for Medicaid and State Operations has the responsibility for implementing the CLIA Program. The objective of the CLIA program is to ensure quality laboratory testing. Although all clinical laboratories must be properly certified to receive Medicare or Medicaid payments, CLIA has no direct Medicare or Medicaid program responsibilities.

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 interventions and developing the software capacity to distribute and store this information.

Closed Access

Gatekeeper model health plan that requires covered persons to receive care from providers within the plan’s coverage. Except for emergencies, the patient may only be referred to and treated by providers within the plan. A managed health care arrangement in which covered persons are required to select providers only from the plan’s participating providers.

Closed Panel

Medical services are delivered in the HMO-owned health center or satellite clinic by physicians who belong to a specially formed, but legally separate, medical group that only serves the HMO. This term usually refers to a group or staff HMO models.


Case Management


See Centers for Medicare and Medicaid Services.

Co-Insurance or Coinsurance

A cost-sharing requirement under a health insurance policy that provides that the insured will assume a portion or percentage of the costs of covered services. Health care cost which the covered person is responsible for paying, according to a fixed percentage or amount. A policy provision frequently found in major medical insurance policies under which the insured individual and the insurer share hospital and medical expenses according to a specified ratio. A type of cost sharing where the insured party and insurer share payment of the approved charge for covered services in a specified ratio after payment of the deductible. Under Medicare Part B, the beneficiary pays coinsurance of 20 percent of allowed charges. Many HMOs provide 100% insurance (no coinsurance) for preventive care or routing care provided “in network”.


A cost-sharing arrangement in which the HMO enrollee pays a specified flat amount for a specific service (such as $10 for an office visit or $5 for each prescription drug). The amount paid must be nominal to avoid becoming a barrier to care. It does not vary with the cost of the service, unlike co-insurance which is based on some percentage of cost.


Coordination of Benefits: Used to avoid duplication of benefits when an individual is covered by more than one group medical program.


Consolidated Omnibus Budget Reconciliation Act of 1986: Specifies regulations for health coverage following termination of employment.(See Consolidated Omnibus Budget Reconciliation Act)


A mechanism for identifying and defining physicians’ and hospitals’ services. Coding provides universal definition and recognition of diagnoses, procedures and level of care. Coders usually work in medical records departments and coding is a function of billing. Medicare fraud investigators look closely at the medical record documentation which supports codes and looks for consistency. Lack of consistency of documentation can earmark a record as “upcoded” which is considered fraud. A national certification exists for coding professionals and many compliance programs are raising standards of quality for their coding procedures.

Community Care Network – CCN

This vehicle provides coordinated, organized, and comprehensive care to a community’s population. Hospitals, primary care physicians, and specialists link preventive and treatment services through contractual and financial arrangements, producing a network which provides coordinated care with continuous monitoring of quality and accountability to the public. While the term, Community Care Network (CCN), often is used interchangeably with Integrated Delivery System (IDS), the CCN tends to be community based and non-profit.

Community Health Center – CHC

An ambulatory health care program (defined under section 330 of the Public Health Service Act) usually serving a catchment area which has scarce or nonexistent health services or a population with special health needs; sometimes known as the neighborhood health center. Community Health Centers attempt to coordinate federal, state and local resources into a single organization capable of delivering both health and related social services to a defined population. While such a center may not directly provide all types of health care, it usually takes responsibility to arrange all medical services needed by its patient population.

Community Health Information Network – CHIN

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.

Community Rating

Setting insurance rates based on the average cost of providing health services to all people in a geographic area, without adjusting for each individual’s medical history or likelihood of using medical services. A method of calculating health plan premiums using the average cost of actual or anticipated health services for all subscribers within a specific geographic area. 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. Although there are certain exceptions, in general, federally-qualified HMOs must community rate. 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.

Community rating by class (Class Rating)

For federally qualified HMOs, the Community Rating by Class (CRC)–adjustment of community-rated premiums on the basis of such factors as age, sex, family size, marital status, and industry classification. These health plan premiums reflect the experience of all enrollees of a given class within a specific geographic area, rather than the experience of any one employer group.

Comorbid Condition

A medical condition that, along with the principal diagnosis, exists at admission and is expected to increase hospital length of stay by at least one day for most patients.

Competitive Bidding

Can be viewed by some as a pricing method that elicits information on costs through a bidding process to establish payment rates that reflect the costs of an efficient health plan or health care provider. Competitive bidding is also the process of offering reduced rates to health plans to obtain exclusive contracts from payers.

Competitive Medical Plan – CMP

A type of MCO created by the 1982 Tax Equity and Fiscal Responsibility Act to facilitate the enrollment of Medicare beneficiaries into managed care plans. Competitive medical plans are organized and financed much like HMOs but are not bound by all the regulatory requirements facing HMOs. A health plan can be eligible for a Medicare risk contract if it meets specified requirements for service provision, capital, risk protection, and financial solvency. This is different from a Federally Qualified HMO.


Accurately following the government’s rules on Medicare billing system requirements and other regulations. A compliance program is a self-monitoring system of checks and balances to ensure that an organization consistently complies with applicable laws relating to its business activities. (see also Fraud, FBI, OIG, DOJ)


A medical condition that arises during a course of treatment and is expected to increase the length of stay by at least one day for most patients.

Composite Rate

Group rate billed to all subscribers of a given group

Comprehensive Major Medical Insurance

A policy designed to provide the protection offered by both a basic and major medical health insurance policy. It is generally characterized by a low deductible, a co-insurance feature, and high maximum benefits.

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.

Concurrent Review

Review of a procedure or hospital admission done by a health care professional (usually a nurse) other than the one providing the care, during the same time frame that the care is provided. Usually conducted during a hospital confinement to determine the appropriateness of hospital confinement and the medical necessity for continued stay. See also Utilization Review, Medical Necessity, Appropriate and Continued Stay Review.

Consolidated Omnibus Budget Reconciliation – COBRA

Federal law that continues health care benefits for employees whose employment has been terminated. Employers are required to notify employees of these benefit continuation options, and, failure to do so can result in penalties and fines for the employer.

Consumer Health Alliance

Regional cooperatives between government and the public that will oversee the new payment system. Once all health insurance purchasing cooperatives (HIPPC’s), the alliance would make sure health plans within a region conformed to federal coverage and quality standards, and oversee costs within any mandated budget.

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.


A legal agreement between a payer and a subscribing group or individual which specifies rates, performance covenants, the relationship among the parties, schedule of benefits and other pertinent conditions. The contract usually is limited to a 12-month period and is subject to renewal thereafter. Contracts are not required by statute or regulation, and less formal agreements may be made.

Contract Provider

Any hospital, skilled nursing facility, extended care facility, individual, organization, or agency licensed that has a contractual arrangement with an insurer for the provision of services under an insurance contract.

Contract Year

A period of twelve (12) consecutive months, commencing with each Anniversary Date. May or may not coincide with a calendar year.

Contributory Program

Program where the cost of group coverage is shared by the employee and the employer or the union.


In group health insurance, the opportunity given the insured and any covered dependents to change his or her group insurance to some form of individual insurance, without medical evaluation upon termination of his group insurance.

Conversion Factor – CF

The dollar amount used to multiply the Relative Value Schedule – RVS – of a procedure to arrive at the maximum allowable for that procedure.

Conversion Factor Update

Annual percentage change to a conversion factor, either set anuually by the government or by the formula reflecting actual expenditure growth from two years falling below or above the original target rate. See Conversion Factor, Sustainable Growth Rate, Sustainable Growth Rate System.

Conversion Privilege

The right of an individual insured under a group policy to certain kinds of individual coverage, without a medical examination, upon termination of his association with the group.

Coordination of Benefits – COB

Provision regulating payments to eliminate duplicate coverage when a claimant is covered by multiple group plans. The procedures set forth in a Subscription Agreement to determine which coverage is primary for payment of benefits to Members with duplicate coverage. Used by insurers to avoid duplicate payment for losses insured under more than one insurance policy. A coordination of benefits, or “nonduplication,” clause in either policy prevents double payment by making one insurer the primary payer, and assuring that not more than 100 percent of the cost is covered. Standard rules determine which of two or more plans, each having COB provisions, pays its benefits in full and which becomes the supplementary payer on a claim.

Cost Consequence Analysis – CCA

A form of analysis that compares alternative interventions or programs in which the components of incremental costs and consequences are listed without aggregation.

Cost Containment

Control of inefficiencies in the consumption, allocation, or production of health care services that contribute to higher than necessary costs. Inefficiencies are thought to exist in consumption when health services are inappropriately utilized; inefficiencies in allocation exist when health services could be delivered in less costly settings without loss of quality; and, inefficiencies in production exist when the costs of producing health services could be reduced by using a different combination of resources. Cost containment is a word used freely in healthcare to describe most cost reduction activities by providers.

Cost Contract

An arrangement between a managed health care plan and HCFA under Section 1876 or 1833 of the Social Security Act, under which the health plan provides health services and is reimbursed its costs. The beneficiary can use providers outside the plan’s provider network.

Cost Effectiveness – Evaluation

The efficacy of a program in achieving given intervention outcomes in relation to the program costs. Follow-up studies, outcome studies and TQM programs attempt to assess treatment efficacy, while cost effectiveness would provide a ratio of this measurement with costs. This analysis may determine the costs and effectiveness of certain interventions compared to similar alternative interventions, determining the relative costs and degree to which they will obtain desired health outcomes.

Cost Minimization Analysis – CMA

An assessment of the least costly interventions among available alternatives that produce equivalent outcomes.

Cost of Illness Analysis – COI

An assessment of the economic impact of an illness or condition, including treatment costs.

Cost Outlier

A case which is more costly to treat compared with other patients in a particular diagnosis related group. Outliers also refer to any unusual occurrence of cost, cases which skew average costs or unusual procedures.

Cost Sharing

Payment method where a person is required to pay some health costs in order to receive medical care. The general set of financing arrangements whereby the consumer must pay out-of-pocket to receive care, either at the time of initiating care, or during the provision of health care services, or both. Cost sharing can also occur when an insured pays a portion of the monthly premium for health care insurance.

Cost Shifting

Charging one group of patients more in order to make up for underpayment by others. Most commonly, charging some privately insured patients more in order to make up for underpayment by Medicaid or Medicare.

Cost Utility Analysis

A form of effectiveness analysis where outcomes are rated in terms of utility, or quality of life.

Cost-benefit Analysis, Evaluation

An analytic method in which a program’s cost is compared to the program’s benefits for a period of time, expressed in dollars, as an aid in determining the best investment of resources. For example, the cost of establishing an immunization service might be compared with the total cost of medical care and lost productivity which will be eliminated as a result of more persons being immunized. Cost-benefit analysis can also be applied to specific medical tests and treatments.


The guarantee against specific losses provided under the terms of an insurance policy.

Covered Benefit

A medically necessary service that is specifically provided for under the provisions of an Evidence of Coverage. A covered benefit must always be medically necessary, but not every medically necessary service is a covered benefit. For example, some elements of custodial or maintenance care, which are excluded from coverage, may be medically necessary, but are not covered.

Covered Services

Services provided within a given health care plan. Health care services provided or authorized by the payer’s Medical Staff or payment for health care services.


Current Procedural Terminology: Standard five-digit medical service codes used as a reference for billing and reporting.


Review procedure where a potential or existing provider must meet certain standards in order to begin or continue participation in a given health care plan, on a panel, in a group, or in a hospital medical staff organization. The process of reviewing a practitioners credentials, i.e., training, experience, or demonstrated ability, for the purpose of determining if criteria for clinical privileging are met. The recognition of professional or technical competence. The credentialing process may include registration, certification, licensure, professional association membership, or the award of a degree in the field. Certification and licensure affect the supply of health personnel by controlling entry into practice and influence the stability of the labor force by affecting geographic distribution, mobility, and retention of workers. Credentialing also determines the quality of personnel by providing standards for evaluating competence and by defining the scope of functions and how personnel may be used. In managed care arenas, one hears of a new basis for credentialing, referred to as financial credentialing. This refers to an organization’s evaluation of a provider based on that provider’s ability to provide value, or high quality care at a reasonable cost.

Current Procedural Terminology – CPT

A standardized mechanism of reporting services using numeric codes as established and updated annually by the AMA. A manual that assigns five digit codes to medical services and procedures to standardize claims processing and data analysis. The coding system for physicians’ services developed by the CPT Editorial Panel of the American Medical Association; basis of the Medicare coding system for physicians services. See Coding.

Customary Charge

One of the factors determining a physician’s payment for a service under Medicare. Calculated as the physician’s median charge for that service over a prior 12-month period.

Customary, Prevailing and Reasonable – CPR

Current method of paying physicians under Medicare. Payment for a service is limited to the lowest of (1) the physician’s billed charge for the service, (2) the physician’s customary charge for the service, or (3) the prevailing charge for that service in the community. Similar to the Usual, Customary, and Reasonable system used by private insurers.