Glossary category
Payers & Insurance
98 plain-English definitions covering payers & insurance — written for the people who run ambulatory surgery centers. Every term links to its own page with key takeaways and FAQs.
- Accountable Care Organization (ACO)A network of physicians, hospitals, and other providers that jointly accept responsibility for the cost and quality of care for a defined patient population, sharing in savings when they hit spending and quality targets.
- Adjusted Average Per Capita Cost (AAPCC)A historical Medicare estimate of what fee-for-service care would cost per beneficiary, adjusted for demographic factors. It was used to set capitated payments to managed care plans before risk-adjustment methods replaced it.
- Adjusted community rating (ACR)An insurance pricing method that sets premiums for a community while permitting limited variation for factors such as age or geography. It moderates the volatility of pure community rating without fully reflecting individual health risk.
- Administrative Services Organization (ASO)An arrangement in which an insurer or third party handles claims processing, provider networks, and administration for a self-funded employer plan, while the employer bears the actual cost of medical claims.
- Admitted CarriersInsurance companies licensed and approved by a state's insurance department to sell coverage there, subject to state regulation and guaranty-fund protection. Admitted carriers must comply with rate and policy-form requirements.
- Affordable Care Act (ACA)The 2010 federal law that expanded U.S. health coverage through insurance marketplaces, Medicaid expansion, and consumer protections like guaranteed issue. It also introduced value-based payment reforms affecting how providers are reimbursed.
- Alternative Payment Model (APM)A reimbursement approach that ties provider payment to quality and total cost rather than the volume of services, including bundled payments and shared-savings arrangements. APMs shift financial risk toward providers.
- Any Willing Provider LawsState statutes requiring health plans to admit any provider into their network who accepts the plan's terms and reimbursement, rather than limiting participation to a chosen panel. These laws affect which surgery centers and physicians can join a payer's network.
- AttributionThe method by which a payer or value-based program assigns each patient to a specific provider or organization accountable for that patient's cost and quality outcomes. Attribution rules determine which entity earns shared savings or bears performance risk.
- BeneficiaryA person enrolled in and entitled to receive benefits under a health insurance plan or government program such as Medicare or Medicaid. Confirming beneficiary eligibility and coverage is an essential first step in the surgery-center revenue cycle.
- CapitationCapitation is a payment arrangement where a provider receives a fixed amount per enrolled patient per period, regardless of services used, shifting financial risk to the provider. It rewards efficient, preventive care but requires strong cost management compared with fee-for-service billing.
- Capitation RateA capitation rate is the specific fixed per-member, per-month dollar amount a payer pays a provider under a capitated contract to cover defined services. The rate is set using projected utilization and patient risk, directly determining the provider's revenue and financial exposure.
- Case Rate ReimbursementCase rate reimbursement is a payment arrangement in which a payer pays a single negotiated, all-inclusive amount for an entire episode or procedure regardless of itemized costs. Surgery centers use case rates to gain predictable payment while bearing the risk of cost overruns.
- Catastrophic Health InsuranceCatastrophic health insurance is a low-premium, high-deductible plan designed to cover major medical expenses from serious illness or injury after a large out-of-pocket threshold is met. Patients with such coverage often owe substantial self-pay balances, complicating point-of-service collections.
- Center for Medicare & Medicaid Innovation (CMMI)The Center for Medicare & Medicaid Innovation (CMMI) is the CMS arm that designs and tests new payment and care-delivery models, such as bundled payments and accountable care arrangements. Its pilots shape how value-based reimbursement reaches surgery centers and other providers.
- Centers for Medicare and Medicaid Services (CMS)The Centers for Medicare and Medicaid Services (CMS) is the federal agency administering Medicare, Medicaid, and related programs. It sets coverage rules, the ASC payment system, fee schedules, and quality-reporting requirements that directly govern how surgery centers bill and get paid.
- Certificate of Coverage (CoC)A certificate of coverage (CoC) is the document a health plan issues to enrollees describing covered benefits, exclusions, cost-sharing, and member rights. Billing teams reference it to confirm what services a patient's plan pays for before and after a procedure.
- Children's Health Insurance Program (CHIP)The Children's Health Insurance Program (CHIP) is a joint federal-state program providing low-cost health coverage to children in families earning too much for Medicaid but unable to afford private insurance. Facilities verify CHIP eligibility and benefit rules before billing covered pediatric services.
- Civilian Health and Medical Program of the Uniformed Services (CHAMPUS)The Civilian Health and Medical Program of the Uniformed Services (CHAMPUS) was the federal program covering civilian healthcare for military dependents and retirees, later replaced by TRICARE. Legacy CHAMPUS references still appear in older billing rules and payer documentation.
- Claims ProcessingClaims processing is the end-to-end handling of a claim by a payer, from receipt and validation through adjudication and remittance. The speed and accuracy of this process directly affect how quickly a surgery center is reimbursed.
- Clinically Integrated Network (CIN)A Clinically Integrated Network (CIN) is a structured group of providers who collaborate on shared clinical protocols, data, and quality goals to improve care and control costs. CINs enable joint contracting with payers and participation in value-based reimbursement arrangements.
- CoinsuranceCoinsurance is the percentage of covered medical costs a patient pays after meeting their deductible, with the insurer covering the remainder. Surgery centers calculate coinsurance during eligibility checks and patient estimates to collect accurate amounts and reduce post-service balances.
- Conversion Factor (CF)The Conversion Factor (CF) is the dollar multiplier Medicare applies to relative value units to calculate a procedure's payment under the Physician Fee Schedule. Updated annually, it converts abstract resource weights into actual reimbursement amounts affecting ASC-affiliated billing.
- Coordinated Care Reward ProgramA payer or program incentive that rewards patients or providers for engaging in coordinated, managed care, such as following care plans, using preferred networks, or meeting preventive milestones. The rewards aim to improve outcomes and lower total spending through better-integrated care.
- CopaymentA copayment is a fixed dollar amount a patient pays out of pocket for a covered service, set by their insurance plan, such as a flat fee per visit. ASCs collect copays at or before the time of service.
- Coverage GapA coverage gap is a phase of an insurance benefit, most notably the Medicare Part D drug benefit's historical doughnut hole, where the enrollee temporarily pays a larger share of costs after initial coverage but before catastrophic coverage begins.
- Coverage with evidence development (CED)Coverage with evidence development (CED) is a CMS approach that pays for a promising but not fully proven item or service only when the patient participates in approved data collection or a study. It links reimbursement to building the evidence base.
- Covered LivesCovered lives is the count of individuals enrolled in and insured under a health plan or managed-care contract, used to size a payer's membership and to structure capitated or per-member payment arrangements. It is a standard denominator in payer market analysis.
- Covered ServiceA medical service, procedure, or supply that a patient's insurance plan agrees to pay for, subject to plan terms like deductibles and prior authorization. Verifying that an ASC procedure is covered before surgery prevents denied claims and patient balance disputes.
- Current Annual PremiumThe current annual premium is the total amount a policyholder pays over a year to maintain an active insurance plan, typically billed monthly. It represents the recurring cost of coverage, separate from cost-sharing like deductibles, copays, and coinsurance owed at the point of care.
- DeductibleA deductible is the fixed amount a patient must pay out of pocket for covered healthcare each plan year before their insurance begins to share costs. ASCs often collect a portion of an unmet deductible upfront, since surgery can be costly.
- Delivery system reform incentive paymentA delivery system reform incentive payment is a Medicaid waiver funding mechanism that pays providers for meeting defined milestones in restructuring care delivery, such as improving care coordination or population health. States use these programs to drive system transformation while controlling spending.
- Disproportionate share hospitalA disproportionate share hospital (DSH) is a facility that serves a high proportion of low-income, Medicaid, and uninsured patients. Such hospitals receive supplemental Medicare and Medicaid payments to offset the financial burden of caring for underserved populations.
- Drug FormularyA drug formulary is a payer's or health system's approved list of covered medications, often organized into cost-sharing tiers. It guides prescribing and reimbursement, and may require prior authorization or step therapy, directly affecting medication coverage and patient out-of-pocket costs.
- Drug Utilization Review (DUR)Drug Utilization Review (DUR) is a systematic evaluation of prescribing and medication use to promote safe, appropriate, and cost-effective therapy. It flags interactions, duplications, dosing errors, and overuse, and is often performed by payers or pharmacies before or after dispensing.
- Employer-Sponsored Health InsuranceEmployer-Sponsored Health Insurance is coverage that companies offer employees, sharing premium costs as a benefit. As commercial payers, these plans typically reimburse ambulatory surgery centers at higher rates than government programs, making them central to a facility's revenue mix.
- Episode grouper for Medicare (EGM)The Episode grouper for Medicare (EGM) is a CMS analytic tool that bundles related Medicare claims into clinically coherent episodes of care, attributing costs and services to measure provider efficiency and resource use across an illness or treatment course.
- Excluded ServicesExcluded Services are items and procedures a health plan or government program does not cover and will not pay for, such as cosmetic surgery. Identifying them during eligibility checks protects ambulatory surgery centers from unbillable, non-reimbursable claims.
- Explanation of Benefits (EOB)An Explanation of Benefits (EOB) is a statement a payer sends a patient after processing a claim, showing the billed amount, what the plan paid, and the patient's remaining responsibility. It is not a bill but clarifies coverage decisions.
- Fee ScheduleA fee schedule is a complete list of the prices a payer or provider sets for each covered service or procedure code. ASC reimbursement hinges on contracted fee schedules, which determine the allowed amount paid per surgical CPT code.
- Health InsuranceA contract in which an insurer agrees to pay specified healthcare costs in exchange for premiums, distributing financial risk across enrollees. Coverage terms, networks, and cost-sharing determine patient out-of-pocket responsibility and how providers are reimbursed for services.
- Health Insurance NetworkThe group of providers, facilities, and suppliers that have contracted with a health plan to deliver services at negotiated rates. Network status affects patient cost-sharing and provider reimbursement, making in-network participation important for surgery center patient volume.
- Health Insurance PremiumThe recurring amount, typically paid monthly, that an individual or employer pays to maintain health insurance coverage, separate from cost-sharing like deductibles and copays. Premium levels reflect plan design, risk pool, and benefit generosity.
- Health Insurance Purchasing Cooperative (HIPC)An organization that pools individuals or small employers to buy health coverage collectively, gaining bargaining leverage and broader plan options than members could obtain alone. The model aims to lower premiums and spread risk across a larger group.
- Health Maintenance Organization (HMO)A managed care plan that provides coverage through a defined network and typically requires members to select a primary care physician and obtain referrals for specialists. HMOs emphasize cost control and care coordination, limiting reimbursement for out-of-network services.
- Health PlanAn entity or product that provides or administers health benefits, defining covered services, provider networks, and cost-sharing for enrollees. Plans negotiate reimbursement rates and set prior authorization and coverage rules that shape how facilities are paid.
- Hierarchal Condition Categories (HCCs)Hierarchical Condition Categories (HCCs) are a CMS risk-adjustment model that groups diagnoses into clinically related categories to predict patient care costs, driving payment to Medicare Advantage and value-based plans; accurate diagnosis coding directly affects risk scores and reimbursement.
- In-NetworkA status describing providers or facilities that have contracted with a health plan to deliver services at negotiated rates. In-network ambulatory surgery centers yield lower patient cost-sharing and more predictable reimbursement, making network participation central to revenue cycle planning.
- Labor-Related ShareThe labor-related share is the portion of a Medicare payment rate considered attributable to local labor costs, which is adjusted by a geographic wage index. It accounts for wage differences across regions in calculating facility reimbursement, including ASC payment rates.
- Long-term Care Insurance (LTCI)Long-term care insurance (LTCI) is a policy that helps cover the cost of extended personal and medical support services, such as nursing home, assisted living, or in-home care, that standard health insurance and Medicare generally do not pay for.
- Managed CareManaged care is a healthcare delivery and financing approach that controls cost, utilization, and quality through provider networks, care coordination, and rules like prior authorization. For surgery centers, managed care contracts shape reimbursement rates, covered procedures, and patient referral flow.
- Managed Care Organization (MCO)A Managed Care Organization (MCO) is a health plan that delivers benefits through contracted provider networks while managing cost and utilization, including HMOs and PPOs. ASCs negotiate participation and rates with MCOs, whose authorization rules directly affect scheduling and revenue cycle outcomes.
- MedicaidMedicaid is a joint federal and state program providing health coverage to low-income individuals, families, pregnant people, and those with disabilities. Eligibility and benefits vary by state, and its reimbursement rates and rules significantly affect provider and facility revenue.
- Medical Loss Ratio (MLR)Medical Loss Ratio (MLR) is the share of premium dollars an insurer spends on medical claims and quality improvement versus administration and profit. The Affordable Care Act requires minimum thresholds, generally 80 to 85 percent, with rebates owed when insurers fall short.
- MedicareMedicare is the federal health insurance program covering people aged 65 and older, certain younger individuals with disabilities, and those with end-stage renal disease. As a dominant payer, its fee schedules and coverage rules heavily shape ambulatory surgery center reimbursement.
- Medicare Access and CHIP Reauthorization Act of 2015 (MACRA)The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) is federal law that repealed the sustainable growth rate formula and established the Quality Payment Program, tying physician reimbursement to performance through MIPS and advanced alternative payment models.
- Medicare AdvantageMedicare Advantage, also called Medicare Part C, is private insurance that delivers Medicare benefits through plans contracting with the government. These plans often bundle drug coverage and extras but impose networks and prior authorization that affect ambulatory surgery center scheduling and reimbursement.
- Medicare HMOsMedicare HMOs are health maintenance organization plans offered under Medicare Advantage that require members to use a defined provider network and obtain referrals for specialists. Out-of-network surgical care is generally not covered except in emergencies.
- Medicare Part AMedicare Part A is the hospital insurance component covering inpatient hospital stays, skilled nursing facility care, hospice, and some home health services. It is generally premium-free for those with sufficient work history and funded through payroll taxes.
- Medicare Part BMedicare Part B is the medical insurance component covering physician services, outpatient care, preventive services, and durable medical equipment. Ambulatory surgery center facility fees and many outpatient procedures are reimbursed under Part B, making its fee schedule central to billing.
- Medicare Part CMedicare Part C, known as Medicare Advantage, lets beneficiaries receive Parts A and B benefits, often with drug coverage, through approved private plans. These plans manage utilization via networks and authorization, influencing how surgical cases are approved and paid.
- Medicare Part DMedicare Part D is the optional outpatient prescription drug benefit delivered through private plans approved by Medicare. It helps beneficiaries cover medication costs and features a defined benefit structure with deductibles, coverage phases, and catastrophic protection.
- Medicare Shared Savings Program (MSSP)The Medicare Shared Savings Program (MSSP) is an accountable care arrangement letting provider groups form ACOs that share in savings, and sometimes losses, when they meet quality benchmarks while reducing the cost of care for assigned Medicare beneficiaries.
- Medicare Summary Notice (MSN)A Medicare Summary Notice (MSN) is the quarterly statement Original Medicare sends beneficiaries listing services billed, what Medicare approved and paid, and any amount the patient may owe. It is informational, not a bill, and helps patients spot errors.
- Merit-based Incentive Payment System (MIPS)The Merit-based Incentive Payment System (MIPS) is a MACRA payment track that adjusts Medicare reimbursement up or down based on clinician performance across quality, cost, improvement activities, and interoperability measures.
- Network IntegrityNetwork integrity is a payer or health system effort to keep patient referrals, procedures, and follow-up care within a defined contracted provider network, reducing out-of-network leakage. For ambulatory surgery centers, it influences which cases and referrals flow to a given facility.
- Network ProviderA network provider is a physician, facility, or ambulatory surgery center that has signed a contract with a health plan to deliver services at negotiated rates. In-network status typically yields lower patient cost-sharing and more predictable reimbursement than out-of-network billing.
- Network UtilizationNetwork utilization measures how much covered members use services delivered by in-network providers versus out-of-network alternatives. Payers track it to manage costs and steerage. For ambulatory surgery centers, strong network utilization signals reliable, contracted case volume and predictable reimbursement.
- Out-of-Network Co-InsuranceThe percentage of an allowed amount a patient owes after meeting their deductible when care is delivered by a provider outside their insurer's contracted network. Out-of-network co-insurance rates are typically higher than in-network rates, raising both patient balances and collection complexity for surgery centers.
- Out-of-Network CopaymentA fixed dollar amount a patient pays for a service from a provider outside their insurer's contracted network. Out-of-network copayments are usually larger than in-network ones and, combined with balance billing, increase patient responsibility that ambulatory surgery centers must estimate and collect.
- Out-of-Pocket LimitThe maximum amount a patient pays for covered services in a plan year, after which the insurer covers 100 percent of allowed costs. It caps cumulative deductibles, copayments, and co-insurance, and is a key figure for accurately estimating patient liability before a surgical procedure.
- PayorThe organization responsible for reimbursing healthcare providers for services, including commercial insurers, Medicare, Medicaid, and self-funded employers. Also spelled payer, payors set coverage rules, contracted rates, and authorization requirements that shape how ambulatory surgery centers are paid and how claims must be submitted.
- Payor vs PayerPayer and payor are two spellings of the same word: the entity that pays for healthcare, such as a commercial insurer, Medicare, Medicaid, or an employer plan. Payer is the standard spelling in US healthcare and billing; payor persists mainly in legal and contract documents. Neither is wrong.
- Pharmacy Benefit Manager (PBM)A Pharmacy Benefit Manager (PBM) is a third-party company that administers prescription drug benefits for health plans and employers, negotiating drug prices with manufacturers, managing formularies, and processing pharmacy claims. PBMs significantly influence drug coverage and out-of-pocket costs.
- Pharmacy Services Administration Organization (PSAO)A Pharmacy Services Administration Organization (PSAO) negotiates and manages contracts with payers and PBMs on behalf of independent pharmacies, giving smaller pharmacies collective bargaining leverage and administrative support they could not achieve individually.
- Point-of-Service Plan (POS)A Point-of-Service (POS) plan is a hybrid health insurance product combining HMO and PPO features, requiring a primary care referral for specialists but allowing out-of-network care at higher cost. Network status affects ambulatory surgery center reimbursement.
- Pre-Existing ConditionA health condition or illness a patient had before enrolling in a new health insurance plan. Historically used to deny or limit coverage, restrictions on pre-existing conditions were largely eliminated for compliant plans under the Affordable Care Act.
- Preferred ProviderA physician, facility, or other provider contracted with an insurer to deliver care at negotiated rates. Patients pay less when using preferred providers. For ambulatory surgery centers, in-network preferred status drives patient steerage and predictable reimbursement.
- Preferred Provider Organization (PPO)A Preferred Provider Organization (PPO) is a health plan offering a network of contracted providers at lower cost while still covering out-of-network care without a referral. Network participation affects how ambulatory surgery centers are reimbursed and selected.
- Prescription Drug CoverageThe portion of a health insurance plan that pays for medications, defined by a formulary, tiered cost-sharing, and prior authorization rules. Coverage terms determine patient out-of-pocket costs and influence which drugs providers can practically prescribe.
- Prior AuthorizationA payer requirement that a provider obtain approval before delivering certain procedures, drugs, or services to confirm coverage and medical necessity. Missing or incorrect prior authorization is a leading cause of surgery center claim denials, making it a critical pre-service step.
- Provider DirectoryA maintained listing of clinicians and facilities with credentials, specialties, locations, and network participation. Payers must keep accurate directories for members, and inaccuracies cause claim denials, surprise-billing disputes, and patient access problems.
- Qualified Entity (QE)A Qualified Entity (QE) is an organization approved by CMS under the Qualified Entity Program to receive Medicare claims data and combine it with other sources to produce provider and supplier performance reports for public reporting.
- Quality Payment Program (QPP)The Quality Payment Program (QPP) is the CMS framework tying Medicare clinician payment to performance, through the Merit-based Incentive Payment System and Advanced Alternative Payment Models. It rewards or penalizes providers based on quality, cost, and improvement measures.
- ReinsuranceReinsurance is insurance purchased by an insurer or self-funded health plan to cap its exposure to unusually large or catastrophic claims. It transfers a portion of risk to a reinsurer, stabilizing the primary plan's finances.
- Rider/Exclusionary riderA rider is an amendment that modifies an insurance policy's standard terms; an exclusionary rider specifically removes coverage for a named condition, treatment, or body part. Riders alter what services a plan will or will not reimburse.
- Risk Adjustment FactorA Risk Adjustment Factor is a score reflecting a patient population's expected health costs based on demographics and diagnoses. Payers use it to adjust capitated payments so plans serving sicker members receive proportionally higher reimbursement.
- Risk Retention Group (RRG)A Risk Retention Group (RRG) is a liability insurance company owned by its policyholders, who share similar exposures and band together to self-insure. Healthcare providers often form RRGs to obtain medical malpractice coverage on favorable terms.
- Social Health Maintenance Organization (SHMO)A Social Health Maintenance Organization is a managed-care model that combines traditional medical coverage with expanded long-term and social support services for older adults. These demonstration plans aimed to integrate health and community services under a single capitated benefit.
- Social Security Disability Insurance (SSDI)Social Security Disability Insurance is a federal program paying monthly benefits to workers who have paid into Social Security and can no longer work due to a qualifying disability. SSDI beneficiaries typically gain Medicare eligibility after a waiting period.
- Surprise BillingUnexpected charges patients receive when treated by out-of-network providers, often during emergencies or at in-network facilities. The federal No Surprises Act limits many such bills, affecting how surgery centers handle out-of-network anesthesiologists and pathologists and disclose patient costs.
- Transitional Coverage for Emerging Technologies (TCET)A Medicare pathway that provides time-limited, expedited coverage for certain FDA-designated breakthrough devices while additional evidence is gathered. TCET aims to speed beneficiary access to innovative technologies while balancing the need for clinical data.
- UnderinsuredDescribes people who have health insurance but face out-of-pocket costs so high relative to income that coverage offers inadequate financial protection. The underinsured often delay care and create collection and bad-debt challenges for providers and revenue-cycle teams.
- Utilization ReviewThe evaluation of whether healthcare services are medically necessary, appropriate, and efficient, conducted before, during, or after care. Payers use it to authorize procedures and control costs, directly affecting prior authorization and claim approval for surgical cases.
- Value Based CareA delivery and payment approach that ties provider reimbursement to the quality and outcomes of care rather than the volume of services. It rewards efficiency and better health results, reshaping contracts, reporting, and revenue-cycle strategy for providers.
- Value-Based Purchasing (VBP) ProgramA Medicare initiative that adjusts hospital payments based on performance across quality, safety, outcome, and patient-experience measures. By rewarding higher-performing facilities and penalizing others, VBP links reimbursement directly to demonstrated care quality.
- Veterans' Health Services ProgramsFederal programs administered by the Department of Veterans Affairs that provide medical, surgical, mental health, and rehabilitative care to eligible veterans. They include direct VA facilities and community-care arrangements that extend services through external providers.
- Workers' Compensation ProgramA workers' compensation program is an employer-funded insurance system that covers medical costs and lost wages for employees injured on the job. As a distinct payer, it follows its own billing rules and fee schedules that surgical centers must handle separately from commercial and government claims.