Overview of the business of healthcare
Accumulated depreciation
A balance sheet account where the total amount of depreciation recognized as expense over time is compiled
Capital
A budget that describes the expected capital acquisitions (equipment, buildings) for a business during a specific period of time
Bottom up approach
A budgeting approach where individual departments provide input to a budget that is then aggregated for the entire business and approved by the board and senior management
Clean claim
A claim for reimbursement submitted to a health plan that has all information and documentation required for the health plan to make a decision on payment or denial
Trial Balance
A complete listing of account in a general ledger in a left and right arrangement, with debits on the left and credits on the right. Contains not only an entity's balance sheet accounts (assets, liabilities and net assets) but its income statement accounts (revenues and expenses) as well.
Accountable care organization
A coordinated group of healthcare providers (including physicians hospitals and other types of providers) organized to improve quality and lower the cost of care to a defined group of patients
Accounts payable
A current liability where funds are owed to suppliers
Copayment
A flat amount the patient pays at the time of service
Chargemaster
A listing of all items for which revenue can be generated in a healthcare provider organization; also referred to as the CDM or charge description master
Acuity
A measurement of the severity of an illness or the resources required to treat an illness or injury
Activity-based costing (ABC)
A method of establishing a cost of a process or transaction based on the cost of individual steps (or activities) in that process
Benefit Payment
A payment by an insurer based on the terms of an insurance policy on behalf of a plan beneficiary or member
Bundled payments
A payment of one amount by an insurer to reimburse services to multiple providers (such as a hospital & physicians together) for a specified illness or injury
Beneficiary
A person on behalf of which an insurance plan payment is made to a healthcare provider
Business intelligence
A process of analyzing business data to support decision making
Accounts receivable aging
A report that summarizes accounts receivable from different sources such as Medicare or commercial insurance by 30 day increments
835
A standard electronic message between a health plan and provider sending remittance data on a claim to the provider
837
A standard electronic message between a provider and health plan sending data on a claim to the health plan
Accrual
Accounting methodology that recognizes revenue when it is earned not received and expenses when they are incurred not paid
Billing and collection
Also known as patient financial services or PFS, the function in a healthcare provider entity that compiles and submits claims to insurers or patients and collects amounts due for services
Accounting Identity
Also known as the accounting equation assets = liabilities + equity
Bad debt
Amount not recoverable from a patient following exhaustion of all collection efforts
Coinsurance
An amount paid by the patient in addition to any benefits paid by the insurer, usually expressed as a percentage of the total payment amount
Accrued payroll and benefits
An estimate of salaries and associated benefit costs (such as payroll tax matching) earned by employees but not yet paid by the employer
Asset
An item of value possessed by a business entity
Accounts payable distribution
And accounting computer system report the details the amounts paid to vendors by date purchase order and expense classification
Audit trail
And accounting system report that shows the details of transactions posted into a revenue or expenses account
Break even analysis
And analysis perform to understand it what volume of activity of business generates enough revenue to pay all expenses and operate at a zero profit
Claims payable distribution
And health plans our report that details payments made to healthcare providers
Accrual basis of accounting
As opposed to the cash basis of accounting, the accrual basis of accounting uses estimates of revenue and expense to match revenue in the period they are earned with the expenses incurred in that same period
Assets
Assets = Liabilities + Net Assets
Average length of stay a LOS
Average stay counted by days of all or a class of in patients discharged over a given period, calculated by dividing the number of inpatient days by the number of discharges
Charity care
Care rendered to patients without the expectation of compensation for such services
Cash basis of accounting
Contrasted with the accrual basis of accounting, this basis of accounting records revenue and expenses in the period in which expense payments are made or revenues are collected
Capital assets
Depreciable property of a fixed or permanent nature, including buildings or equipment not for sale in the regular course of business
Cash budget
Details of the expected sources and uses of cash by a business as a part of its annual budget
Categorical eligibility
Eligibility for a benefit program based solely on one's demographic characteristics
Capital structure ratios
Financial rations that evaluate the mix of debt and equity in a business
Balance sheet
Financial statement that presents a snapshot of the financial condition of a healthcare 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
Administrative load ratio
In a health plan the percentage of total premiums collected expended for administrative costs
Administrative Cost
In a health plan, those expenses not paid for medical costs on behalf of plan members; but instead associated with administrative functions such as sales, customer services, claims processing and finance
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
Capital lease
Leasing arrangement where the leasee seeks a long-term commitment to use the asset with or without the eventual opportunity to purchase the asset
Community rating
Mathematical method for determining health insurance premiums based on the large pool with the pool being made up of many smaller components such as individuals, small employers, etc. Individual pools may be assigned by a demographic factor such as geography, employer size, etc.
Case mix index
Measurement of the relative costliness/acuity of patients treated in each hospital or group of hospitals
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
Debt Service Coverage Ratio
Net income + interest expense + depreciation expense / Maximim annual debt service
Case rate
Payment to a provider for all care for a specific service, such as a surgery or treatment of an illness
Charge based reimbursement
Payment to healthcare provider-based and billed charges and not on a prospectively negotiated amount
Balanced Billing
Practice of a provider Billing a patient for balance is not paid by a third-party
Build charges
Price assigned to units of medical services, such as a visit to a physician or an inpatient day at a healthcare facility; gross prices charged for healthcare services
Claims logging
Process in a health plan of creating an inventory of claims to be adjudicated
Budgeting
Process of formulating a comprehensive management plan of operation that formally expresses both broad and specific objectives and set standards for the evaluation of performance
Benchmarking
Process of identifying industry standards and best practices
Claim
Request to an insurer by insured person or assignee for payment of benefits under an insurance policy
Contribution margin
Revenue from services minus all variable expenses
Concurrent Review
Review of a procedure, facility admission, or other medical treatment and progress conducted by a healthcare professional other than the one providing care
Change in net assets
See also net income; the amount of change in net assets recorded as a result of earnings during an accounting period
Carve
Set of health plan benefits that are contracted separately from the standard benefits package
Billing
Submission of a claim for payment for services rendered by a healthcare provider to the insured or to the patient
Controller
The Banager in charge of the accounting function of a business, may report to the CFO or in some organizations will oversee all financial management
Contractual allowance
The difference between a provider's billed charges and the actual payment from an insurer, reflecting the discount below bill charges excepted by the provider
Centers for Medicare and Medicaid
The federal government agency responsible for administering the Medicare and Medicaid programs in the United States
Coding
The process of analyzing a medical record to determine a patient's diagnosis and procedures performed and assigning ICD codes to diagnoses or inpatient procedures and CPT codes to ambulatory procedures
Charge capture
The process of recording a charge for a service or item at a patient's account
Bond issue
The selling of a number of small debt instruments to multiple lenders
Chief Financial Officer (CFO)
The senior executive in the organization responsible for financial management
Chief executive officer (CEO)
The senior executive overseeing an organization
Ambulatory payment classification system
The unit of reimbursement used by insurers (primarily Medicare) to determine payment for outpatient facility services by grouping of services into a finite number of classifications