Hospital /Healthcare Accounting GLOSSARY
Page 1
Accounts
Payable (A/P)
short-term debt, obligation, or liability owed by the organization to other
persons or companies for goods or services furnished
Accounts
Receivable (A/R)
money owed to an organization for goods or services furnished
Accounts
Receivable
Collection Period
number of days in the accounting period divided by accounts receivable
turnover; this ratio indicates on average, how long it takes to collect
amounts due
Accounts
Receivable
Turnover
ratio indicates how many times accounts receivable is collected in a given
cycle
Accrual Basis of
Accounting
system of accounting that recognizes revenues when earned and
expenses when resources used
Adjusted
Discharge
for adjusted discharges or patient days: Adjusted Discharges (days) =
Inpatient Discharges (days) X (1 + [Gross Outpatient Revenue/Gross
Inpatient Revenue])
Adjusted Patient
Days
estimate of utilization by inpatient, outpatient and newborn based on
total gross revenue
Aging
process wherein accounts receivable or accounts payable are scheduled,
listed, or arranged based on elapsed time from date of service or
transaction
Allowance for
Bad Debts
an estimate of the amount of accounts receivable that a health care
provider will be unable to collect; it reduces the value of accounts
receivable
Ambulatory
Patient Group
(APG),
Ambulatory
Payment
Classification
(APC)
institutional outpatient reimbursement system based on the
methodology developed by CMS; APCs/APGs are to outpatient
visits/services what DRGs are to inpatient hospital admissions; the
payments are based on categories or groupings of like or similar services
requiring like or similar professional services and supply utilization
Amortization
the systematic allocation of an item to revenue or expense over a number
of accounting periods such as repayment of a loan on an installment basis
2016 Marian Powers, PhD
Hospital /Healthcare Accounting GLOSSARY
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Annual Debt
Service
used to determine how much a hospital or health system is leveraged
Assets
resources owned by the organization; one of the three major categories
on the balance sheet
Assignment
agreement in which a patient transfers to a provider the right to receive
payment from a third party for the service the patient has received
Average Age of
Plant
a measure of the average age in years of a hospitals fixed assets; a lower
value indicates less of a need for replacement and a higher age indicates
the need for more capital spending; accumulated depreciation divided by
depreciation expense is the ratio formula
Average Daily
Census (ADC)
average number of inpatients, excluding newborns, receiving care each
day during a reported period
Average Length
of Stay (ALOS)
average stay counted by days of all or a class of inpatients discharged over
a given period, calculated by dividing the number of inpatient days by the
number of discharges
Bad Debt
amount not recoverable from a patient following exhaustion of all
collection efforts
Balance Billing
practice of a provider billing a patient for balances not paid by a third
party
Balance Sheet
financial statement that presents a snapshot of the financial condition of
a health care organization at a specific point in time; statement that lists
the financial resources (assets), financial obligations (liabilities), and
ownership rights (equity/fund balance) within the organization
Base Capitation
stipulated dollar amount to cover the cost of total health care per covered
person, carried-out services; usually stated in a monthly dollar amount
Bed Days/1000
an aggregate measure reflecting both admissions and lengths of stay as
well as a global measure of inpatient management; number of inpatient
days per 1000 covered health plan members
Bed Turnover
Rate
number of times a facility bed, on average, changes occupants during a
given period of time
2016 Marian Powers, PhD
Hospital /Healthcare Accounting GLOSSARY
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Benchmarks
industry standards for specific tasks or performance normally set by
surveying groups and comparing data across groups
Bond
long-term debt issued by a business or government unit whereby the
issuer receives cash and in return issues a note; the issuer agrees to make
principal and interest payments on specific dates to holders of the bond
Bond Rating
assignment or grading of the likelihood that an organization will not
default on its bond obligation
Book Value
cost of an asset less its accumulated depreciation
Break-Even Point
the price at which a transaction produces neither a gain nor loss; this
occurs when income matches expenditures; this definition can apply to a
product, investment or the entire company's operations
Budget
comprehensive management plan of operation that formally expresses
both broad and specific objectives and sets standards for the evaluation
of performance
Capital
fixed or durable non-labor inputs or factors used in the production of
goods and services, the value of such factors, or the money specifically
allocated for their acquisition or development
Capital Asset
depreciable property of a fixed or permanent nature, including buildings
or equipment not for sale in the regular course of business
Capital Budget
plan that outlines the organization’s future expected expenditures on new
fixed assets (e.g., land, building and equipment)
Capital Cost
cost of investing in the development of new facilities, services, or
equipment, excluding operational costs
Capital
Expenditure
outlay for capital assets such as facilities and equipment, excluding outlay
for operation or maintenance
Capital
Expenditure
Growth Rate
a gauge indicating how aggressive a hospital invests in its plant and
equipment; a high value indicates an active capital expenditure program
of additions and replacements; measured as a percentage of the
organizations total gross property, plant, and equipment added in a given
year
2016 Marian Powers, PhD
Hospital /Healthcare Accounting GLOSSARY
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Capital Financing
institutional funding for facilities and equipment that become part of the
capital assets of the institution
Capital Lease
leasing arrangement where the lessee seeks a long-term commitment to
use the asset with or without the eventual opportunity to purchase the
asset
Capital Structure
structure of the liabilities and the net assets section of the organization’s
balance sheet
Capitation
method under which selected health services are paid for on the basis of
a fixed rate per eligible member without regard to the actual number or
nature of services provided to each enrollee; typically paid per member
per month (PMPM). Payment system in which providers receive a specific
amount in advance to care for specific health care needs of a defined
population over a specific time period. Capitated provider assumes the
risk of caring for covered population for the PMPM amount.
Carve-Out
set of health plan benefits that are contracted separately from the
standard benefits package
Case
Management
method of managing the provision of health care with the goal of
improving continuity and quality of care while lowering cost
Case Manager
clinical professional who works with patients, providers, families, and
insurers to coordinate all the services deemed necessary to care for the
patient in the best and lowest cost medically appropriate setting
Case Mix
clinical composition of a provider's population among various diagnoses
used as a factor in determining cost of service and rate setting; mix of
patients who have different third party payers for their medical bills (i.e.,
Medicare, private insurance, workers' compensation)
Case Mix Index
(CMI)
measure of the relative costliness/acuity of patients treated in each
hospital or group of hospitals
Case Rate
Fixed reimbursement amount depending on the type of case; typically
includes both physician and hospital charges, limits the liability of the
payer and shifts some of the financial risk to the provider
Cash
also called currency; is used to determine liquidity ratios and transact
financial business; considered the most liquid of all assets
2016 Marian Powers, PhD
Hospital /Healthcare Accounting GLOSSARY
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Census
count of patients who at the time counted were duly registered in a
provider's care, normally on an inpatient basis; count of all the people in
the United States taken every ten years by the federal government; listing
of all eligible members who are to be covered by a plan
Centers for
Medicare and
Medicaid
Services (CMS)
formerly Health Care Financing Administration (HCFA); government
agency and division of the U. S. Department of Health and Human
Services (HHS) that is responsible for administering Medicare, Medicaid
and the Children's Health Insurance Program (CHIP); is also the
contracting agency for third-party payers who seek direct
contractor/provider status for administration of the Medicare benefit
package to its enrollees
Charges
prices assigned to units of medical services, such as a visit to a physician
or an inpatient day at a health care facility; gross prices charged for health
care services considering any discounts to insurers, government payers,
uninsured patients, patients who qualify for financial assistance or
discounts for any other reasons
Chargemaster
provider’s official list of charges (prices) for goods and services rendered
Charity Care
care rendered to patients without the expectation of compensation for
such services
Chart of
Accounts
listing of an organization's account numbers and titles within a general
ledger system
Claim
request to an insurer by an insured person or assignee for payment of
benefits under an insurance policy
Claims
Adjudication
in health insurance, this refers to the determination of a member's
payment, or financial responsibility, after a medical claim is applied to the
member's insurance benefits
Claims Billed
submission of a claim for payment for services rendered by a health care
provider to the insured or to the patient
Claims Incurred
insurance company's actual liability for all claims which have been
incurred meaning that the covered individual has received services or
supplies and those services have yet been paid by the insurance company
Claims Paid
actual amount paid to either individuals or providers to satisfy the
contractual liability of a benefit plan; does not include member liability for
copayments, coinsurances, deductibles, etc.
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Hospital /Healthcare Accounting GLOSSARY
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Claims Review
retrospective or prospective review by government, medical foundations,
insurers, or others responsible for payment to determine the financial
liability of the payer, eligibility of the beneficiary and the provider,
appropriateness of the service provided, amount requested under an
insurance or prepayment contract, and utilization rates for specific plans
Clean Claim
claim that can be processed without additional information from the
provider or third party
Clearinghouse
third party used for centralizing the sending and receiving of electronic
messages, claims, documents, claims and other remittance advices
between organizations
Contract
legal arrangement between two parties; legal arrangement between an
insurer and a provider under which a provider agrees to certain terms
such as specified reimbursement rates for health care services provided
and the insurer agrees to certain terms such as timely payment
Contractual
Adjustment /
Deductions
accounting adjustment required to reflect uncollectible differences
between established charges for services rendered to insured persons and
rates payable for those services under contracts with third-party payers
Contribution
Margin
revenue from services minus all variable expenses; difference between
per unit of revenue and per unit cost (variable cost rate) and thus the
amount that each unit of output contributes to cover the fixed costs
Coordination of
Benefits (COB)
claims review procedure by which a claim covered by two or more carriers
is identified and the liability of each is determined for the purpose of
avoiding duplication of payments
Copayment
a type of cost sharing arrangement under which the insured pays a
predetermined dollar amount per episode of service, with the insurer
paying the remainder
Cost
expenses incurred
Cost Accounting
process used to calculate the expense associated with delivery of an
individual unit of service
Cost Allocation
assignment to each of several organizational departments or services an
equitable proportion of the costs of activities that serve them all
Cost Center
the grouping of all related costs attributable to a "financial center" within
an institution, e.g., department or program, segregated for accounting or
reimbursement purposes
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Hospital /Healthcare Accounting GLOSSARY
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Cost of Capital
rate of return required to undertake a project; the discount rate that
reflects the overall average risk of the project or business
Cost Outlier
patient whose cost of treatment exceeds the predefined cost threshold
established for DRG payments assigned
Cost Plus
insurance contractual arrangement whereby the subcontracted payer of
claims for a group health plan is paid the actual cost of the claim
settlement plus a fixed amount for providing claims processing services
Cost-Based
Reimbursement
method of Medicare reimbursement for critical access hospitals and other
cost report based payments
Cost Sharing
method by which part of the cost of medical services is shared between
the plan and the patient
Cost Shifting
the practice of charging certain patients higher rates to recoup losses
sustained when a third-party payer reimburses at a lower rate for other
patients
Covered Person
individual who meets plan eligibility requirements and for whom current
premium payments are paid
Covered Service
service supplied by a provider to a patient, which is included in the scope
of insurance benefits
Current Assets
asset that is expected to be converted into cash within one accounting
period (often a year)
Current
Liabilities
financial obligations that are paid within one year
Days Cash on
Hand
cash plus short and long-term investments divided by total expenses less
depreciation divided by 365; measures the number of days of average
cash expense that a hospital maintains in cash or marketable securities; a
measure of short and long-term liquidity; a higher value indicates better
debt repayment ability
Days in Accounts
Receivable
net accounts receivable divided by (net patient revenue/365); ratio
indicates how quickly a hospital is converting its receivables into cash
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Hospital /Healthcare Accounting GLOSSARY
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Days per 1000
for a stated population of 1,000 individuals, the estimated number of
hospital inpatient days per year
Debt Service
Coverage
measures total debt service coverage, including interest plus principal,
against annual funds available to pay debt service; does not take into
account positive or negative cash flow associated with balance sheet
changes; higher value indicates better debt repayment ability
Deductible
expense that the insured must incur before an insurer will assume any
liability for all or part of the remaining cost of covered services
Deferred
Revenues
accounting treatment applied to the receipt or accrual of revenue before
it is earned; monies received that have not been yet earned, such as
capitation receipts on the basis of PMPM
Depreciation
the systematic allocation of the cost of a capital asset over a
predetermined timeframe
Diagnosis
Related Groups
(DRGs)
patient classification system that relates demographic, diagnostic, and
therapeutic characteristics of patients to length of inpatient stay and
amount of resources consumed; provides a framework for specifying
hospital case mix; identifies a number of classifications of illnesses and
injuries for which Medicare payment is made under the prospective
pricing system
Direct
Contracting
single or multi-employer health care alliances that contract directly with
providers for health care services with no insurance company or managed
care plan involvement
Direct Cost
cost that is clearly and directly associated with rendering services
Discharge
Planning
coordination by provider personnel with external sources to provide the
necessary care to the patient when the patient is discharged
Discount Rate
interest rate used to adjust a future cash flow to its present value
Discounted Fee
For Service (FFS)
a contractual arrangement between a provider and a payer where the
provider agrees to accept less than the normal charge for providing a
service; usually specified as a fixed percent such as 90%, 85%, 80%, etc. of
the normal charge
Disproportionate
Share Hospital
(DSH)
a designation given to a hospital that meets CMS criteria for care given to
indigent and/or state health care related program patients
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Hospital /Healthcare Accounting GLOSSARY
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EBIDA
earnings before interest, depreciation, and amortization; used by not-for-
profit as a measure of operational efficiency; a measure of operating
success before the costs of long-lived assets
EBITDA
earnings before interest, taxes, depreciation, and amortization; used for-
profits
Electronic Health
Record (EHR)
a global computerized record containing storage and retrieval of patient
health information in a digital format. Usually contains patients
demographics, medical history, medications, allergy list, lab test results,
radiology images and advance directives
Exempt
Financing
financing transactions or debt for tax-exempt organizations
Expense
Measure of the resource used to generate revenue and or provide a
service
FASB
Financial Accounting Standards Board a private organization whose
mission is to establish and improve the standards of financial accounting
and reporting requirements for private businesses
Fee For Service
(FFS)
traditional means of billing by health providers for each service
performed; requesting payment in specific amounts for specific services
rendered
Fee Schedule
listing of fees or payments for specific provider services or supplies
Financing
refers to source of resources used in funding a project or an investment
Fiscal
Intermediary (FI)
public or private insurer agency selected by CMS to pay institutional
claims under Medicare
Fiscal Year
accounting or reporting year adopted by an entity
Fixed Asset
business’ long term assets such as land, building and equipment
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Hospital /Healthcare Accounting GLOSSARY
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Fixed Asset
Turnover
an indicator of operating efficiency; the number of operating revenue
dollars generated per dollar of fixed asset investment is the ratio formula
Fixed Budget
provides for specified expenditures that do not vary with activity levels
Fixed Cost
cost that remains constant over a period of time or level of activity and is
not affected by changes in volume
Flexible Budget
budget that, when prepared, recognizes that expenditures are a function
of activity levels and are adjusted accordingly
Forecast
estimate of the most probable future financial position
Form 990
name of IRS form applicable to not-for-profit organizations for reporting
their activities for a fiscal period
Foundation
a fund raising entity, often affiliated with a health care system or provider
Full-Time
Equivalent (FTE)
workforce equivalent of one full-time individual or several part-time
workers for a specific period
Gatekeeper
primary care physician responsible for monitoring a patient's utilization of
health care services; a type of health insurance plan requiring covered
persons to select a primary care physician or the plan's participating
providers. The patient is required to see the selected primary care
physician for care and referrals to other health care providers within the
plan. HMOs use this type of health plan.
Generally
Accepted
Accounting
Principles
(GAAP)
the overall conventions, rules, and procedures that define accepted
accounting practice in the US
Global
Capitation
form of capitation that covers all medical expenses, including professional
and institutional charges
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Hospital /Healthcare Accounting GLOSSARY
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Gross Margin
net sales minus cost of goods sold; difference between sales revenues and
manufacturing costs as an intermediate step in the computation of
operating profits or net income
Health
Maintenance
Organization
(HMO)
health plan that has management responsibility for providing
comprehensive health care services on a prepayment basis to voluntarily
enrolled persons within a designated population
Health Plan
health insurance plan, HMOs, PPOs, self-funded plans, or any other plans
that pay for health care services to enrollees
Health Care
System
corporate body that may own and or manage health provider facilities or
health-related subsidiaries as well as non-health related facilities that are
either freestanding or subsidiary corporations and may include multiple
hospitals or one hospital and additional provider facilities or programs
Hospital
institutional health care provider with an organized medical and
professional staff and with permanent facilities that are able to provide
inpatient and outpatient services including medical, nursing, and other
health-related care to patients
Hospital-Based
Physician (HBP)
physician who furnishes services in a hospital through a contractual or
employment relationship
Hospitalist
a physician based in a hospital setting responsible for the care and
treatment of hospitalized patients; spends most of their time in a hospital
and are more readily available to the patient than a doctor who spends
much of the day outside the hospital in an office or clinic setting
Indemnity
Insurance
standard type of health insurance where benefits are paid in a
predetermined amount in the event of a covered loss
Independent
Practice
Association (IPA)
organizational structure through which private physicians participate in a
prepaid medical plan, charge agreed-upon rates to enrolled patients, bill
the association on a fee-for-service basis, and are organized as part of a
health maintenance organization
Indirect Costs
costs that are incidental or not related to the direct function of treating
patients
Inpatient (IP)
patient who is provided with room, board, and continuous acute nursing
service in an area of a hospital where patients remain hospitalized
overnight
Insurance
contract that provides reimbursement for, or indemnification from, the
results of a specific event
2016 Marian Powers, PhD
Hospital /Healthcare Accounting GLOSSARY
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Integrated
Delivery System
(IDS)
a system of health care providers organized to deliver a broad range of
health care services; other terms include integrated health care delivery
system (IHCDS), integrated delivery network (IDN), and integrated
delivery and financing system (IDFN)
Internal Rate of
Return (IRR)
percentage return on investment; rate of return at which the net present
value equals zero
Interest
money paid for the use of money
Key Performance
Indicators (KPI)
financial statement ratio and /or operating indicator that is considered by
management to be critical to the business’ financial performance
Length of Stay
(LOS)
number of calendar days that elapse between an admission and discharge
Lessee
one who uses the asset in the leasing arrangement
Lessor
one who owns the asset in the leasing arrangement
Long-Term Debt
Capitalization
formulated as long-term debt divided by long-term debt plus unrestricted
net assets; higher values for this ratio imply a greater reliance on debt
financing and may imply a reduced ability to carry additional debt
Malpractice
professional misconduct or lack of ordinary skill in the performance of a
professional act
Malpractice
Insurance
insurance either purchased or provided for by self-funding to reimburse
or compensate a provider for the adverse effects of a legal action
Managed Care
comprehensive health care plans that attempt to reduce costs through
contractual agreements with providers and through care management
initiatives
Marginal Cost
the next dollar spent to generate one additional unit of service
Market Value
current exchange price as of the date of the financial statement
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Hospital /Healthcare Accounting GLOSSARY
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Medicaid (Title
XIX)
federally aided, state-operated and administered program which provides
medical benefits for certain indigent or low-income persons in need of
health and medical care; benefits, program eligibility, rates of payment
for providers, and methods of administering determined by the state
subject to federal guidelines
Medical
Foundation
Model
a tax-exempt entity, usually a hospital or clinic that provides health care
to patients. Physicians ally with foundations via professional service
agreements. The foundation, not the doctor, holds the managed care
contracts.
Medical Group
Model
competitive entity that offers a high degree of integration of health care
delivery; is usually made up of a large multi-specialty medical group
operating under one tax ID that owns and operates one or more clinics
that may also include ancillary services such as laboratory and imaging, as
well as ambulatory surgery; generally the medical group contracts with
payers separately from any hospital
Medical Record
record of a patient maintained by a hospital or a physician for the purpose
of documenting clinical data on diagnosis, treatment, and outcome
Medicare (Title
XVIII)
U.S. health insurance program generally for people aged 65 and over,
consists primarily of two separate but coordinated programs: hospital
insurance (Part A) and supplementary medical insurance (Part B)
Medicare
Advantage
Medicare Prescription Drug, Improvement and Modernization Act (MMA)
replaced the Medicare+Choice program with Medicare Advantage,
allowing Medicare beneficiaries to enroll in a managed care plan
Medicare Part A
hospital insurance program portion of Medicare, which automatically
enrolls all persons aged 65 and over entitled to benefits under the Old
Age, Survivors, Disability and Health Insurance Program or railroad
retirement; generally pays for inpatient care
Medicare Part B
voluntary portion of Medicare, which generally covers physician services;
requires enrollment and the payment of a monthly premium
Medicare Part C
a program known as Medicare Advantage; if you are entitled to Medicare
Part A and enrolled in Part B, you are eligible to switch to a Medicare
Advantage plan provided by Medicare approved managed care plans,
provided one or more plans are available in your service area
Medicare Part D
Medicare prescription drug plan for Medicare beneficiaries
2016 Marian Powers, PhD
Hospital /Healthcare Accounting GLOSSARY
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Medicare
Payment
Advisory
Commission
(MedPAC)
independent advisory group appointed by Congress to review and make
recommendations to the HHS Secretary on issues affecting the Medicare
program including normal increases in Medicare payment rates;
mandated by the Balanced Budget Act as a consolidation of the
Prospective Payment Assessment Commission (ProPAC) and the Physician
Payment Review Commission (PPRC)
Medicare
Provider
Analysis and
Review File
(MedPAR)
database containing clinical and financial claims data for Medicare
beneficiaries, in which data elements are defined by Medicare billing
requirements and are maintained by CMS
Medigap
Insurance
supplemental insurance sold by private insurance companies to pay for
medical expenses not covered by Medicare
Member
any individual enrolled in a health care benefit plan
Member Month
unit of volume measurement calculated regardless of whether or not the
member actually received services during the month
MS-DRG
Medicare Severity Adjusted DRG; system implemented by CMS October 1,
2007 and used in the inpatient prospective payment system. The number
of DRGs was expanded to745.
Net Accounts
Receivable
accounts receivable reduced by all contractual allowances covered in
government participation agreement and third-party managed care
contracts
Net Assets
in not-for-profit organizations, net assets often is used in place of
“equity”; residual amount from total assets less total liabilities
Net Fixed Assets
value of assets after deducting depreciation
Net Income
Net Operating
Income
net of revenues, expenses, gains, and losses over a specified period of
time
net revenue less operating expenses but before all non-operating
income and expenses as well as taxes that result in a profit.
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Hospital /Healthcare Accounting GLOSSARY
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Net Working
Capital
Net Operation
Loss
Net Operation
Revenue
Net Patient
Service Revenue
Net Present
Value
Not-For-Profit
Organization
(NFP)
Observation
Occupancy Rate
One-Time
Revenue
Operating
Budget
Operating Costs
current assets minus current liabilities
net revenue less operation expenses but before other income and
expense and taxes that result in a loss
total revenue less contractual allowance reductions
represents revenue actually collected after all contractual adjustments
and bad debts are removed
the sum of the present values (PVs) of the individual cash flows. NPV is a
central tool in discounted cash flow (DCF) analysis, and is a standard
method for using the time value of money to appraise long-term projects.
Used for capital budgeting, it measures the excess or shortfall of cash
flows, in present value terms, once financing charges are met.
tax-exempt organization chartered for a charitable purpose; entity
organized under any state's not-for-profit corporation enabling statute for
purposes such as charity, education, research, religion, or other purposes
in which private persons are not permitted to receive distributions of
assets
23 hour or less stay in hospital setting
measure of percentage of beds occupied in a hospital over a period of
time
amount of money received from a non-repeating source or event, such as
a sale of an asset
budget that combines both revenue and expense budgets
costs and expenses directly attributable to operations of business
activities
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Hospital /Healthcare Accounting GLOSSARY
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Operating Lease
a lease with no transfer of ownership interest; annual rent commitments
are recorded as rental expense in the current period as they occur
Operating
Margin
defined in the health care industry as total operating revenues minus total
operating expenses. Operating margin percentage is a measure of
operating success in controlling costs per dollar of revenue
Out-Of-Pocket
(OOP) Cost
portion of payment for health services required to be paid by the
participating member in the health plan
Outpatient (OP)
a person who receives health care services without being admitted to a
hospital
Outpatient
Service
hospital health care service provided to patients who do not require
admission as inpatients
Overhead
Expenses
excludes the economic costs of the physicians time in delivering the
services but includes shared expenses such as office rent, utilities, and
insurance; physician groups may share these expenses equally but they
may also share them according to other allocation methods
Patient Day
unit of measure depicting lodging in a facility between two consecutive
census taking periods; unit of time (days) inpatient services of the health
care facility are utilized by a patient
Patient Financial
Obligation
the amount the patient owes for health care services, after payment from
other sources and after any discounts have been considered; includes co-
payments, deductibles, coinsurance, and amounts due for services not
covered by insurance
Patient Mix
numbers and types of patients served by provider or insurer, classified
according to their home, socioeconomic characteristics, diagnosis, or
severity of illness
Pay for
Performance
(P4P)
uses incentives to encourage and reinforce the delivery of evidence-based
practices to improve the health care quality and services as efficiently as
possible; also available to hospitals in certain markets
Payers
insurance companies or other financing vehicles, employers, or
government entities (Medicare, Medicaid) that pays a provider for the
delivery of health care services on behalf of their clients, employees, or
other covered lives
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Hospital /Healthcare Accounting GLOSSARY
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Peer Review (PR)
concurrent or retrospective review by practicing physicians or other
health professionals of the quality and efficiency of patient care practices
or services ordered or performed by other physicians or other
professionals
Per Diem Rate
established daily rate of payment regardless of services of rendered; set
amount that a payer pays for one day of care
Per Diem
Reimbursement
payment based on a negotiated rate which can be varied by service
Per Member Per
Month (PMPM)
payment for each plan's member for one month
Per Thousand
Members Per
Year (PTMPY)
provider utilization expressed as hospital inpatient days per thousand
members per year
Point of Service
(POS)
health care insurance plan that allows the member to select to use
providers either in network or out of network; beneficiaries are enrolled
in an HMO but have the option to go outside of the network for an
additional cost
Precertification
(Pre-Admission
Certification,
Pre-Admission
Review, or
Precert)
process of obtaining authorization from the health benefit plan for
routine hospital admissions (inpatient or outpatient) or other high cost
services prior to service delivery
Preferred
Provider
Organization
(PPO)
an arrangement whereby a third- party payer contracts with a group of
medical care providers who furnish services at lower than usual fees in
return guarantees of a certain volume of patients
Premium
periodic payment, usually monthly, made to a health benefit plan in
return for providing health benefits coverage to members under the
contract
Prepaid
incidence of an expenditure before the benefits are received
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Hospital /Healthcare Accounting GLOSSARY
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Present Value
value today of an amount to be received or paid later at an assumed
discount or interest rate
Pricing
Transparency
making hospital prices widely available to patients who may want to shop
around for certain services; usually applicable to elective services where
the patient can afford to take the time to shop around; empowers patient
with high deductible health plan as well as consumers to find value and
quality when comparing health care procedures and services
Primary Care
routine medical care, normally provided in a doctor's office or
professional and related services administered by an internist, family
practitioner, obstetrician-gynecologist or pediatrician in ambulatory
setting, with referral to secondary care specialists as necessary
Primary Care
Physician (PCP)
family physicians, general practitioners, internists, pediatricians, and,
occasionally OB-GYNS, who act as a patient's principal or first contact for
health care services
Prospective
Payment System
(PPS)
method of payment by which rates of payment to providers for services
to patients are established in advance for the coming fiscal year;
providers are paid these rates for services delivered regardless of the
costs actually incurred in providing these services
Provider
health care professional, a group of health care professionals, a hospital,
or some other facility that provides health care services to patients
Quick Ratio
Cash, short-term investments, and receivables divided by current
liabilities
Ratio Analysis
a significant component of financial statement analysis; summarizes
financial statement relationships among the financial statement elements
Reimbursement
process by which health care providers receive payment for their services
Reinsurance
insurance purchased by a health benefits plan to protect it against
extremely high cost cases (specific reinsurance) or against extremely high
claims cost in total (aggregate reinsurance)
Return on Assets
(ROA)
net income divided by total assets; a useful gauge of profitability by
measuring the size of the surplus generated in relation to the amount of
assets needed to achieve the surplus
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Hospital /Healthcare Accounting GLOSSARY
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Return on Equity
(ROE)
net income divided by book value; a financial indicator that measures a
hospitals ability to add new investment in plant and equipment without
adding excessive levels of new debt; the amount of net income earned
per dollar of net assets or equity; an increase is a positive trend
Return on
Investment (ROI)
percentage gain or loss experienced from an investment
Revenue
the income that results from the sale of goods and the rendering of
services, which is measured by the charge made to patients for goods and
services furnished to them; gains from the sale or exchange of assets,
interest, and dividends earned on investments and unrestricted donations
of resources to the hospital are also considered revenue
Revenue Cycle
all administrative and clinical functions that contribute to the capture,
management, and resolution of patient service
Self-Insurance
program for providing group insurance with benefits financed and risk
assumed entirely through the internal means of the policyholder, instead
of through coverage purchased from a commercial carrier
Self-Insured or
Self-Funded Plan
health plan where the risk for the medical costs is assumed by the
employer, union, or plan administrator rather than an insurance company
or managed care plan that handles the administrative functions of the
plan
Self-Pay Patients
patients who are personally responsible for all or a portion of their health
care bills because of factors such as health plan cost-sharing provisions
(annual deductible or co-payments); services not covered by health
insurance; or the lack of coverage by private insurance or governmental
health care programs
Semi-Variable
Costs
step costs that are fixed up to a certain level of operations; upon reaching
a predetermined level, these costs become variable
Statement of
Cash Flows
a financial statement that summarizes the current period business
activities on a cash basis
Statement of
Earnings
see Statement of Income
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Hospital /Healthcare Accounting GLOSSARY
Page 20
Statement of
Income /
Statement of
Operations
a report of a company’s revenues, expenses, gains, and losses that are the
result of operating and non-operating activities over a specific period of
time
Statement of
Revenue and
Expenses
see Statement of Income
Stop-Loss
Insurance
reinsurance that provides protection for the expenses of medical
treatment above a certain cost limit; maximum amount a plan member is
required to spend for services in a given period or over a lifetime
Tax-Exempt
Organization
organization determined by the IRS to be exempt from federal income tax
under Internal Revenue Code section 501(a) regulations
Tax-Exempt
Bonds
bonds in which the interest payments to the investor are exempt from IRS
taxation; bonds must be issued by an organization that has received tax-
exempt from the IRS and are used to fund projects that qualify as exempt
uses; backed by the organization’s revenue and offer lower interest rates
than taxable bonds
Third Party
Payer
entity other than the patient that pays for health care services; examples
include Medicare, indemnity insurance, Medicaid and HMOs
Uncompensated
Care
services absorbed by a provider in providing medical care for patients
who do not pay
Uninsured
Patients
self-pay patients who have no commercial health insurance or
government sponsored health coverage for their health care at any given
time during the year
Utilization
the frequency with which a benefit is used, for example 3,200 doctors
office visits per 1,000 HMO members per year; utilization experience
multiplied by the average cost per unit of service delivered equals
capitated costs
Utilization
Management
(UM)
integration of utilization review, risk management, and quality assurance
into management in order to ensure the judicious use of the facility's
resources and high quality care
Utilization
Review (UR)
review of appropriateness of health care services on a prospective,
concurrent, and retrospective basis
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Hospital /Healthcare Accounting GLOSSARY
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Variable Cost
Withhold
Working Capital
a cost whose unit value remains relatively constant but whose aggregate
value changes, usually proportionately to changes in volume
form of compensation whereby a health plan withholds payment to a
provider until the end of a period at which time the plan distributes any
surplus based on some measure of provider efficiency or performance
sum of an institution's short-term or current assets including cash,
marketable (short-term) securities, accounts receivable, and inventories
minus current liabilities
Glossary terms taken from the following three sources:
1) Health Care Financial Management Association Glossary
2) Understanding Healthcare Financial Management, 5th Edition, by Louis C.
Gapenski, Ph.D., George H. Pink, Ph.D., Health Administration Press,
November 2006
3) Essentials Of Health Care Finance, 5th Edition, by William O. Cleverley and
Andrew E. Cameron, Aspen Publishers, 2002
2016 Marian Powers, PhD
