H456 Exam 2

Contract "Pitfalls"

Common challenges for hospital-owned plans including conflicting incentives, underestimating plan operation complexity, lack of economies of scale, undercapitalization, and incorrect IBNR calculations.

Coordination of Benefits (COB)

The process used to prevent double payment when an individual is covered by two or more health plans; determines which plan is the primary payer and which is secondary.

Evergreen Clause

A contract provision that allows an agreement to continue in force indefinitely unless one or both parties give formal notice of cancellation.

No Balance Billing Clause

A contractual agreement where a provider accepts the plan's allowed amount as payment in full and cannot bill the member for any difference beyond standard cost-sharing.

Contract Negotiation Process

A voluntary process where payers seek access and favorable pricing while providers seek patient volume and direct payment; large health systems use market power to negotiate higher rates.

Contract Law – Civil vs. Criminal

Civil law covers lawsuits over benefits coverage or contract disputes; criminal law is applied by the DOJ to enforce penalties for healthcare fraud and abuse.

Dispute Resolution

Internal reviews are conducted by plan physicians not involved in the initial decision; external reviews are conducted by independent review organizations (IROs) and are legally binding.

Who May Execute a Contract?

In a medical group, usually only partners can sign contracts; in a payer organization, the board of directors has final authority, often delegating execution to officers.

Charge Master (CDM)

A hospital's comprehensive list of every billable service and medical good with its associated list price; serves as the starting point for all billing.

Charges vs. Cost vs. Payment

Charges are list prices; cost is the actual resource expense to the provider; payment is the negotiated amount the provider actually receives.

ICD-10-CM

International Classification of Diseases, 10th Edition, Clinical Modification; used to report diagnoses across all clinical settings.

Universal Billing (UB) Form

Also known as UB-04 or CMS-1450; the standardized form used by hospitals and facilities to submit claims.

Usual, Customary and Reasonable (UCR)

A method of determining the maximum allowable charge for a service based on statistically profiling prevailing fees in a specific geographic area.

CPT Code Set

a set of five-digit codes maintained by the AMA to identify medical procedures and services for billing.

Hospital Billing Cycle

Claims move from capture (data entry) to adjudication (processing); claims may be pended if information is missing or reopened for adjustment after payment.

Electronic Claims Submission

HIPAA-mandated transmission of claims via standardized ANSI X12N transactions (e.g., 837) to improve efficiency and reduce costs.

Remittance Advice

A communication sent to a provider alongside payment detailing how a claim was processed and what the patient is responsible for paying.

Attestation

A physician's formal confirmation that a patient meets specific clinical criteria, such as for a drug formulary exception.

Evaluation & Management (E&M)

Standard CPT codes (e.g., 99213) used by physicians to bill for office visits and patient evaluations.

Upcoding

The abusive practice of submitting a billing code for a more expensive service than what was actually performed.

Bundling and Unbundling

Bundling is an all-inclusive payment for an episode of care; unbundling is the abusive practice of billing separately for items that should be included in a single fee.

DRG Methodology

Diagnosis Related Groups pay a flat amount per admission based on diagnosis and procedures; MS-DRGs better account for severity of illness and complications.

Capitation Methodology

Prepayment for services on a fixed per-member per-month (PMPM) basis, regardless of the volume of services rendered.

Fee Schedule

A list of the maximum allowable charges a plan will pay for specific services.

Per Diem Rates

A fixed payment per day for inpatient care; differential (front-loaded) per diems pay a higher rate for the first day of a stay.

Incentives Under DRG vs. Per Diem vs. Charges

Charges reward increasing price and volume; per diems reward longer stays; DRGs reward efficiency and shorter lengths of stay.

Outlier

An extra payment for cases where the cost of care exceeds a specific threshold.

Disproportionate Share Hospital (DSH)

Payments added to Medicare/Medicaid reimbursements to help facilities that cover uncompensated care or serve low-income populations.

Relative Value Units (RVU)

Numeric values assigned to CPT codes based on work, practice expense, and malpractice cost; multiplied by a conversion factor to determine payment.

Network Management

MCO function responsible for recruiting, contracting, and credentialing providers.

Provider Relations

MCO function responsible for managing ongoing provider relationships and resolving issues.

Utilization Management

MCO function that manages costs by determining medical necessity through prospective, concurrent, and retrospective reviews.

Claims Administration

MCO function responsible for processing and paying bills for medical services.

Underwriting

MCO function responsible for evaluating risk and developing premium rates.

Credentialing

The process of reviewing a physician's training, licensure, and malpractice history; Primary Source Verification (PSV) confirms documents directly with the original source.

Carve-Out Managed Care Networks

Specialized networks (e.g., behavioral health, dental) managed and contracted separately from the main medical benefits.

Third Party Administrator (TPA)

A company that provides administrative services like claims processing for a self-funded plan but does not assume insurance risk.

Group Practice – Partnership/Ownership

Partners jointly own the practice and share costs and profits by formula; non-partners are typically paid a salary.

Incentive Compensation (Physician)

Methods like P4P or withholds in capitated models that provide financial rewards or penalties based on quality or cost-performance metrics.

Advance Beneficiary Notice (ABN)

A Medicare-specific form notifying a patient that they may be financially responsible because Medicare is expected to deny payment for a service.