Accountability: Physicians, as well as health plans, are more explicitly responsible for the cost and quality of health care in managed care compared to the traditional fee-for-service system. When physicians, individually and in groups, share in the responsibility for the costs of care, they accept financial accountability for resources utilized. This is in contrast to the traditional indemnity insurance system where the insurer, but not the provider, was accountable and faced losses if expenses exceeded revenues. Physicians become accountable for quality of care when their performance is subject to assessment and measurement, with the results made public in the health care marketplace to other providers, purchasers, health plans and consumers. As accountability increases, there is a decrease in physician autonomy; physicians face financial and competitive consequences of their clinical actions and decisions. Top of page

Capitation: The per capita (per person) payment made to a health care provider to deliver a specific menu of health services to a defined population over a set period of time. The provider usually receives, in advance, a negotiated monthly payment per member based on the expected cost of providing the specified services. Payment varies to reflect the total number of members covered and, typically, characteristics of the members such as age and sex; but payment does not vary based on the actual services provided to each member. Top of page

Commercial insurance: Insurance purchased by employers for their workers or directly by private consumers. Commercial insurance is differentiated from public programs that cover the poor, elderly and disabled. Top of page

Contact Capitation: A method of paying specialists a predetermined lump sum per patient upon referral to manage and provide care during the episode of illness. This arrangement, also known as "case rate capitation" is a hybrid of capitation and fee-for-service reimbursement. Top of page

Fee-For-Service: Provider reimbursement in which the provider is paid according to the number and type of services performed. This is the reimbursement system used by conventional indemnity insurers. In this system, the provider’s income is directly related to the volume and intensity of the units of service rendered. The insurer may pay a percentage of charges or utilize a predetermined fee schedule. Top of page

Gatekeepers: An informal, though widely-used, term that refers to a primary care physician who controls referrals of patients for tests, specialty physician services and hospitalizations; a popular cost control and utilization control component of many managed care plans. Top of page

Generalist: General physician or family physician, trained to take care of the majority of nonsurgical diseases, sometimes including obstetrics. Top of page

Health Maintenance Organization (HMO): An organization of health care personnel and facilities that insures and provides comprehensive medical services to its members on a prepaid basis. Members are required to choose a PCP whom they must consult for all their health care needs; the PCP typically authorizes most referrals to specialists and other services. Members receive care from the HMO’s participating providers. Top of page

Indemnity Health Insurance: Insurance that reimburses an individual for fees paid for medical services after they are performed. Payments may be made to the patient or directly to the providers, on a retrospective, fee-for-service basis. This was the prevailing form of health insurance provided by commercial insurance companies prior to the growth of managed care organizations and products. Top of page

IPA (independent practice association) model: Organized system of health insurance and medical care in which an HMO contracts with independent, private-practice physicians or associations of such physicians, who see HMO members and other patients. Physicians in this model generally are paid on a modified fee-for-service or capitated basis. IPAs are the most common form of HMO. Top of page

Managed Care: Managed care links health insurance with an organized care delivery system for a defined population. As such, it requires that providers assume responsibility and accountability for the health of a defined population, and share financial risk inherent in assuming that responsibility. The goal of managed care is to provide the highest quality of care to individual patients and populations, efficiently and affordably. In the practice setting, managed care places special emphasis on coordinated and comprehensive services, appropriate use of both ambulatory and inpatient settings, evidence-based decision making, cost-effective diagnosis and treatment, population-based planning, and health promotion and disease prevention. Top of page

Point-of-Service Health Plan (POS): Also identified as open-ended HMO. A plan combining the features of an HMO with an indemnity insurance option. The member uses the plan like an HMO and receives HMO coverage; but the member may exercise "freedom of choice" and seek care outside the HMO system with additional charges (higher copayments and deductibles, and submission of claims forms). Members choose how and from whom to receive services at the time they need them. Top of page

Preferred Provider Organization (PPO): An arrangement in which the health plan contracts with independent physicians, hospitals and other health care providers who become the "preferred" or "participating" providers. Providers typically accept reduced, "discounted fee-for-service" rates of reimbursement from the health plan in exchange for access to the PPO’s enrollees. PPOs have fewer restrictions than HMOs (e.g., patients are not required to select a primary care physician or seek prior authorization for services). Patients may choose to receive care from providers who do not participate in the PPO, with higher copayments and deductibles attached to services provided by non-participating providers. Top of page

Prepayment: Negotiated and prospective payment made to a health care provider for specified services to a specified group of insured persons prior to the provision of medical care. Unlike fee-for-service reimbursement, prepayment rates are negotiated up front and not adjusted after the fact for actual service or resource consumption levels. Top of page

Primary Care Capitation: The per capita payment made to a health care provider to deliver a specific menu of health services to a defined population over a set period of time. The provider receives, in advance, a negotiated monthly payment per member based on the expected cost of providing the specified services. Payment varies to reflect the total number of members covered. Payment does not vary based on the actual services provided to each member. Top of page

Primary Care Physicians: Physicians who assume responsibility for the continuing course of treatment for the member, including initial screening, testing, treatment and referrals; usually trained in family medicine, internal medicine or general pediatrics. Top of page

Primary Care: General or basic health care focusing on preventive care and the treatment of routine injuries and illnesses. Primary care is provided as the patient's first contact on an outpatient basis. Top of page

Risk-Sharing: A fundamental feature in managed care, whereby the managed care plan and its providers share financial risk for providing care to enrollees. The amount of risk incurred by the various parties depends on the specific contract between the health plan and its providers and the mechanisms for reimbursement. Top of page

Specialist: A physician who devotes himself or herself to the study and treatment of a particular group of diseases. Top of page

Utilization Management (UM): A systematic approach used by many health insurance companies, managed care organizations, delivery systems, hospitals and physician practices to: evaluate the necessity, appropriateness and efficiency of health services; determine and implement best practices to achieve high quality, cost-effective health care; and lower costs by discouraging unnecessary treatment. Top of page