Managed Care Glossary of Terms

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.

(CMA) Cost Minimization Analysis
An assessment of the least costly interventions among available alternatives that produce equivalent outcomes.

(COI) Cost of Illness Analysis
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.

Coverage
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.

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

Credentialing
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.

(CPT) Current Procedural Terminology
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.

(CPR) Customary, prevailing, and reasonable
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.