Managed Care Glossary of Terms

Adjusted Community Rate ( ACR )
Health plans and insurance companies estimate their ACRs annually and adjust subsequent year supplemental benefits or premiums to return any excess Medicare revenue above the ACR to enrollees. This are the estimated payment rates that health plans with Medicare risk contracts would have received for their Medicare enrollees if paid their private market premiums, adjusted for differences in benefit packages and service use.

Adjusted drug benefit list
A small number of medications often prescribed to long-term patient. Also called a drug maintenance list. It can be modified from time to time by a health plan, HCFA or 3rd party administrator. See also Drug Formulary, Formulary.

Adjusted per capita cost ( APCC )
Medicare benefits estimation for a person in a given county using sex, age, institutional status, Medicaid disability, and end stage renal disease status as a basis.

Adjusted Community Rating ( ACR )
ACR is a rating by community influenced by certain group demographics. Estimated payment rates that health plans with Medicare risk contracts would have received for their Medicare enrollees if paid their private market premiums, adjusted for differences in benefit packages and service use. Health plans estimate their ACRs annually and adjust subsequent year supplemental benefits or premiums to return any excess Medicare revenue above the ACR to enrollees. See Adjusted Average Per Capita Cost, Medicare Risk Contract. See also Community Rating.

Adjusted Payment Rate ( APR )
The Medicare capitated payment to risk-contract HMOs. For a given health plan, the APR is determined by adjusting county-level AAPCCs to reflect the relative risks of the plan's enrollees.

Administrative Costs
Costs related to utilization review, insurance marketing, medical underwriting, agents' commissions, premium collection, claims processing, insurer profit, quality assurance programs, and risk management. Administrative costs also refer to certain allowable costs on hospital HCFA cost reports, usually considered overhead. Rules exist which disallow certain expenses, such as marketing.

Administrative Services Organization ( ASO )
A contract between an insurance company and a self-funded plan where the insurance company performs administrative services only and the self-funded entity assumes all risk.

Administrative Services Only ( ASO )
A relationship between an insurance company or other management entity and a self-funded plan or group of providers in which the insurance company or management entity performs administrative services only, such as billing, practice management, marketing, etc., and does not assume any risk. The client bears the financial risk for the claims. Clients contracting for ASO can include health plans, hospitals, delivery networks, IPAs, etc. A provider system wishing to capitate may contract with a TPA for ASO for certain services for which the provider group does not want to bring in house. This is a form of outsourcing. See also TPA.

Admission Certification
A method of assuring that only those patients who need hospital care are admitted. Certification can be granted before admission (preadmission) or shortly after (concurrent). Length-of-stay for the patient's diagnosed problem is usually assigned upon admission under a certification program.

Admissions Per 1,000
Number of patients admitted to a hospital or hospitals per 1,000 health plan members. An indicator calculated by taking the total number of inpatient and/or outpatient admissions from a specific group, e.g., employer group, HMO population at risk, for a specific period of time (usually one year), dividing it by the average number of covered members in that group during the same period, and multiplying the result by 1,000. This indicator can be calculated for behavioral health or any disease in the aggregate and by modality of treatment, e.g., inpatient, residential, and partial hospitalization, etc.

Adverse Event
An injury to a patient resulting from a medical intervention.

Adverse Selection
The problem of attracting members who are sicker than the general population, specifically, members who are sicker than was anticipated when developing the budget for medical costs. A tendency for utilization of health services in a population group to be higher than average or the tendency for a person who is in poor health to be enrolled in a health plan where he or she is below the average risk of the group. From an insurance perspective, adverse selection occurs when persons with poorer-than-average health status apply for, or continue, insurance coverage to a greater extent than do persons with average or better health expectations. Occurs when premium doesn't cover cost. Some populations, perhaps due to age or health status, have a great potential for high utilization. Some population parameter such as age (e.g., a much greater number of 65-year-olds or older to young population) that increases the potential for higher utilization and often increases costs above those covered by a payers capitation rate. Among applicants for a given group or individual program, the tendency for those with an impaired health status, or who are prone to higher than average utilization of benefits, to be enrolled in disproportionate numbers and lower deductible plans.

Affiliated Provider
A health care provider or facility that is part of the HMO's network usually having formal arrangements to provide services to the HMO member.

Affiliation
An agreement between two or more otherwise independent entities or individuals that defines how they will relate to one another. Agreements between hospitals may specify procedures for referring or transferring patients. Agreements between providers may include joint managed care contracting.

Age/Sex Factor
Underwriting measurement representing the medical risk costs of one population compared to another based on age and sex factors.

Age/Sex rates ( ASR )
Also called table rates, they are given group products' set of rates where each grouping, by age and sex, has its own rates. Rates are used to calculate premiums for group billing and demographic changes are adjusted automatically in the group.

Age-at-Issuance Rating
A method for establishing health insurance premiums whereby an insurer's premium is based on the age of individuals when they first purchased health insurance coverage. This is an older form of actuarial assessment.