Favorable Selection

Selection of subscribers or covered lives based on data which shows a tendency for utilization of health services in that population group to be lower than expected or estimated.

Federal Bureau of Investigation (FBI)

As an agency under the DOJ, the FBI investigates violations of federal criminal law and provides law enforcement assistance to federal, state, local and international agencies. The FBI has investigated hospitals for fraud and abuse. (see Fraud)

Federal Qualification

A status designated by HCFA after conducting an extensive evaluation of an HMO’s organization and operations. An organization must be federally qualified or be designated as a competitive medical plan (CMP) to be eligible to participate in Medicare and cost and risk contracts. Federal designation that allows an organization to participate in certain Medicare cost and risk contracts.

Federally Qualified Health Center (FQHC)

A federal payment option that enables qualified providers in medically underserved areas to receive cost-based Medicare and Medicaid reimbursement and allows for the direct reimbursement of nurse practitioners, physician assistants and certified nurse midwives. Many outpatient clinics and specialty outreach services are qualified under this provision which was enacted in 1989.

Federally-Qualified HMO

A prepaid health plan that has met strict federal standards and has been granted qualification status. A federally-qualified HMO is eligible for loans and loan guarantees not available to non-qualified plans. Employers of 25 or more workers were, until recently, required to offer a federally-qualified HMO if the plan requested to be included in the company’s health benefits program.

Fee Disclosure

Physicians and caregivers discussing their charges with patients prior to treatment.

Fee Schedule

A listing of accepted fees or established allowances for specified medical procedures. As used in medical care plans, it usually represents the maximum amounts the program will pay for the specified procedures.


Traditional method of payment for health care services where specific payment is made for specific services rendered. Usually people speak of this in contrast to capitation, DRG or per diem discounted rates, none of which are similar to the traditional fee for service method of reimbursement. Under a fee-for-service payment system, expenditures increase if the fees themselves increase, if more units of service are provided, or if more expensive services are substituted for less expensive ones. This system contrasts with salary, per capita, or other prepayment systems, where the payment to the physician is not changed with the number of services actually used. Payment may be made by an insurance company, the patient or a government program such as Medicare or Medicaid. With respect to the physicians or other supplier of service, this refers to payment in specific amounts for specific services rendered–as opposed to retainer, salary, or other contract arrangements. In relation to the patient, it refers to payment in specific amounts for specific services received, in contrast to the advance payment of an insurance premium or membership fee for coverage, through which the services or payment to the supplier are provided.


Relating to, or founded upon, a trust or confidence. A legal term. A fiduciary relationship exists where an individual or organization has an explicit or implicit obligation to act in behalf of another person’s or organization’s interests in matters which affect the other person or organization. This fiduciary is also obligated to act in the other person’s best interest with total disregard for any interests of the fiduciary. Traditionally, it was generally believed that a physician had a fiduciary relationship with patients. This is being questioned in the era of managed care as the public becomes aware of the other influences which are effecting physician decisions. Doctors are provided incentives by managed care companies to provide less care, by pharmaceutical companies to order certain drugs and by hospitals to refer to their hospitals. With the pervasive monetary incentives influencing doctor decisions, consumer advocates are concerned because the patient no longer has an unencumbered fiduciary.

First-Dollar Coverage

Insurance coverage with no front-end deductible where coverage begins with the first dollar of expense incurred by the insured for any covered benefit.

Fiscal Intermediary

The agent (e.g., Blue Cross) that has contracted with providers of service to process claims for reimbursement under health care coverage. In addition to handling financial matters, it may perform other functions such as providing consultative services or serving as a center for communication with providers and making audits of providers’ needs. This entity may also be referred to as TPA or third party administrator. A private organization, usually an insurance company, that serves as an agent for the Health Care Financing Administration (HCFA), which is part of HHS, that determines the amount of payment due to hospitals and other providers and paying them for the Medicare services they have provided. Intermediaries make initial coverage determinations and handle the early stages of beneficiary appeals.

Fixed Costs

Costs which do not change with fluctuations in census or in utilization of services.

Flat Fee-Per-Case

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. Often characterizes “second generation” managed care systems. After the MCOs squeeze out costs by discounting fees, they often come to this method. If provider is still standing after discount blitz, this approach can be good for provider and clients, since it permits a lot of flexibility for provider in meeting client needs.

Flexible Benefit Plan

Program offered by some employers in which employees may choose among a number of health care benefit options. See also Cafeteria Plan.

Flexible Spending Account (FSA)

A plan which provides employees a choice between taxable cash and non-taxable benefits for unreimbursed health care expenses or dependent care expenses. This plan qualifies under Section 125 of the IRS Code. See also Medical Spending Account.

Formatting and Protocol Standards

Data exchange standards which are needed between CPR systems, as well as CPT and other provider systems, to ensure uniformity in methods for data collection, data storage and data presentation. Proactive providers are current in their knowledge of these standards and work to ensure their information systems conform to the standards.


An approved list of prescription drugs; a list of selected pharmaceuticals and their appropriate dosages felt to be the most useful and cost effective for patient care. Organizations often develop a formulary under the aegis of a pharmacy and therapeutics committee. In HMOs, physicians are often required to prescribe from the formulary. See also Drug Formulary.


Intentional misrepresentations which can result in criminal prosecution, civil liability and administrative sanctions.

Freedom of Choice

A principle of Medicaid which allows a recipient the freedom to choose among participating Medicaid providers.

Funding Level

Amount of revenue required to finance a medical care program.

Funding Method

System for employers to pay for a health benefit plan. Most common methods are prospective and / or retrospective premium payment, shared risk arrangement, self-funded, or refunding products. See also Self-insured, Risk and Premium.