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