Hospitals

*Assumes payment for a large urban hospital with wage index and geographic adjustment factor of 1.000.

** Cases in DRG 546 were assigned to DRGs 497/498 prior to 10/01/2006.

Medicare Payment = MS-DRG relative weight * (labor standardized amount + non-labor standardized amount + capital)
Source: FY 2012 Medicare Hospital Inpatient Prospective Payment System, Final Rule. August 1, 2011.

MS-DRG Descriptions With Associated Medicare Reimbursement

Per the Hospital IPPS final rule, the overall statistics by CC group are as follows:

• MCC: 22.2% of patients
• CC: 36.6% of patients
• Non-CC: 41.1% of patients

A complication is defined as a condition that arises during the hospital stay and a comorbid condition is a pre-existing condition. Both of these conditions have been identified as potentially extending the length of hospital stay by at least one day in 75% of the cases on average.

A CC/MCC may affect DRG assignment; therefore, it’s important that the physician documentation supports the assigned code. The CC/MCC list is updated annually as new codes are assigned to ICD-9-CM.

CC Listing (PDF, 3.1 MB)

MCC Listing (PDF, 1.5 MB)

Abuse – Improper or excessive use of program benefits or services by providers or beneficiaries. Abuse can occur intentionally or unintentionally, when services are used which are excessive or unnecessary; which is not the appropriate treatment for the patient's condition; when cheaper treatment would be as effective; or when billing or charging does not conform to requirements. It should be distinguished from fraud, in which deliberate deceit is used by providers or consumers to obtain payment for services which were not actually delivered or received, or to claim program eligibility. See also Fraud.

Accounts Receivable (A/R) – The amount shown on a practice's bookkeeping records as being "owed" to them.

Actual Charge – A physician's billed charge. If the actual charge is less than the amount Medicare or another carrier is prepared to pay, they will pay only the actual charge.

Adjusted Average Per Capita Cost (AAPCC) – A measure of the average cost of treating Medicare patients in a locality. Health maintenance organizations with Medicare risk contracts are paid a capitated rate of 95% of the AAPCC.

Adjusted Historical Payment Basis (AHPB) – The AHPB for each service is based on the average charge for that service in each of the approximately 230 Medicare localities. It includes ALL charges for a given service in a locality, regardless of provider status, combining figures for physicians of all specialties and, in some cases, non-physician providers as well. The result not only eliminated specialty differentials, it also lowered the average for some services below the prevailing charge for fully licensed physicians.

Adjustment – Regarding a claim for reimbursement, the processing of a change to a previously settled claim history record. A new claim record will be created as a result of an adjustment. The original resolved claim will remain as it is on the file.

Regarding a patient account, a modification (usually a reduction) in the balance due by the patient. This may be due to a change in the payer's resolution of the claim, a decision by the practice to reduce the patient responsible amount (eg, because of financial condition of the patient), or some other reason.

Administrative Law Judge (ALJ) Hearing – The final step in the Medicare appeals process. An ALJ Hearing is presided over by an Administrative Law Judge.

Admitting Physician – The physician responsible for admission of a patient to a hospital or other inpatient health facility. Some facilities have all admitting decisions made by a single physician (typically a rotating responsibility) called an admitting physician.

Adverse Selection – The tendency of people with poor health or expectations of health problems to apply for or continue health coverage to a greater degree than people in better health or with expectations of better health. Adverse selection is blamed for spiraling health costs in small group plans; as premiums rise healthy people drop out which, in turn, causes premiums to rise more for those left in the risk group. Some groups have also claimed that adverse selection is largely responsible for indemnity insurance costs being higher than HMO costs, a claim the HMO industry disputes.

Age Discrimination In Employment Act of 1967 (ADEA) – As amended in 1978, ADEA requires employers with 200 or more employees to offer older active employees under age 70 who are eligible for Medicare (and their spouses, if they are also under age 70), the same health insurance coverage that is provided to younger employees.

Allograft – A graft of tissue obtained from one person and implanted into another.

Allowable Charge – The amount of payment an insurance company or other payer allows for a covered service, which may be less than the actual charge by the physician or hospital.

American Medical Association (AMA) – A national voluntary nonprofit organization of physicians, composed of state and territorial medical societies and component county medical societies. The AMA attempts to speak for physicians nationally, conducts education and publication services to members, and (with members dues) sponsors research to improve medical science. The AMA "owns" the copyright to the CPT Coding system, and grants permission for its use by the government, insurance carriers, publishers, etc.

Anterior – Toward the front of the body.

Anterior-Lateral – Toward the front and to one side of the body.

Appeal – The step past a "review" in which a provider officially requests that the decisions made in processing a claim be reviewed by the carrier. Medicare's review and appeal procedures extend to an Administrative Law Judge and to an Appeals Court.

Approved Amount – The same as an "allowable." The amount a carrier approves for payment for a service or procedure. It includes both the amount to be paid to the provider and the patient's co-payment (20%) amount.

Arthroplasty – Surgical joint replacement to reduce pain and improve function.

Assignment – Practice of accepting as payment in full the amount approved by Medicare or another payer. For Medicare, physicians accepting assignment receive 80% of the approved amount from Medicare and bill patients for the remaining amount.

Attending Physician – The physician rendering the major portion of care, or having primary responsibility for the care of the patient's major condition or diagnosis.

Audit – The physical review of practice records to determine if the practice has been (and is being) compliant with carrier requirements. Audits may be performed by Medicare, other government agencies, or by private carriers.

Autograft – A graft of tissue taken from a patient and then re-implanted elsewhere in the same patient. An example is when one or more pieces of bone are removed from the iliac crest for transformation between the vertebrae.

Automated Response Unit – A device that allows providers and beneficiaries, through touch telephones, to directly access information on a payer's computer regarding their current benefits.
 

Balance Billing – Practice of billing patients for payments exceeding the Medicare or other payer-approved amount. Except in areas where prohibited by state law, physicians not participating in Medicare may balance-bill Medicare patients up to the amount of the Medicare Charge limit (115% of the approved amount for nonparticipating physicians). 

Baseline Adjustment for Volume and Intensity of Service – An adjustment to the conversion factor needed to fulfill the statutory budget neutrality requirement. The adjustment accounts for anticipated changes in volume and intensity of services by physicians in response to changes in payment rates, policy standardization and other factors.

Behavioral Offset – A proposed reduction in the conversion factor used by Medicare to compensate for expected volume increases by physicians. Replaced by the Baseline Adjustment for Volume and Intensity of Service (above).

Beneficiary – A person who is eligible to receive benefits from an insurance policy.

Bilateral – Performing a procedure on both sides. When a unilateral (one side) procedure is performed on both sides, modifier "50" is used to indicate that the procedure was performed bilaterally. Reimbursement for such a procedure is normally made at 150% of the regular reimbursement amount.

Blue Cross – The words and identification symbol used by nonprofit hospital service corporations approved by the Blue Cross Association.

Blue Cross Blue Shield Association (BCBSA) – A national organization to which all Blue Cross Blue Shield organizations belong. BCBSA acts as a national coordinating agency for all member plans.

Blue Cross Plan – A nonprofit corporation under the Blue Cross Approval Program that administers a placement program for the purchaser of hospital and/or related services.

Blue Shield – The words and identification symbol used by nonprofit medical care formations approved by the National Association of Blue Shield Plans (NABSP).

Blue Shield Plan – A nonprofit corporation sponsored and/or approved by the Medical Society to administer a voluntary prepayment and medical surgical program which operates under the membership standards of the National Association of Blue Shield Plans (NABSP).

Budget Neutrality – A requirement in the legislation mandating Medicare physician payment reform that requires that total expenditures be no more than what would have been spent if the old customary, prevailing and reasonable charge system had been maintained. 
 

CAC (Carrier Advisory Committee) – A physician advisory committee for Medicare Part B, which works with the carrier's Medical Director to develop/revise medical policies.

Capitation – A method of payment, frequently employed by HMO's, in which doctors or hospitals are paid a flat fee for each person to whom service is provided, regardless of how many services any individual consumes. The object is to shift part of the risk for controlling resource utilization to the service provider.

Carrier – Private companies that administer health insurance programs. Medicare Part B (physician insurance) services are provided by 54 carriers which are under contract with CMS. May also be referred to as a payer.

Cauda Equina – The long spinal nerves that emerge from the lower end of the spinal cord from the level of the first lumbar vertebra down to the coccyx.

Center for Medicare and Medicaid Services (CMS) – The agency within the US Department of Health and Human Services which administers the Medicare and Medicaid programs. Formerly named Health Care Financing Administration (HCFA). See also Medicare.

Certification – As used in utilization review, certification means attesting medical necessity for institutional admission on the basis of pre-established standards. As used in Medicare approved institutions and providers, it means they are qualified for being reimbursed by the Medicare program.

CHAMPUS (Civilian Health and Medical Program of the Uniformed Services) – A program administered by the Department of Defense which pays for care delivered by civilian health providers to retired members, and to dependents of active and retired members of the uniformed services of the U.S.

Charge Limit – See Limiting Charge.

Claim – Common designation of an insurance claim (health or other); a request for payment of benefits for services rendered.

Claim Form – The current version of the CMS 1500 or UB-04 required by Medicare.

Claims Process – The total process of making benefit determination on claims submitted for payment. It includes the review of clerical accuracy, eligibility, benefit coverage, medical necessity, and appropriateness of service.

CLIA-88 – Clinical Laboratory Improvement Act of 1988. The legislation which regulates the operation of physician office laboratories. Until this legislation, physician office laboratories were not regulated at the federal level (some states regulated them, however).

CMS-1500 – The insurance claim form mandated for use with Medicare. Also used by most other insurance carriers.

CNS – Certified Nurse Specialist.

Coinsurance – Requirement that insured individuals pay a predetermined percentage of medical costs. For Medicare Part B, beneficiaries pay 20%. Private insurers typically require 20% coinsurance as well, though the trend has been to lower or eliminate coinsurance for HMO or PPO coverage while raising it for traditional indemnity plans.

Collections Ratio – The ratio between charges and collections over a specified period of time. The unadjusted collections ratio is found by dividing collections by gross charges. This ratio multiplied times gross charges estimates that portion of gross (total) charges that are actually expected to be collected. The adjusted ratio is found by dividing revenue by net charges (gross charges minus write-offs and adjustments). The adjusted ratio estimates the proportion of revenue that will be collected compared to the charges that are actually collectable.

Common Working File (CWF) – A regional database used for obtaining, maintaining and distributing beneficiary specific Medicare data, such as deductibles, psychiatric limitation, etc. The CWF screens show all Medicare Part A and Part B claims prior to payment.

Comorbidity – A pre-existing condition which may affect the care or treatment for the current condition.

Complication – A condition that arises during the care and/or treatment of a patient.

Compression – The act of pressing together.

Conscious Parallelism – The term used by the government to describe the presumably illegal use of fees that "parallel" those of another practitioner or practice.

Consent Form – A form signed by a patient which verifies that the patient has been told and understands what procedure(s) are to be performed, the risks involved in the procedure(s) to be performed, and absolving the physician, the hospital and/or others from responsibility for uncontrollable outcomes.

Consolidated Omnibus Budget Reconciliation Act (COBRA) – An act effective May 1, 1986 which requires most employer sponsored group health plans to offer employees and their families the opportunity for continuation of health coverage under certain circumstances. Also allows for Medicare beneficiaries who are still working to elect to have their group health coverage primary to Medicare.

Consultation – A service provided by a physician, in response to the request of another physician, which asks for opinion and advice on a specific medical problem. The consulting physician may or may not initiate treatment.

Contractor Performance Evaluation Program (CPEP) – A system for the evaluation of the performance of Medicare contractors, including carriers and intermediaries.

Conversion Factor (CF) – A multiplier used to translate relative values into dollar payment amounts for specific services. The Medicare conversion factors are changed annually to limit payments for budget purposes.

Coordination of Benefits – A method to determine whether or not payment of benefits will be reduced because of group coverage with another payer. It is an attempt to avoid double payment on a claim yet assure full payment for benefits provided under either or both policies.

Co-payment – A type of cost sharing whereby the insured or covered person or persons pay a specified dollar amount per unit of service or unit of time at the time of service. Unlike coinsurance, it does not vary with the cost of the service.

Correct Coding Initiative (CCI) – A national effort by CMS to reduce/eliminate the unbundling of services by providers.

Cost Sharing – A financial arrangement in which the patient shares in the cost of services. The most common forms are deductibles, coinsurance and co-payments.

Co-Surgery – A surgical session in which two physicians, normally of different specialties, perform different procedures in the same operative session.

Coverage – The extent of benefits available to an insured.

Covered Services – Services eligible for payment under an insurance plan or policy which limits the payment of benefits.

CRNA – Certified Registered Nurse Anesthetist.

Crossover – The provision of Medicare adjudication to another payer of healthcare.

CSW – Clinical Social Worker.

Current Procedural Terminology (CPT) – A system of terminology and coding developed by the American Medical Association that is used for describing, coding and reporting medical services and procedures performed by physicians, physician employees and physician extenders.

Customary Charge – A physician's median charge for a given service during a period of time. Medicare used physicians' customary charge as part of a formula to set payments under the old customary, prevailing and reasonable charge system. Many private insurance companies still use them.

Customary, Prevailing and Reasonable (CPR) Method – Medicare's method for setting payments before Jan. 1, 1992, when implementation of payment reform began. Under CPR, for a given service doctors were paid the lowest of their actual charge (the individual doctor's median charge for the service) or the prevailing charge (the median charge of all physicians or specialists in the Medicare locality providing the service), or what the carrier determined to be "reasonable." CPR essentially locked into place wide variations in pay for similar services provided in different locations.

Decompression – Removal of pressure.

Deductible – A set amount of medical expenses a patient must pay to become eligible for insurance benefits under an insurance program. Physician and outpatient service deductibles for private insurance typically begin at $100 per year. Many carrier plans have deductibles from $250 to $1,000 or more. This cuts their benefit costs and encourages workers to join managed care plans.

Deficit Reduction Act of 1984 (DEFRA) – DEFRA helps prevent discrimination against elderly employees in health insurance, particularly in regard to extending the provisions of the Tax Equity and Fiscal Responsibility Act of 1992 (TEFRA). It requires group health plans to be offered to employees and dependents in the 65 – 69 age bracket, even if the employees are not in that age bracket.

Denial – Determination that a claim for certain care or services will not be reimbursed.

Dept. of Health and Human Services – A cabinet level agency of the federal government responsible for administering health and social welfare programs (including Social Security), Medicare and the federal portion of Medicaid. There are similar departments in state governments.

Diagnosis – A condition, illness, or injury, usually classified by the ICD-9-CM (International Classification of Diseases, Ninth Revision, Clinical Modification).

Diagnosis Codes – Diagnosis codes define the condition which explains and/or justifies the services provided. They are reported using the ICD-9-CM codes.

Diagnosis Related Group (DRG) – A classification of diagnoses which demonstrate similar resource consumption and hospital length of stay patterns. Used to determine hospital reimbursement.

Disability – A physical or mental handicap resulting from an illness or injury.

Discectomy – Surgical removal of an intervertebral disc.

Distraction – The act of separating joints without dislodging them and without rupturing the tissues that connect them.

Downcode – The practice of coding services using a lower resource code, a practice some physicians erroneously believe reduces the likelihood of being targeted for review or audit.

Durable Medical Equipment Regional Carrier (DMERC) – One of four regional carriers responsible for processing claims for all durable medical equipment, prosthetics, orthotics and supplies (DMEPOS), which includes parenteral and enteral nutrition and immunosuppressant drugs.

Elective Surgery – Surgery which need not be performed on an emergency basis because reasonable delays will not affect the outcome of the surgery unfavorably.

Electronic Funds Transfer – A direct deposit option for providers who meet the qualifications for electronic payment.

Electronic Media Claims (EMC) – Claims submitted electronically. All Medicare carriers and many commercial insurers are equipped to receive claims via modem, computer tape or computer disk.

Electronic Remittance Advice (ERA) – Medicare remittance advice received by providers who submit claims electronically.

Emergency Care – Care for patients with life threatening conditions that require immediate medical intervention.

Employer Group Health Plan (EGHP) – A health insurance or benefit plan that is offered through an employer of 20 or more employees.

Employer Identification Number – Also referred to a tax ID (identification) number assigned by the IRS.

Endoscopy – Insertion of an instrument (endoscope) through a small puncture wound (rather than an incision) for diagnostic, surgical or other treatment purposes. The procedure is normally less traumatic than an incisional procedure, and the wound normally does not require sutures.

EOB (Explanation Of Benefits) – Form used by carriers to explain action taken on claims fled with them.

EOMB (Explanation of Medicare Benefits) – A statement from Medicare carriers explaining the action taken on Medicare claims. The EOMB details what billed services are or are not covered by Medicare, the amount of the benefit, and the amount due from Medicare and the patient. It includes Medicare "Action Codes" which explain the action taken. A copy is sent to the Medicare beneficiary, and on assigned claims, to the physician.

Evaluation and Management Services (E/M) – Sometimes characterized as "cognitive services," these are patient evaluation and management functions performed during patient office/outpatient visits or hospital/inpatient visits (including consultations). They consist largely of taking a patient history, patient examination and medical decision-making.

Facet – Each of four joints formed above and below and on either side of each vertebra. 

Facetectomy – Surgical removal of one of the articular facets of a vertebra.

Fair Hearing – A step in the Part B Medicare appeals process after a Review has been performed. A Fair Hearing is a formal procedure presided over by a Hearing Officer, which offers the beneficiary or provider an opportunity to present the reasons for their dissatisfaction with the payment which Medicare has made on their claim, or denial of payment.

Fee Schedule – For Medicare, a list of maximum payments for specified Medicare services. Also, the normal charge amounts for a provider.

Fiscal Year – A twelve month period for which an organization plans the use of its funds. The federal fiscal year is October through September.

Foramen (vertebral) – The large circular opening in a vertebra that houses the spinal cord. The opening is formed by the vertebral body in front and an arch of bone at the back. The plural is foramina.

Foraminotomy – Surgical removal of bone from around the edge of the intervertebral foramina.

Fraud – Intentional misrepresentation by either providers or beneficiaries to obtain services or payment for services to which they are not entitled. May include deliberate misrepresentations of need or eligibility; providing false information concerning cost or conditions to obtain reimbursement or certification; or claiming payment for services which were not delivered or received. 
 

Gaming – The practice of tailoring documentation and billing practices to take maximum advantage of peculiarities of reimbursement systems and policies. This term can refer to legitimate strategies for maximizing receipts, such as billing for visits performed outside a global service package. More frequently it refers to questionable or even fraudulent activities such as itemizing and billing separate components of a service or altering coding patterns to avoid audits.

General Accounting Office (GAO) – The financial auditing arm of Congress which audits federal fund expenditures utilized for all federally funded programs.

Geographic Adjustment Factor (GAF) – From the GPCI, the factor used to adjust the Medicare Fee Schedule to account for the differences in the cost of practicing medicine in different geographic locations in the country.

Geographic Practice Cost Index (GPCI) – Pronounced "gypsies," these indices are used to modify Medicare payments to reflect differences in physician costs in different areas. GPCI values have been developed for the cost of living, practice costs and professional liability costs in each Medicare locality relative to the national average. If costs in a given area are below the national average, GPCI values are less than 1.00; if costs are higher, GPCI values are more than 1.00. For each service, relative values for physician work, practice expense and professional liability insurance costs are multiplied by the corresponding GPCI value. The products are added together and multiplied by the conversion factor to arrive at a payment amount.

Global Charge – The sum of the professional and technical components of a service when both are provided and billed by the same physician.

Global Surgical/Global Service Period – A standardized (Medicare) surgery payment policy that provides a single payment for a group of services including preoperative care for one day before surgery, all intraoperative care and follow-up care for either 10 (minor surgery) or 90 (major surgery) days following the surgery. Initial consultations for surgery are not included in the package. The standardized package replaced various global packages defined by individual Medicare carriers before payment reform. Private insurers have similar global surgical payment policies.

GPO – Government Printing Office.

Group Insurance – An insurance policy covering members of a homogeneous group, issued to an employer or the group, with individuals receiving certificates of coverage. The policyholder is the employer, not the employee.

Group Practice – Physicians or other health professionals providing services with income pooled and redistributed to the members according to some prearranged plan. Groups vary in size, composition and financial arrangements. 
 

Harvard Relative Value Scale Study – Research at Harvard University directed by William Hsiao, PhD, and Peter Braun, MD, under the auspices of HCFA, establishing a system of relative values for physicians' services. The system is referred to as the "RBRVS," and was adopted by HCFA in 1992 as the basis for compensating providers under Medicare Part B.

HCPCS (Common Procedural Coding System) – Codes that are required by CMS when billing services and supplies.

Health Professional Shortage Area (HPSA) – Areas identified by the Public Health Service as medically under served. Physicians in dedicated HPSAs are paid a bonus of 10% above Medicare payment schedule amounts and are exempt from certain Medicare payment rules.

Hearing – See Fair Hearing.

Herniated Intervertebral Disc – A disc that has ruptured and spread out of the capsule that encloses it into adjacent areas.

Homebound – A patient is considered "homebound" if leaving home requires a considerable and taxing effort, and the patient doesn't go out very often or for short periods, or it is medically inadvisable. Generally they are unable to leave home without the aid of crutches, walkers, wheelchairs, or another person's assistance. NOTE: Aged persons who stay at home due to feebleness or concerns about security are NOT considered homebound.

Hospice – A facility designed to provide palliative care (eg, pain relief) for terminally ill persons.

Hospitalization Insurance – Insurance which covers only inpatient hospital service, not physician services. It usually pays a specified benefit amount per day of hospitalization.
 

Iliac Crest – The prominent bony ridge at the top of the hip bone that extends from the side of the body just below the waist and angles downwards towards the front of the body.

Incident-to Services – Services provided by the staff of a physician, under his immediate supervision. Such services are billed as though performed by the physician himself.

Injection – Injecting a medication into the muscle (IM, or intramuscular) or tissue (Sub-Q, or subcutaneous) using a needle or other device.

Inquiry – Request for information or assistance made by or on behalf of a beneficiary, provider, or the government, in any format (letter, memo, note, etc.). Allowable charges, complaints, and appeals are excluded from this definition.

Instrumentation – The use of rods, screws, plates, hooks, wires, bolts, etc. to correct and stabilize abnormalities of the spine.

Interbody – The area between the bodies of two vertebras.

Intermediary – A private insurance organization which contracts with the federal government to handle Medicare payment for services by hospitals, SNFs, and home health agencies paid through the hospital insurance program.

Internal Fixation – Process of fastening together pieces of bone in a fixed position with wires, plates, screws, rods, and other aides.

Interspace – The space between two adjacent vertebral bodies which contains the intervertebral disc.

Julian Date – A three-digit number indicating the day of the year. January 1 is 001 and December 31 is 365. Medicare uses a five-digit Julian date (includes the last two digits of the year) as the first five digits of the Claim Control Number (CCN) or Document Control Number (DCN).

Kyphosis – Abnormally increased convexity in the curvature of the thoracic spine as viewed from the side; hunchback. 

Lamina – Part of the back of the bony arch of each vertebra.

Laminectomy – Excision of the lamina.

Laminotomy (hemilaminectomy) – Cutting into the lamina. Because the lamina is composed of bone, cutting results in removal of part of the lamina, usually the lamina on one side of the vertebra.

Large Group Health Plan – A health insurance or benefit plan that is offered through an employer who has 100 or more employees or is part of a multi-employer trust or association which has at least one employer of 100 or more employees.

Lateral – Toward the side of the body.

Limiting Charge – Limit set by law on how much nonparticipating physicians may bill Medicare patients. The limiting charge is the lower of the actual charge or 115% of the approved charge for nonparticipating physicians. Also called Charge Limit.

Limiting Charge Exception Reports – Reports sent to non-participating providers who submit unassigned claims with charges in excess of the limiting charge established for each procedure.

Locality – Geographic areas defined by Medicare or another insurance carrier for determining payment amounts. There are over 200 Medicare localities, some covering entire states, and others covering counties, groups of counties or metropolitan areas. Medicare Payment Reform reduced the wide variations in payments among localities, sometimes within a few miles of each other, experienced under the old CPR system.

Lordosis – The anterior concavity in the curvature of the lumbar spine as viewed from the side. Often used to refer to abnormally increased curvature (hollow back, saddle back, swayback) and to the normal curvature (normal lordosis).

Major Procedure – Medicare's designation for procedures which have a 90 day global service period.

Malpractice – Generally, dereliction from professional duty. With Medicare, one of the three factors used to adjust the relative values of physician services (the other two are work and practice expense). The malpractice component reflects the cost of insurance indemnifying physicians against professional liability claims.

Maximum Actual Allowable Charge (MAAC) – Limit on the amount nonparticipating physicians could bill Medicare patients under the old CPR system. It was phased out by adoption of the limiting charge (Charge Limit) in 1992.

MCO (Managed Care Organization) – An organization designed to offer and administer a "managed" health care plan in which the benefits are standardized and participation by physician and other providers is limited and by agreement. Also used to identify other kinds soft health service organizations, such as a "support service" organization which serves a specified group of providers.

Medicaid – State administered health insurance programs, regulated by the federal government, for economically and other disadvantaged persons. May be known as "Welfare," "Title XIX," "MediCal," "TennCare," or other names.

Medicaid Qualified Medicare Beneficiary – A program in which the state Medicaid program pays the Medicare deductible and co-payment amounts for persons who are qualified for coverage under Medicaid.

Medical Review – The review by the medical staff of medical records or information as it relates to services rendered and billed by a provider or beneficiary for payment.

Medically Necessary – The levels of services and supplies (frequency, extent and kinds) adequate for the diagnosis and treatment of an illness or injury. Medically necessary includes the concept of appropriate medical care.

Medicare – The federal health insurance program designed for persons over 65 years of age. Also covers End Stage Renal Disease for patients requiring hemodialysis or kidney transplant, and persons of any age who are entitled to monthly disability benefits for 24 consecutive months under either Social Security or the Railroad Retirement Program.

Medicare Advantage Program – A program enacted in Title II of The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) on December 8, 2003. The program replaces the Medicare+Choice (M+C) program established under Part C of the title XVIII of the Act, while retaining most key features of the M+C program. Medicare Advantage attempts to broadly reform and expand the availability of private health plan options to Medicare beneficiaries.

Medicare Economic Index (MEI) – Used to update Medicare payments, the MEI is a measure of general and medical inflation. Under the new system the MEI is used to update the conversion factors used to transform relative value units into dollar payment amounts. The increases are subject to limits imposed by the Medicare Volume Performance Standards which require payment cuts if service volume grows beyond a certain point.

Medicare Fee Schedule (MFS) – The basis for setting Medicare's payments for physician services, which replaced the old CPR system on Jan. 1, 1992. It was the cornerstone of so called "Physician Payment Reform." It is based on the Resource Based Relative Value System (RBRVS) developed at the Harvard University School of Public Health. The Harvard RBRVS takes into account the resource cost of physician work, practice overhead and professional liability insurance. RBRVS values are adjusted for geographic differences in practice costs and multiplied by a conversion factor to arrive at a dollar payment figure. Payment schedule amounts include both the 80% paid by Medicare and the 20% patient co-payment. Transition to the full Medicare payment schedule began in 1992 and was completed in 1996.

Medicare Modernization Act (MMA) – On December 8, 2003, the MMA was signed into law. This landmark legislation provides seniors and people living with disabilities with a prescription drug benefit, more choices, and better benefits under Medicare. This was the most significant improvement to senior health care in nearly 40 years.

Medicare Part A – That part of the Medicare insurance program that covers hospitals, skilled nursing facilities, home health agencies, etc.

Medicare Part B – That part of the Medicare insurance program that covers physicians' services, outpatient hospital care, diagnostic tests, ambulance services and other services not covered under Part A or Durable Medical Equipment Prosthetic and Orthotics.

Medicare Participant Physician/Supplier Directory (MEDPARD) – A directory of providers who have signed a participation agreement and agree to accept assignment on all claims.

Medicare Secondary Payer (MSP) – Medicare is secondary (billed second) when a patient has another insurance coverage that is primary (billed first).

Medicare Supplemental Policy – Insurance coverage designed to pay all or part of the patient responsible portions of Medicare Insurance coverage. See Medigap Policy.

Medicare Volume Performance Standard (MVPS) – A national spending goal for Medicare Part B services, the MVPS is used to control spending growth by cutting physician payments if service volume grows faster than projected. Essentially, if the MVPS is exceeded in one year, physician payment updates are cut the next year. The cuts are made by reducing the Medicare Economic Index to compensate for the amount actual Part B expenditures exceeded the MVPS target. That, in turn, reduces the conversion factor by which Medicare multiplies relative values for each service to arrive at a dollar payment amount. The MVPS is established annually by Congress either according to recommendations by HHS, the Physician Payment Review Commission and groups such as the AMA, or by a statutory formula.

Medigap Policy – An insurance policy designed specifically to cover patient responsible amounts of Medicare benefits.

Minor Procedure – Medicare's designation for procedures which have a "0" or "10 day" global service period.

Modifier – A 2 digit number which is appended to a CPT procedure code which gives the carrier additional information about the procedure performed.

MSO – An organization established to provide management services to other organizations (usually medical practices). May be owned by one or more practices, or may be independently owned.

Multiple Surgery – Multiple surgical procedures (designated by modifier 51) which are performed at the same operative session. Carriers normally pay the full payment amount for the highest valued procedure, and a lesser amount for subsequent procedures. As of 1/1/95, Medicare pays 100% for the first procedure and 50% for each subsequent procedure.

Myelopathy – A general term denoting functional disturbances and/or pathological changes in the spinal cord; the term is often used to designate nonspecific lesions in contrast to inflammatory lesions (myelitis).  

Nonparticipating Physician (NON-PAR) – A physician who has elected not to sign a Medicare participation agreement. Nonparticipating physicians must collect from patients for services, but are free to bill Medicare patients more than the Medicare approved amount for a service. However, bills may not exceed the limiting charge, which is 115% of the approved amount for non-par physicians. Nonparticipating physicians may accept assignment on a case-by-case basis. Approved amounts for nonparticipating physicians are set at 95% of approved amounts for participating physicians in the same locality.

Non-Segmental Instrumentation – Fixation at each end of the construct and may span several vertebral segments without attachment to the intervening segments.

Not Medically Necessary – Term used by Medicare to explain non-payment when: a) the physician and Medicare disagree on the patient's need for a particular medical service, b) Medicare usually does not pay for the particular service in question, c) the treatment is (according to Medicare) too new or innovative, or d) there is another reason for nonpayment. The term does NOT necessarily mean that the physician in question is not providing appropriate care.

NP – Nurse Practitioner.

NPI (National Provider Identifier) – An 8 digit alphanumeric identifier plus a 2 position alphanumeric location identifier to indicate the provider's practice location. NPIs are good for life, and only the location identifier may change.

Nucleus Pulposus – A semifluid mass of fine white and elastic fibers that form the central portion of an intervertebral disc.

OBRA 89 (Omnibus Budget Reconciliation Act of 1989) – Legislation mandating Medicare physician payment reform. OBRA 89 specified that the new system be based on an RBRVS and that its implementation be budget neutral, that is, costing no more than would have been spent under the old CPR system. The legislation also contains a number of specific directions about payment for physician services.

OIG / Office of the Inspector General – In the Department of Health and Human Services, the OIG was established in 1976 to identify and eliminate fraud, abuse and waste in HHS programs, and to promote efficient and economic departmental operations.

Old Age, Survivors and Disability Insurance Act – The 1965 amendment to OASDI which established Medicare effective July, 1966.

Optical Character Recognition – Allows information entered on an optical recognition form to be read and retrieved by a scanning machine, thus eliminating the need for the information to be manually keyed.

Ordering Physician – A physician who orders services for the patient.

OSHA – Office of Safety and Health Administration of the federal government.

OSHA Act of 1970 – Initial statutory basis for OSHA programs and operations. Covers infection control, hazard communications, and other safety/health control requirements.

Osteophyte – A bony outgrowth, usually branched in shape.

Osteophytectomy – Surgical removal of osteophytes (bony outgrowths).

Out-of-Office Journal (OOOJ) – A form used to record physician's out-of-office services so they can be reported accurately and completely.

Out-of-Pocket Expense – Payment which must be made by the patient in order to receive service. Includes co-payment, coinsurance and/or deductible amounts.

Outlier – A point in a statistical distribution that is outside a certain range, usually defined as two or three standard deviations from the mean. Often refers to a case or hospital stay that is unusually long or expensive for its type, or to a physician practice that uses an abnormally high or low volume of resources.

PA – Physician Assistant. 

Participating Physician – A physician who has signed a Medicare participation agreement, which binds the physician to accept assignment on all Medicare claims within the calendar year. Participating physicians are paid 80% of approved charges directly from Medicare and they must bill patients for the 20% co-payment, but may not bill for more. Some private insurers, notably Blue Cross and Blue Shield plans, have similar participation programs.

Patient Authorization Form – A form signed by a patient which authorizes the release of information and carrier payment to a physician for the services provided by the physician. Also called signature on file.

Pay to Provider – Identifier that designates the person(s) to whom reimbursement should be made to for services rendered.

Payer – The organization that pays insurance claims.

Payer ID – A nationally standardized system of uniquely identifying payers of health care benefits orchestrated by CMS in order to simplify the processing of health care claims among different entities. The Payer ID is 9 digits long.

Performing Physician Provider – The physician (as defined in section 1861 of the Social Security Act) who rendered the services being billed to the carrier.

Physician – Within the meaning of section 1861 of the Social Security Act:

A doctor of medicine or osteopathy legally authorized to practice medicine and surgery by the state in which he/she performs such function or action.

A doctor of dental surgery (DDS) or dental medicine (DM) who is legally authorized to practice dentistry by the state in which he/she performs such functions, and who is practicing within the scope of his/her license when performing such functions.

A doctor of podiatric medicine (DPM) for purposes of subsections (k), (m), (p), (1) and 1814(a), 1932(a), (2), (F), (ii) and 1835, but only with respect to functions which he/she is legally authorized to perform as such by the state in which he/she performs them.

A doctor of optometry (DO), but only with respect to the provision of items or services described in 1861(s) which he/she is legally authorized to perform by the state in which he/she performs them.

A chiropractor (DC) who is legally authorized to perform the services of a chiropractor in the jurisdiction in which he/she performs such services, and who meets uniform minimum standards specified by the Secretary, but only for the purpose of 1961 (s) (1) and 1861 (s) (2) (A), and only with respect to treatment by means of manual manipulation of the spine (to correct a subluxation demonstrated by x-ray to exist).

Physician Payment Reform – A legislative change in the way Medicare pays for physician and non-physician practitioner services required by the Omnibus Reconciliation Act of 1989 (PL 101-239). The statute required a national fee schedule based on a resource-based relative value scale with geographic adjustments for difference in cost of practice, volume performance standards, and beneficiary protections.

Physician Payment Review Commission (PPRC) – An advisory committee created by Congress to review, evaluate and make recommendations regarding Medicare physician payment proposals.

Physician Work – One of three factors used to determine the relative value of physician services. This component reflects time, technical skill, training, and physical and mental effort required to provide a service. The other two components being practice expense and professional liability insurance costs. The practice expense component reflects practice overhead involved in providing a service, including rent, staff salary and benefits, and medical equipment and supplies.

Posterior – Toward the back of the body.

Posterior-Lateral – Toward the back and to one side of the body.

Practice Expense – One of three factors used to adjust the relative value of physician services. This component reflects practice overhead involved in providing service, including rent, staff, salary and benefits, and medical equipment and supplies.

Prevailing Charge – A factor used by carriers to limit physician payments. Medicare used such a factor under the CPR system which was used before Physician Payment Reform. The prevailing charge was set at the customary, or median, charge of the 75th percentile of physicians delivering a particular service in a particular Medicare locality. Increases in the prevailing charge were capped by the Medicare Economic Index.

Prior Authorization – Requirement of a third party under some systems of utilization review, that a provider justify the need for delivering a particular service to a patient before providing the service (as a condition of receiving reimbursement). Generally, prior authorization is required for non-emergency services which are expensive, or particularly likely to be overused or abused. Prior authorization is not required by Medicare.

Procedure Code – A CPT code used by a physician or other provider to describe the procedure or service rendered to the patient.

Professional Component – The portion of payment for a service covering physician work, practice costs and professional liability insurance as opposed to the technical component, which covers the use of equipment and supplies and technician salaries.

Professional Liability Insurance (PLI) Component – One of three factors used to determine the relative value of physician services, the other two being physician work and practice expenses. The PLI component reflects the cost of insurance indemnifying physicians against professional liability claims.

Prone – Lying face downward.

Provider – An individual or institution which gives medical care.

Provider Based Physician – A physician who generally receives compensation from (or through) a provider.

Public Law 98-97 – First passed in 1965, established Medicare, covering persons over age 65 and those under the Railroad Retirement System.  

Quality Improvement Organization (QIO) – Groups of practicing physicians and other health care professional who are paid by the federal government to review the care given to Medicare patients. Formerly named Peer Review Organization (PRO). 

Railroad Retirement Benefits – Medicare entitlement extended to retired railroad beneficiaries.

RBRVS (Resource-Based Relative Value Scale) – A relative value scale developed by a Harvard University School of Public Health research team that assigns values to physician services based on the resource cost of providing those services. As the basis of Medicare's new payment schedule, it was the cornerstone of so called Physician Payment Reform. The RBRVS payment schedule was intended to even out regional payment differences that existed under the old CPR system as well as establish a rational basis for setting payments for office visits and other "cognitive" services relative to surgery and other "procedural" services. The RBRVS assigns relative value units to each physician service for physician work, practice expenses and professional liability insurance costs required to perform that service. Values for each of these three components are modified to reflect local cost variations by multiplying them by the geographic practice cost index values established for each Medicare locality. The RBRVS undergoes constant revision by CMS.

Reasonable Charge – The least of the customary, prevailing, lowest charge limit (LCL), inflationary index (IL) charge of the amount submitted on a claim. Part of the Customary, Prevailing and Reasonable Charge (CPR) method.

Rebundling – The grouping together of separate services into one procedure code.

Reconsideration – See Review.

Referring Physician – A physician who requests an item or service for a beneficiary for which payment may be made under the Medicare program.

Relative Value Scale (RVS) – An index of physician services that assigns values to individual services relative to other services. The widest used is that developed by and referred to as the McGraw-Hill system. Such scales are generally based on historical charges (charge-based) or on resources consumed to provide services (resource-based). Various relative value scales have been used by insurers as the basis of payment schedules, many of whom now use the RBRVS. Relative values are multiplied by a conversion factor to arrive at a dollar payment amount.

Relative Value Unit (RVU) – Basic element of measure for the Medicare RBRVS. Each service is assigned relative value units for physician work, practice expense and professional liability insurance. The three added together are the relative value of the service. RVUs are modified by geographic practice cost index values to compensate for regional variations in practice costs.

Remittance Advice – An account of assigned claims processed by a payer for a particular provider of services.

Review – Also known as reconsideration. The practice of resubmitting an insurance claim for (manual) review by a carrier. Normally done when the practice believes it detects an error in processing the claim. None of those involved in the original determination is involved in the reconsideration. See Fair Hearing and Administrative Law Judge Hearing.

Roster Billing – Used when a provider accepts assignment in billing for mass immunizations.

Sciatica – A syndrome characterized by pain radiating from the back into the buttock and into the lower extremity along its posterior or lateral aspect. It is most commonly caused by prolapse of the intervertebral disc. The term is used to refer to pain anywhere along the sciatic nerve.

Scoliosis – An appreciable lateral deviation in the normally straight vertical line of the spine.

Segmental Instrumentation – Fixation at each end of the construct and at least one additional point of fixation to an intervening segment.

Separate Procedure – A procedure that is normally carried out as part of a total service, and not identified by code. When performed independently of the other service(s), it is coded and charged.

Signature on File – See Patient Authorization Form.

Social Security Administration – The largest subdivision of DHHS, established by the Social Security Act of 1935, originally called the Social Security Board, and later the Federal Social Security Agency. The present title was adopted in 1953. Administers that part of the social security law which provides monthly benefits and disability benefits, and Title XVIII (Medicare).

Specialty Differential – Under Medicare's old CPR system some carriers paid physicians from different specialties different amounts for providing the same service. Legislation mandating Medicare Physician Payment Reform required that specialty differentials be eliminated.

Spinal Arthrodesis/Fusion – A spinal fusion/arthrodesis involves laying down bone or bone substitute between relatively intact vertebrae in order to stabilize them.

Spinal Nerve Root – The portion of a motor or sensory nerve that lies closest to the spinal cord.

Spondylitis – Inflammation of the vertebrae.

Spondylolisthesis – Forward displacement of one vertebra over another, usually of the fifth lumbar over the body of the sacrum, or of the fourth lumbar over the fifth.

Stenosis – Narrowing or stricture of a duct or canal.

Sublaminal – Beneath a lamina.

Subrogation – Means by which claims are identified as the responsibility of another insurer, since treatment of the condition resulted from the action of an outside party.

Supine – Lying on the back.

Supplemental Insurance – An insurance policy intended to pay for items and services not covered or included in other (primary) insurance policies.
 

Technical Component – Portion of payment for physician services covering equipment, supplies and technician salary, as opposed to the professional component, which covers physician work, practice overhead and professional liability costs. 

TEFRA (Tax Equity and Fiscal Responsibility Act of 1982) – Purpose was to prevent discrimination against elderly employees with regard to health insurance. Made Medicare secondary to employer group health plans for active employees and spouses aged 65-69. TEFRA also amended ADEA to require employers to offer employees and dependents aged 65-69 the same coverage available to younger employees.

Third Party Payer – Any organization that pays or insures health or medical expenses on behalf of beneficiaries recipients (eg, Blue Cross and Blue Shield Plans, commercial insurance companies, Medicare and Medicaid). The individual or employer generally pays a premium for such coverage in all private and some public programs. The organization then pays bills on the patient's behalf. Such payments are called third-party payments, and are distinguished by the separation between the individual receiving the service (the first party), the individual or institution providing the service (the second party) and the organization paying for it (the third party).

Time Limit – The period of time during which a notice of claim or proof of loss must be filed.

TITLE XVII – The Social Security Act which contains the principal legislative authority for the Medicare program, and which is therefore a common name for the program in government circles.

TITLE XVIII – The Social Security Act which contains the principal legislative authority for the Medicaid program, and which is therefore a common name for the program in government circles.

Transverse – A direction that is at right angles to the long axis of a part.

Unbundle – The practice of billing components of an integral service separately for higher reimbursement. Also known as code fragmentation.

Uniform Reporting of Physician Services – Also known as "Rebundling." A computerized system which determines if physicians are correctly reporting procedure codes on Medicare claims.

Upcode – The practice of coding services at a higher level than justified by their content.

Update – The annual adjustment to the Medicare Fee Schedule conversion factor.

UPIN (Universal Physician Identifier Number) – A provider identification number assigned by CMS which is required on virtually all Medicare and Medicaid insurance claims.

Vertebral Body – The solid circular anterior front portion of a vertebra.

Vertebral Corpectomy – Resection of the vertebral body of a vertebra.

Vertebral Segment – A single vertebra

Waived Procedures – Common designation for those (minor) laboratory procedures which can be performed in a physician's office which is not certified to perform more extensive laboratory procedures.

Write-off – An amount subtracted from a patient account. Medicare and some other insurance programs require that the amount of a charge which exceeds the "approved amount" be written off.