Since the world of healthcare delivery is in constant change, we have compiled a glossary of terms to help you better understand and navigate it. Each week we will unlock a new term for you to use as a reference tool. Just click on the term for the full definition.

180-Day Notification Period

Created by the Biologics Price Competition and Innovation Act, the 180-day notification period starts when a prospective biosimilar manufacturer communicates to the reference manufacturer its intent to commercialize its product. The US court system has been active in trying to determine when the 180-day calendar begins (ie, at the time of FDA approval or perhaps at the time the manufacturer submits its application)

340B Drug Pricing Program

A US federal government program created in 1992, also known as 340B in reference to the section of the public health service act, obligates pharmaceutical manufacturers taking part in the medicaid drug rebate program to provide a discount on drugs for patients who receive medical services from approved safety net healthcare providers. The discount for approved 340B providers is the same as that for state medicaid providers. The goal of the 340B program is to allow covered entities to extend limited federal resources as far as possible, reaching more eligible patients and providing more comprehensive services. In 2015, eligibility of both safety net providers and the relationship of qualified patients will be under review as the 340B program has expanded, partly due to the affordable care act, beyond the original intent.

Accountable Care Organization (ACO)

An ACO is comprised of a group of coordinated healthcare providers which then provides care to a group of patients from a population health perspective. Through payment reform, this model is characterized by a care delivery model that seeks to tie provider reimbursements to quality metrics and reductions in the total cost of care for an assigned population of patients. Although the original aco model focused on medicare beneficiaries who were enrolled in the traditional fee-for-service program, acos have expanded into the commercial and medicaid channels. Brown & toland physicians, monarch healthcare, and atrius health are a few examples of the new aco model.

Acute Care

Unlike chronic care, acute care is often necessary for only a short time. Typically, acute care is considered medical treatment rendered to people whose illnesses or medical problems are short-term or do not require long-term continuing care.

Administrative Costs

Under a managed care plan, administrative costs are comprised of administrative services such as claims processing, billing, and overhead expenses.

Agency for Healthcare Research and Quality (AHRQ)

The Agency for Healthcare Research and Quality was created by Congress in 1989 to conduct federal research into technology assessment and outcomes management. AHRQ develops the knowledge, tools, and data needed to improve the health care system and helps Americans, health care professionals, and policymakers make informed health decisions.

Ambulatory Care

Also known as outpatient care. Health services provided without the patient being admitted into the hospital for overnight stay. Examples of services providing ambulatory care are ambulatory care centers, hospital outpatient departments, physicians’ offices, and home healthcare services.

Advanced Alternative Payment Model (APM)

Physicians participating in Medicare's value-based care models may receive payments through the Advanced Alternative Payment Model (APM), part of the new MACRA legislation. To qualify for an annual 5% incentive payment from 2019 through 2024 and avoid having to report MIPS data, providers must use "certified" electronic health records, receive Medicare payments that are based on quality measures (similar to required by MIPS reporting), and bear some significant level of (downside) financial risk in the care of their Medicare patients.


A reconsideration of a decision, such as a utilization review recommendation, a benefit payment, or administrative action. Typically, this is a formal request by a patient or provider.

Attrition Rate

Disenrollment of members in a plan expressed as a percentage of total membership. As an example, a plan with 50,000 members with a 2% attrition rate per month would need to gain 1000 new members each month to retain the initial 50,000 covered lives.

Average Sales Price

Introduced as part of the Medicare Modernization Act, the average sales price (ASP) was implemented to replace average wholesale price or wholesale acquisition cost as the basis for reimbursing drugs administered in the physician’s office. The ASP is set by the Centers for Medicare & Medicaid Services and reimbursed currently at ASP +4.3%, resulting in lower reimbursements than in the past under other formulas, discouraging practices from participating in “buy and bill.” The ASP is based on the manufacturer’s total sales (in dollars) and number of units of a drug to all purchasers in the United States during one fiscal quarter.

Average Wholesale Price

Average wholesale price is the average cost of pharmaceuticals charged to a pharmacy provider by a large group of pharmaceutical wholesale suppliers. These retail prices for drugs, reported by pharmaceutical manufacturers, are published in commercial clearinghouses (eg, Redbook, Medi-Span, First Databank). Each price is specific to a drug’s national drug code.


The Biologics and Biosimilar Collective Intelligence Consortium (BBCIC) is a drug surveillance system that is patterned after the Food and Drug Administration's Sentinel program. Its formation was led by the Academy of Managed Care Pharmacy. The BBCIC utilizes databases of its payer partners to monitor for safety signals of both biosimilars and biologics approved by the FDA.

Benefit Package

Benefit packages include services covered by a health insurance plan and the financial terms of such coverage. These include cost, limitation on the amounts of services, and annual or lifetime spending limits. Benefit packages vary from one health insurance company to the next.


Bioequivalence refers to whether 2 medications (generally with the same active ingredient) demonstrate the same rate and extent of absorption in the body. Bioequivalence studies are often required by the US Food and Drug Administration before approval will be granted to conventional generic drugs and for new formulations (eg, transdermal, oral, or solution) of existing approved medications.

Biological Drugs/Biopharmaceuticals

Biologics are isolated from a veriety of natrual sources–human, animal, or microorganism–and may be produced by biotechnology methods and other cutting-edge technologies. Products such as vaccines, blood and blood components, allergenics, somatic cells, gene therapy, tissues, and recombinant therapeutic protiens are a few examples of biologics.


A biomarker is a sign or signal that health professionals can use to help determine whether a particular medical intervention may be appropriate for an individual patient or to determine whether that intervention is having the desired effect. Examples of biomarkers include genetic mutations, specific DNA/RNA sequences, laboratory values, the presence or absence of antibodies, and physical signs.


Biosimilar agents are close copies of approved biologic drugs. The complexity of manufacturing biologic products prevents the manufacture of exact or “generic” formulations of biologics, as the biosimilar may differ in several ways, generally relating to the structure of this very large molecule. For a biosimilar to be approved by the US Food and Drug Administration, it must be shown to have the same mechanism of action as the originally approved medication and to not result in any clinically meaningful differences in outcomes. This does not imply that the drugs are interchangeable, however.

Biosimilar Tier

Payers and PBMs are considering whether to establish a "biosimilar" tier for preferred biosimilars (i.e., a 4th tier, with nonpreferred reference products or other nonpreferred biologics in a 5th tier). This preferred tier would have lower member cost sharing than the nonpreferred biologic tier, in an effort to encourage members to utilize biosimilars.

Bundled Payment

Under a bundled payment environment, providers are given a single reimbursement based on multiple ICD-10 codes. For example, a surgical procedure would be paid one fee, avoiding unbundled charges such as anesthesia, nursing services, surgeon's fee, intravenous fluids or medications, operating room use, etc.

Buy and Bill

When a physician’s office or clinic purchases a medicine for administration in their practice (typically an injectable or infusible drug), and then invoices the payer, this is termed “buy and bill.” Payers, including the federal government, have sought to discourage the practice by lowering reimbursements to physicians for the drugs themselves, which in the past were a source of significant revenue for the practice.

Case Management

Method designed to accommodate the specific health services needed by an individual through a coordinated effort to achieve the desired health outcome in a cost-effective manner. The monitoring and coordination of treatment rendered to patients with a specific diagnosis or requiring high-cost or extensive services. Case management is intended to ensure continuity of services and accessibility to overcome rigidity, fragmented services, and the improper utilization of facilities and resources.

Catastrophic Care Insurance

A program in which only high-cost health events are covered, such as severe and prolonged illness, which poses the threat of financial ruin.

Center for Medicare and Medicaid Innovation

The Innovation Center was created through the Affordable Care Act to test “innovative payment and service delivery models to reduce program expenditures…while preserving or enhancing the quality of care” for those individuals who receive Medicare, Medicaid, or Children’s Health Insurance Program (CHIP) benefits. The Innovation Center plays a lead role in ACO development, transformation to medical homes, and in MACRA's quality payment initiatives. 

Checkpoint Inhibitors

A relatively new class of cancer drugs, checkpoint inhibitors work by blocking proteins on cancer cells, or the proteins on the T-cells that attack the tumor. PD-L1 agents are examples of checkpoint inhibitors, which seek to unleash the body's natural killer T-cells, enabling them to identify and attack cancerous cells.

Chronic Care

Unlike acute care, chronic care is concerned with long-term medical care lasting typically more than 90 days. It is characterized as any condition that requires ongoing adjustments by the affected person and interactions with the healthcare system over a long period. Chronic medical conditions, such as asthma, diabetes, emphysema, chronic bronchitis, congestive heart disease, hypertension, and depression, require effective chronic care to avoid disability. The goal of chronic care is to maintain wellness by keeping symptoms in remission while balancing treatment regimens and quality of life for the patient.

Claims Review

Prior to reimbursement, an enrollee’s healthcare service claims go through a review process. The purpose of this claims review process is to validate the medical appropriateness of the provided services and to be sure the cost of the service is not excessive.

Clinical Pathways

A “map” of preferred treatment/intervention activities. Clinical pathways are algorithms that include recommendations intended to optimize patient care that are informed by a systematic review of evidence and an assessment of the benefits and harms of alternative care options. It has been shown that their implementation reduces the variability in clinical practice and improves outcomes. They are designed through an accumulated database of clinical outcomes. These pathways are developed by clinicians for specific diseases or medical events. Physicians may be required to follow these in order to obtain the best clinical outcome.

Community Rating

In community rating, member premiums are based not on an employer’s actual claims, but underwriting considers the total population. Therefore, a 10-employee company that has 3 workers with diabetes would not necessarily see higher health premiums than a similar-sized employer with a completely healthy workforce.

Companion Diagnostic

The role of a companion diagnostic is to measure the presence, absence, and/or quantity of a biomarker for a specific drug or intervention. The companion diagnostic is most commonly used before initiating therapy to help determine if a patient is likely to benefit from therapy, which may be expensive. It is a key component in the promotion of precision or personalized medicine.

Companion Diagnostic Test

Genetic or biomarker tests that are used to determine whether patients would benefit from the use of a specific therapeutic intervention. Crucial to precision medicine (or personalized medicine), these tests are increasingly approved along with the medications linked to them. An early example was the test for HER2 overexpression in candidates for trastuzumab therapy for breast cancer. 

Comparative Effectiveness Research (CER)

A rigorous evaluation of the impact of different options that are available for treating a given medical condition for a particular set of patients. An example of cer would be a study that may compare similar treatments, such as competing drugs, or the analysis of very different approaches, such as surgery and drug therapy. The analysis may focus only on the relative medical benefits and risks of each option, or it may also weigh both the costs and the benefits of those options. The purpose of cer is to assist consumers, clinicians, purchasers, and policymakers to make informed decisions that will improve healthcare at both the individual and population levels.

Consumer-Directed Health Plan (CDHP)

Over the past few years, CDHPs have become increasingly popular because they allow beneficiaries more direct control over medical decisions and costs. Typically, this is a multitiered plan that includes a health spending account (HSA) tier, a deductible portion tier, and a health insurance liability tier. The HSA is funded by the employer and can be rolled over from year to year, if funds have not been exhausted. Generally, a “defined contribution,” such as a specific dollar amount (eg, $1500), is places in this account by the employer for the employee. Once this tier is exhausted, the employee then moves into the deductible tier. The deductible (eg, $3000) is paid directly by the employee. Once the deductible level has been reached, the health insurance liability portion is activated. Employees also may fund medical reimbursement accounts to pay for their share of expenses.


Usually considered as a ratio, the cost-effectiveness of a drug or procedure, for example, relates the cost of that intervention to the resulting health benefits. It is often expressed as the cost per quality-adjusted life-year or QALY.


Type of payment method where a patient is required to pay some health costs in order to receive medical care. The patient must pay the out-of-pocket expenses to receive care, usually at the time of initiating care. These expenses typically include deductibles, coinsurance, and copayments. Healthcare insurance premiums paid by the person enrolled are excluded in cost-sharing.

Coverage Gap

Under Medicare Part D prescription drug coverage, the coverage gap, also known as the doughnut hole, is when Medicare temporarily stops paying for prescriptions. Beneficiaries in the coverage gap are responsible for payment of the entire cost of medications. However, the Affordable Care Act includes important improvements to Medicare prescription drug coverage such as reducing expenses for seniors in the donut hole now and eliminating the gap altogether by 2020. In 2014, when Medicare beneficiaries’ out-of-pocket drug costs exceed $2850, they enter this gap. Coverage resumes when costs total $4550. Copayments required for brand-name and generic drugs are being phased down to the standard 25% by 2020.

Defined Benefit

The traditional approach to self-funded health program financing, under the defined benefit, the entity pays for a specifically designed package (e.g., including full medical coverage, 30 days of inpatient care, etc), and the premium is based on this defined package of benefits.

Defined Contribution

Under a defined contribution, an entity pays a set amount for health plan premiums (without regard to a particular health plan's benefit design). The employee then takes that contribution and shops for a health plan that meets his or her needs. This approach tends to create more consumer engagement in plan choice and limits the amount paid by the plan sponsor or employer. employer to the employee.

Disease Management Measures

Related to the family of outcome measures that treat the disease as opposed to managing health. These are indicators of a health plan’s success in treating the entirety of a disease across the continuum of care. Measures may include major diagnostic categories (hypertension, diabetes, heart disease), primary care (patient satisfaction with service, utilization of preventive services, illness episodes per 1000), specialty care (diagnosis-specific health status scores), and acute care episodes (average length of stay, surgeries per 1000, readmission rates).

Dispense as Written (DAW)

A coding system used by a physician that will determine whether generic substitution is to occur when a prescription is filled. The dispensing pharmacist translates the notation of the physician when submitting a claim for payment using 1 of the 10 DAW codes.

Dispensing Fee

Dispensing fees, which vary by type of product, are either negotiated with private insurers or set by government health programs. This contracted rate of compensation is paid to a pharmacy for the processing/filling of a prescription claim. The dispensing fee is added to the negotiated formula for reimbursing ingredient cost to cover a pharmacy’s costs of doing business and providing patient care and counseling.

Drug Utilization Review (DUR)

There are 3 forms of dur prospective (before dispensing), concurrent (at the time of prescription dispensing), and retrospective (after the therapy has been completed). This authorized, structured, ongoing review of healthcare provider prescribing, pharmacist dispensing, and patient use of medication can curb drug misuse and abuse and monitor quality of care. An effective dur can reduce hospitalization and other costs related to inappropriate drug use.


The DrugAbacus is a value tool being developed by Memorial Sloan Kettering Cancer Center to evaluate a number of factors to determine how a cancer drug should be appropriately priced. The factors considered are actual annual drug price, its potential toxicity, how novel is its mechanism of action, the incidence of the disease being treated, the burden of illness of the disease, the cost of development of the drug, the aggressiveness of the disease treated, and whether the drug fills an unmet need.

Drug Wholesaler

Wholesalers are involved in the logistics function of the pharmaceutical supply chain. They purchase their goods (ie, medications) from manufacturers and redistribute them to purchasers (in general, pharmacies, physicians, and other providers).

Dual Eligible

A Medicare beneficiary who also receives the full range of Medicaid benefits offered in his or her state. With the recent Medicaid expansion due to healthcare reform, more individuals qualify to become dual eligible.

Electronic Health Record (EHR)

An EHR is a longitudinal electronic record of patient health information produced by activities captured in 1 or more care settings. An EHR is a subset of each care delivery organization’s electronic medical record. Patient demographics, progress notes, problems, medications, vital signs, medical history, immunizations, laboratory data, and radiology reports are included as part of the ehr. Ehrs are portable with the patient.

Electronic Medical Record (EMR)

A digital version of a paper chart that contains all of a patient’s medical history from one practice. An emr is mostly used by providers for diagnosis and treatment. It is an automated, online medical record that is available to any number of providers, ancillary service departments, pharmacies, and others involved in patient treatment or care. Emrs are more beneficial than paper records because they allow providers to track data over time; identify patients who are due for preventive visits and screenings; monitor how patients measure up to certain parameters, such as vaccinations and blood pressure readings; and improve overall quality of care in a practice.

Electronic Prescribing (E-Prescribing)

Computer-based electronic generation, transmission, and filling of a medical prescription taking the place of paper and faxed prescriptions. E-prescribing is meant to reduce the risks associated with traditional prescription script writing. E-prescribing allows a physician, nurse practitioner, or physician assistant to electronically transmit a new prescription or renewal authorization to a retail or mail-order pharmacy. Medication errors are reduced through e-prescribing.

Electronic Prior Authorization

With prior authorization a requirement for most specialty pharmaceuticals and expensive medical interventions, electronic prior authorization (ePA) promises to cut the time and administration for this mandatory step in assuring the right patients receive the most appropriate care at the right time. With ePA, a physician working on an electronic health record may simply check a box on the patient’s electronic file, which allows the system to collate the necessary data and send this to the health plan or insurer for adjudication. The response from the plan may be obtained before the patient leaves the physician’s office.


The European Medicines Agency is the European Union's drug regulatory body, similar in function to that of the US Food and Drug Administration. The EMA is based in London and many of the pharmaceutical staff are British. With Britain's impending "Brexit," the future location and organization of the EMA seem unsettled.


The Employee Retirement Income Security Act of 1974 (ERISA) mandates minimum standards, and reporting and disclosure requirements (eg, clear health benefit summaries) for pension, group life, and private health insurance plans. The law has been cited as having wide effects, including on malpractice claims against a health plan or sponsor.

Evidence Blocks

The National Comprehensive Cancer Network (NCCN) developed "Evidence Blocks" to illustrate the relative value of a medical intervention based on the following components and on the weight of existing evidence: (1) efficacy, (2) safety, (3) quality of evidence, (4) consistency of evidence, and (5) affordability. These pictograms are incorporated into NCCN clinical guidelines.

Evidence-Based Medicine (EBM)

The judicious use of the best current evidence in making decisions about the care of the individual patient. EBM is meant to integrate clinical expertise with the best available research evidence and patient values. EBM had become part of the mainstream in benefit design decisions.

Exception Report

A type of summary report that identifies any events that are outside the scope of what is considered a normal range. A list of items (ie, procedures, drugs, physicians, etc) that do not conform to defined limits of acceptability. For example, a drug utilization exception report may list all patients who use a higher number of prescriptions than allowed by plan guidelines.

Exclusive Provider Organization (EPO)

An EPO is a narrower form of a preferred provider organization in which patients must visit a caregiver who is in the defined network of providers. If a visit to an outside provider is made, the EPO will offer limited or no coverage for the office or hospital visit. EPOs were created as a service and cost-efficiency option.

Experience Rating

Experience rating is a method of determining member premiums based on actuarial statistics and experience. For example, an employer with 10 workers has 3 with diabetes, that employer’s health insurance premiums would be higher than another employer with 10 healthy workers.

Explanation of Benefits (EOB)

After services have been rendered, a health plan will submit a reconciliation statement (an EOB) to the member and the provider that indicates who provided the care, the kind of covered service or supply received, the allowable charge and amount billed, the amount the health plan paid, how much of the deductible has been paid, and the cost-share. It also gives the reason for denying a claim.


In the US Food and Drug Administration (FDA) 351(k) pathway for biosimilar approvals, extrapolation refers to the FDA’s approval of the drug for several or all of the indications of the reference product, regardless of whether clinical studies have been carried out to prove the agent’s effectiveness for those indications. The FDA assumes that the new agent will result in outcomes for these indications that are similar to that of the reference product.

Flexible Spending Account (FSA)

An employee benefit offered by many companies that allows employees to have pretax dollars withheld from their salaries to pay for certain unreimbursed out-of-pocket medical expenses and dependent-care expenses. Fsa funds cannot be used toward insurance premiums.

Genomic Medicine

Synonymous with personalized medicine, genomic medicine crafts medical care to a person's individual genetic composition. Genomic medicine seeks to identify variations in a person's DNA that may determine whether they are at higher risk of developing a disorder or whether they will more likely respond to a particular therapy.

Global Payment

Relative to other reimbursement programs, providers in global payment programs bear the greatest financial risk. For example, a hospital receives one negotiated payment for all care rendered to a specific patient undergoing a surgical procedure; the hospital is at risk for all expenses―including complications, readmissions, etc―incurred beyond the global payment.

Group Purchasing Organization

These organizations seek to purchase through contracts on behalf of several entities, typically hospital chains or systems or other local or regional purchasing groups. The group purchasing organization seeks to obtain lower costs through greater leverage of its combined buying power. They purchase medications, capital equipment, and virtually any type of hospital supply.

Head-to-Head Trial

Sometimes referred to as active comparator trials, these studies vary from placebo-controlled trials in that they are testing an intervention against the standard of care (not a placebo). These studies are critical to understanding the incremental value of one medication over another.

Health Exchanges

Most people get health insurance through their employers. But people without this option can now shop for health insurance on exchanges, as an alternative to buying coverage directly from individual health insurers. Also called “marketplaces,” exchanges are online markets where consumers and small businesses can go to shop for health insurance. Exchanges are changing the way millions of Americans view their health insurance—whether it’s how they shop for a plan, what plan they decide to buy, or how they use their benefits.

There are basically 2 types of healthcare exchanges public and private. A public exchange may be run by the state or federal government, or by the state and federal government working together. Every state has a public exchange available to its residents. Subsidies and tax credits help make insurance affordable for many individuals who shop on the public exchanges. Private exchanges are not run by the government but by a private sector company, such as a health plan or a consulting firm. For employers who are trying to keep the cost of offering health benefits manageable, private exchanges offer an interesting solution. Employers can give their employees a set amount of money (defined benefit) and then direct them to a private exchange. There, they can shop for a health plan and other benefits, like dental, based on what the employer has selected as options. Experts predict that by 2016, more than 25 million people will use exchanges to buy health insurance.

Healthcare Effectiveness Data & Information Set (HEDIS®)

HEDIS measures address a broad range of important health issues. HEDIS is a tool used by most health plans across the country to measure performance on important dimensions of care and service. HEDIS consists of 81 measures across 5 domains of care. HEDIS is designed to provide purchasers and consumers with the information they need to reliably compare the performance of healthcare plans.

High-Risk Pool

A high-risk pool is a mechanism that allows insurers selling individual insurance policies to lower premiums to the general population by excluding people with known expensive diseases. These individuals, often with pre-existing chronic conditions, are placed in a high-risk pool, for which money is set aside to subsidize their care. Republican health reform proposals use high-risk pools, but they must be fully funded to operate as intended to keep premiums affordable. 

High-Deductible Health Plan (HDHP)

A medical plan that has specified minimum limits for the annual deductible and maximum limits for out-of-pocket expenses. For calendar year 2014, a “high-deductible health plan” is defined as a health plan with an annual deductible that is not less than $1250 for self-only coverage or $2500 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6350 for self-only coverage or $12,700 for family coverage.

Home Healthcare

In contrast with inpatient and ambulatory care, home healthcare is medical care that would ordinarily be administered in a hospital or on an outpatient basis. Home healthcare may be provided by licensed healthcare professionals who provide medical care needs or by professional caregivers who provide daily care to help ensure the activities of daily living are met. Home healthcare reduces the need for hospitalization and its associated costs.


The Institute for Clinical and Economic Review (ICER) is an independent, nonprofit organization that evaluates medical therapies and addresses value by estimating the incremental cost-effectiveness (cost per quality-adjusted life-year) and appropriate "value-based pricing" for the intervention.

Indication-Based Pricing

Medications that treat several indications may utilize different dosage regimens for some or all. Manufacturers will decide to either charge one price for all indications and dosing ("flat pricing") or charge different amounts based on the drug dose utilized for a particular indication ("indication-based pricing").

Hospital System

Two or more hospitals that are owned by the same organization constitute a hospital system. A hospital system generally makes decisions about coverage and capital purchases through the central organization, not through individual hospitals. A hospital system is not necessarily a “health system,” which owns care delivery services in addition to inpatient facilities (eg, medical groups, nursing facilities, pharmacies, among other examples).


This is a listing of services, procedures, and supplies offered by physicians and other providers that are assigned specific alpha-numeric codes for the purpose of reimbursement and utilization management. Named after the predecessor to CMS (the Health Care Financing Administration), the HCFA Common Procedure Coding System is broken into 2 levels used today: (1) the AMA’s Current Procedural Terminology (CPT) code set; (2) nonphysician services, drugs, or equipment (e.g., durable medical equipment). Level 2 codes are broken down by service, with A-codes (e.g., medical/surgical supplies) all the way to V-codes (e.g., vision and hearing services).

Integrated Delivery Network (IDN)

A network of facilities and providers that work in collaboration to offer a continuum of care typically to a specific geographic area or market. The concept was developed in the early 1980s and has since evolved to address common healthcare delivery concerns, such as capitation, excess capacity, decreased margins, and access complaints from patients. IDNs typically include multiple types of associations across the continuum of care. For example, a network could include, but is not limited to, a short- and long-term hospital, hmo, ppo, urgent care clinic, home health agency, hospice services, and a retail pharmacy. Kaiser permanente, ascension health, sutter health, and the cleveland clinic health system are examples of large idns across the country.

Interchangeable Biosimilar

When a biosimilar is deemed by the US Food and Drug Administration as “interchangeable” with the originally approved biologic product, it may be substituted for the latter without any clinical efficacy or safety differences. From a practical standpoint, an interchangeable biosimilar may be considered and used as generic drugs are currently used as substitutes for conventional brand name medications.

International Classification of Diseases, Ninth Revision (ICD-9)

A statistical classification system consisting of a listing of diagnoses and identifying codes for reporting diagnosis of health plan enrollees identified by physicians; coding and terminology to accurately describe primary and secondary diagnoses and provide for consistent documentation for claims. ICD-9 is designed to promote international comparability in the collection, processing, classification, and presentation of mortality statistics. ICD-9 is mandatory for medicare claims. The codes are revised periodically by the world health organization. Issued in 1979, ICD-9 will be replaced by ICD-10 in 2015.

International Nonproprietary Name

The International Nonproprietary Name is the universal designation given to a medicine (usually during late-stage clinical trials) to uniquely differentiate the agent from others in its therapeutic class. This is not the brand name, which is trademarked by the manufacturer (eg, amoxicillin vs Amoxil or trastuzumab vs Herceptin).


A J-code is a Healthcare Common Procedure Coding System (HCPCS) reimbursement code for drugs administered in any means other than the oral route. It is a 4-digit code preceded by the letter J, which does not vary based on dosage of drug. The Centers for Medicare and Medicaid Services (CMS) assigns a J-code to a new product sometime after approval by the US Food and Drug Administration. First, CMS will assign a temporary Q-code until the permanent J-code is assigned.


The Medicare Access and CHIP Reauthorization Act (MACRA) is the legislative replacement for the sustainable growth rate as a method for calculating physician Medicare payments. Implemented in 2017, MACRA comprises 2 main ways for physicians to be compensated: through the Merit-Based Incentive Payment System (MIPS) and the Advanced Alternative Payment Model (APM).

Mail-Order Pharmacy

A pharmacy that operates by the Internet, phone, or mail and whose primary business is to dispense prescription drugs or devices under prescription drug orders and send the orders to customers through the mail or shipping companies. Mail-order pharmacies are the fastest-growing provider of prescriptions to the US insured population. Patients using mail order have been shown to be more compliant. Typically, a 90-day supply of medication is shipped at one time to reduce the number of prescriptions and provide convenience.

Mandatory Generic Substitution

A drug plan feature that limits the ingredient cost of a drug charge to that of the lowest-cost alternative. This pharmacy benefit management tool mandates the use of a generic equivalent drug product whenever one is available. Where there is a generic interchangeable drug (a generic equivalent), then the generic drug will be dispensed or the plan member will be reimbursed up to the cost of the generic equivalent. This plan feature helps to limit cost within a group insurance drug program. Prescribers must justify the use of a brand-name product over the use of its generic equivalent typically through a prior authorization process.

Maximum Allowable Cost (MAC)

To ensure that a health plan, pharmacy benefit manager, or insurer gets the lowest price possible, it contracts with manufacturers, pharmacies, and drug distributors to cap its costs for prescription medicines, particularly generics. If a drug company charges more than the MAC, the payer will not cover the difference between the MAC and actual cost.

Meaningful Use

In a health information technology context, meaningful use (mu) defines minimum us government standards for using electronic health records (ehrs) and for electronically exchanging patient clinical data between healthcare providers, between healthcare providers and insurers, and between healthcare providers and patients. Mu is divided into 3 stages stage 1 focuses on promoting adoption of ehrs. Stage 2 increases thresholds of criteria compliance and introduces more clinical decision support, care-coordination requirements, and rudimentary patient engagement rules. Stage 3 will focus on robust health information exchange as well as other more fully formed mu guidelines introduced in earlier stages. The 3 stages of mu are designed to support eligible professionals and hospitals with implementing and using ehrs in a meaningful way to help improve the quality and safety of the nation’s healthcare system.

Meaningful Use Payments

The Centers for Medicare & Medicaid Services (CMS) encouraged providers and physician groups to upgrade their electronic medical record systems and their use of this information technology through bonus payments based on whether they can demonstrate "meaningful use" of the technology. CMS incorporated these bonuses in an effort to improve quality and safety of care; improve care coordination, and population and public health; and maintain the privacy and security of patient health information. Meaningful use payments are now part of the MACRA payment system.

Medicaid Block Grants

Federal contributions to Medicaid in a block grant system would be limited to a set amount each year, not based on actual Medicaid expenditures and not set as a matching contribution, as it has been since Medicaid’s inception. The block grant turns control over program control and requirements to the states. States are not required to spend the block grant funds on healthcare payments. According to opponents, this could result in cuts in benefits and services; proponents believe it will encourage greater efficiency in the care provided to Medicaid recipients.

Medically Necessary Services

Any healthcare services and/or supplies that a doctor decides are required to diagnose, prevent, or treat an illness, injury, or disease in accordance with the standards of good medical practice. The services cannot be something supplied simply for the convenience of the patient, the service provider, or supplier.

Medicare Shared Savings Program

The Medicare Shared Savings Program (MSSP) was instituted by the Centers for Medicare & Medicaid Services to promote the growth of accountable care organizations (ACOs). In the MSSP, ACOs take on risk for the care of patients and have the opportunity to earn a level of bonus payments based on Medicare’s savings (measured against expected benchmarks). This differs from the Pioneer ACO program in that the level of risk and program restrictions is greater for Pioneer ACOs (but the level of possible shared savings is greater as well).

Medicare Star Program

The Medicare Star Program is a quality-based rating and bonus payment program. Medicare Advantage and Part D plans must fulfill quality requirements in 4 domains to earn a star rating of 1 to 5. Plans earning 4 or 5 stars receive bonus payments equal to 5% of the area’s benchmark reimbursement. These public ratings can be used by consumers to differentiate plans when they choose Medicare coverage during open enrollment.

Medication Therapy Management (MTM)

Medical care provided by pharmacists whose aim is to optimize drug therapy and improve therapeutic outcomes for patients. MTM includes 5 core components a medication therapy review, personal medication record, medication-related action plan, intervention and/or referral, and documentation and follow-up. MTM services target beneficiaries who have multiple chronic conditions (such as diabetes, asthma, hypertension, hyperlipidemia, and congestive heart failure), take multiple medications, or are likely to incur annual costs above a predetermined level.


Part of the new MACRA legislation, the Merit-Based Incentive Payment System (MIPS) incorporates 3 legacy payment approaches by CMS: (1) meaningful use payments, (2) the Physician Quality Reporting System, and (3) the Value-Based Payment Modifier. Physicians who receive fee-for-service Medicare payments may participate in MIPS.

National Committee For Quality Assurance (NCQA)

A private, not-for-profit organization dedicated to improving healthcare quality, NCQA has been a central figure in driving improvement throughout the healthcare system, helping to elevate the issue of healthcare quality to the top of the national agenda since its founding in 1990. Its mission and vision are to improve the quality of healthcare and to transform healthcare through measurement, transparency, and accountability. NCQA develops quality standards and performance measures for a broad range of healthcare entities. To earn NCQA’s seal of approval, accredited health plans today face a rigorous set of more than 60 standards and must report on their performance in more than 40 areas of interest.

National Council for Prescription Drug Plans

The NCPDP is a nonprofit organization that creates and promotes standards that are used in the prescribing, dispensing, monitoring, managing and paying for medications and pharmacy services. For example, NCPDP was responsible for developing the language and coding for electronic prescribing and electronic prior authorization transactions.

National/Regional Business Groups on Health

These are coalitions of large, mostly self-funded, employers that work together to pool resources and leverage to study health benefits and, in some cases, purchase health benefit packages. An example is Employers Health (formerly the Employers Health Coalition of Ohio).


The National Comprehensive Cancer Network (NCCN) is a nonprofit alliance of 27 of the leading US cancer centers that is focused on developing resources, such as clinical guidelines, for numerous stakeholders in the healthcare delivery system.

Net Cost

The net cost is the amount the purchaser paid for a medication or device after all discounts or rebates from the manufacturer. It can be based on the average wholesale price, wholesale acquisition cost, or even average sales price.

Net Health Benefit

Net health benefit is a measurement used to assess the value of an intervention based on the magnitude of improvement in clinical benefit, toxicity, and cost when compared with the standard of care. For example, ASCO's Value Frameworks reports a net health benefit score (maximum score, 130 for palliative care for advanced cancer, 100 for curative interventions).

Net-Net Cost

This term refers to the final cost to the plan or insurer, after all discounts or rebates from the manufacturer, but also accounting for any copayments or coinsurance from patients. For example, if a drug’s net cost to an HMO is $200 per month’s supply, and the patient’s tier 3 copayment is $75, the net-net cost to the health plan is $125. In practical terms, the net-net cost to the plan may be less than zero (ie, a savings), if the patient’s cost-sharing amount is greater than the medication’s net cost.

Nonpreferred Brand Drug

A nonpreferred drug is a medication that has been determined to have an alternative drug available that is clinically equivalent. In multitiered pharmacy benefit plans, such drugs are typically placed on the third tier with possible prior authorizations, with generic drugs assigned to the first tier, and preferred drugs assigned to the second tier. In some instances, a fourth to sixth tier has been created for specialty drugs. The member cost-share increases with each tier level (first tier has the lowest copayment and the sixth tier the highest, which may switch to coinsurance).

Open Enrollment

Open enrollment is the term used to describe a set period of time during which a population chooses one of several health benefit plan options. This applies to exchange plan members (eg, whose open enrollment for 2017 is November 1, 2016, to January 31, 2017), Medicare Advantage and Part D members (October 15- December 7 each year), and private employers (variable dates, depending on the employer).

Oral Parity

Also known as “oral chemotherapy parity laws,” oral parity has passed in 34 states plus the District of Columbia. The oral parity laws require health insurers to cover oral chemotherapeutic agents under “no less favorable” terms than intravenous (IV) chemotherapy. The current disparity lies in that oral cancer drugs are typically handled through a patient’s pharmacy benefit, whereas IV chemotherapy is handled through a patient’s medical benefit. Pharmacy benefits typically include coinsurance, high overall deductibles, and caps on annual drug benefits for oral chemotherapy drugs, whereas medical benefits usually require patients to pay a flat copayment ($25-$50 per visit) for care in an outpatient setting, which can include the administration of IV medications. In short, patients’ costs are minimized if covered under a medical benefit.

Legislation such as H.R. 1801–Cancer Drug Coverage Parity Act of 2013 are being supported to make it a federal law. The current version of the bill reads as follows: “Cancer Drug Coverage Parity Act of 2013 - Amends the Employee Retirement Income Security Act of 1974 (ERISA), the Public Health Service Act, and the Internal Revenue Code to require a group or individual health plans providing benefits with respect to anticancer medications administered by a health care provider to provide no less favorable coverage for prescribed, patient-administered anticancer medications used to kill, slow, or prevent the growth of cancerous cells and that have been approved by the Food and Drug Administration (FDA).”

Out-of-Pocket (OOP) Costs

What a patient pays for health-related services above and beyond the monthly premium. Depending on the health plan, these expenses for covered health services may include an annual deductible, coinsurance, and copayments for doctor visits and prescription drugs.

Outcome Measures

A clinical outcome is the result of medical or surgical intervention or nonintervention, or the results of a specific healthcare service or benefit package. Outcome measures can include a vast range of health states. Mortality, physiologic measures (such as blood pressure), laboratory test results (such as serum cholesterol), patient-reported health states (such as functional status), and symptoms may all be used as outcome measures. Outcome measures can be very useful in quality improvement programs, by pointing out the areas in which intervention could improve care.

Outcomes-Based Contracting

Typically used to refer to pharmaceutical contracting, outcomes-based contracting simply means that the manufacturer will bear some of the financial risk associated with the use of their product. This is usually based somehow on the patient’s outcome (ie, if the patient doesn’t respond adequately to therapy, the insurer receives a 100% rebate on payment for the drug). It requires that the payer is able to monitor the patient for the intended outcome (which can be verified by the drugmaker) and adequate tracking systems are in place to determine that a set of preconditions are met to define “drug failure.”

Patent Dance

Included in the Biologics Price Competition and Innovation Act, the "patent dance" is a multistep process that is meant to provide reference manufacturers with sufficient opportunity to defend patents on their biologics through the US Patent and Trademark Office or through the US court system. The patent dance begins at the time the biosimilar manufacturer requests a sample of the reference product. It is currently seen as delaying access to biosimilar drugs.

Patient Activation

Patient activation refers to a his or her ability, willingness, and knowledge to be an active partner in their own healthcare.

Patient Engagement

Patient engagement is a measure of how well the patient actively participates in their care. It is dependent not only on self-motivation, but on a health plan or system's activities to educate and opportunities to connect with the patient to improve their own care.

Patient Experience Officer

The Patient Experience Officer is an outgrowth of the Institute for Healthcare Improvement's "triple aim" (increase affordability, improve quality of care, and improve the patient experience of care). Hospitals and health systems now routinely employ a high-ranking quality-based executive to serve as Patient Experience Officer to lead their efforts to improve the patient's experience (i.e., patient journey) through the health system.

Patient Journey

The patient journey is a chronology of medical, clinical, and environmental events that outline the progression of the patient's experience, disability, and insurance and employment status for those with chronic illnesses. The patient journey can be broken down into limited episodes of care, and maps can be developed from the perspective of not only the patient but of the health system, the individual provider, or caregivers.

Patient-Centered Medical Home (PCMH)

This healthcare delivery system model holds promise as a way to improve healthcare by transforming how primary care is organized and delivered. It has become a widely accepted model for how primary care should be organized and delivered throughout the healthcare system, and is a philosophy of healthcare delivery that encourages providers and care teams to meet patients where they are, from the simplest to the most complex conditions. Building on the work of a large and growing community, the agency for healthcare research and quality defines a medical home not simply as a place but as a model of the organization of primary care that delivers the core functions of primary healthcare. The medical home encompasses 5 functions and attributes comprehensive care; patient-centered, coordinated care; accessible services; quality; and safety.

Patient-Centered Outcomes Research

Patient-centered outcomes research is designed to assist patients, physicians, and other providers make informed health care decisions. This type of research is intended to answer questions not typically addressed in conventional medical research, those that respond directly to patient concerns (such as, “What can I do to improve the outcomes that are most important to me?”).

Per Diem Payment

The term “per diem” refers to “per day,” or in healthcare terms, the reimbursement rate paid to hospitals for the care provided to patients each day of the patient’s stay. It is a negotiated flat rate.

Per Diem Reimbursement

When an institution such as a hospital receives a set rate per day rather than reimbursement for charges for each service provided. Per diem reimbursement can be varied by service (eg, medical/surgical, obstetrics, mental health, and intensive care) or can be uniform regardless of intensity of services.

Per Member Per Month (PMPM) Cost

Health plans and insurers often calculate expenditures on this standard unit of measure. For example, if a health plan with 1 million members spends $1 million on a particular drug for the entire year, the annual cost would be $1.00 per member, which, divided by 12 months, yields $0.083 PMPM.

Performance Measures

Methods or instruments used to estimate or monitor how a healthcare provider’s actions conform to criteria and standards of quality. It is a set of technical specifications that define how to calculate a “rate” for some important indicator of quality. For example, one HEDIS® measure defines very precisely how plans should calculate the percentage of members who should have received beta blockers that actually were given a prescription. Using these measures, plans can determine what their rate is and how they compare with other plans.


This is the field involving the evaluation of the cost utility of drug therapy based on its long-term benefit to the patient. Often, this encompasses several types of analyses, including cost-benefit analysis, cost-effectiveness analysis, and cost-impact or budget-impact analyses.

Pharmacy Carve-Out

When a plan sponsor chooses a pharmacy benefit manager (PBM) to administer and manage prescription drug benefits that is separate from the PBM contracted with the health plan administering their medical claims. The carved-out rx plan can be fully insured or self-funded. Carving out the pharmacy benefit removes the health plan as an intermediary for pharmacy benefits and offers plan sponsors the opportunity to save money without cutting employee pharmacy benefits.

Pharmacy/Medical Benefit Silos

Virtually every health plan and health system manages their pharmacy and medical benefits through separate departments. If their claims/utilization data are not shared across the medical and pharmacy benefits, they are referred to as “siloed.” Integrating or sharing the data results in several advantages. For example, consider a patient who is dispensed a medication but visits the emergency department due to a side effect of that drug. In a siloed situation, the health plan's pharmacy would not find out about the emergency department visit.

Physician Quality Reporting System (PQRS)

A quality reporting program under medicare part b that uses incentive payments to promote reporting of quality information by eligible professionals (EPS). Beginning in 2015, the program also applies a negative payment adjustment to eps who do not satisfactorily report data on quality measures for covered professional services. PQRS gives participating eps the opportunity to assess the quality of care they are providing to their patients, helping to ensure that patients get the right care at the right time. By reporting pqrs quality measures, providers also can quantify how often they are meeting a particular quality metric. Quality measures are developed in collaboration with provider associations, quality groups, and the centers for medicare & medicaid services (CMS). The types of measures reported under pqrs change from year to year. The measures generally vary by specialty, and focus on areas such as care coordination, patient safety/engagement, clinical process/effectiveness, and population/public health. Using the feedback report provided by cms, eps can compare their performance on a given measure with their peers.

Population Health

Unlike disease management, population health speaks to the broader sickness care and wellness of a group of individuals (i.e., their health outcomes). This includes not only health outcomes, but factors that determine the group's health, and policies and interventions that link them.

Preexisting Condition

Any condition for which the patient has already received medical advice or treatment prior to enrollment in a new medical insurance plan. Normally this is defined as a health problem for which the new enrollee received healthcare services before the date that the new health plan benefit begins. Beginning in 2014, due to the passage of the patient protection and affordable care act, preexisting condition exclusions are prohibited in all health insurance plans.

Preferred Brand Drug

A preferred drug is a medication that has been clinically reviewed and approved by a pharmacy and therapeutics committee. This medication has been included based on its proven clinical and cost effectiveness. In multitiered pharmacy benefit plans, such drugs are typically placed on the second tier, with generic drugs assigned to the first tier and nonpreferred drugs assigned to the third tier; in some instances, a fourth tier is assigned for specialty drugs.

Preferred Generic

In 5- or 6-tier formulary structures, the first tier may be reserved for generics for which the plan gets a favorable contract compared with other generics. The second tier is the nonpreferred generic tier, which although it requires greater cost-sharing for patients compared with preferred generics, is usually less costly than branded agents. This uncommon formulary tier is not to be confused with a “preferred specialty” tier.

Private Health Exchange

In contrast with state- and federal-run public health exchanges, a private health exchange is managed by large health consultant companies. In private exchanges, employers can offer multiple health plans to their workers without the requirements that apply to public exchanges (and thus may lower costs).

Prospective Payment System (PSS)

Mandated by the Balanced Budget Act of 1997, the Medicare PPS affects many aspects of care. As the name indicates, the PPS is based on a predetermined, fixed amount paid to providers for specific services in all care environments. For example, the diagnosis-related group system comprises classifications of disorders that predetermine how inpatient hospital services are reimbursed.

Protected Classes

In 2006, the first year of the medicare prescription drug benefit known as medicare Part D, the Centers for Medicare & Medicaid Services (CMS) took several steps to ensure that part d plans offered a robust formulary design. For example, a Part D plan must offer at least 2 drugs in every category or class of drugs. It was quickly recognized that the 2-drug policy was not sufficient for certain vulnerable populations. Therefore, CMS developed a policy affecting specific drug classes that it entitled “Classes of Clinical Concern” where formulary restrictions would not be imposed. The CMS policy required all Part D plans to include on their formularies “all or substantially all” Part D drugs within 6 drug classes—antineoplastics, anticonvulsants, antiretrovirals, antipsychotics, antidepressants, and immunosuppressants.

Quality Improvement (QI)

A formal approach to the analysis of performance and systematic efforts to improve it. A continuous process that identifies problems in healthcare delivery, examines solutions to those problems, and regularly monitors the solutions for improvement.

Real-World Evidence (RWE)

Unlike a controlled, placebo trial, which is the scientific gold standard for testing the efficacy of an intervention, real-world evidence is gained in normal clinical practice (e.g., in patients who are taking multiple medications or who have several disorders) and with usual drug adherence.

Reference Pricing

Health plans and insurers will sometimes set a "reference price" for a drug when a less expensive alternative (ie, a generic) is available. The reference price is usually the average cost of the lower-priced drug, and patients who wish the higher-priced option must pay the difference between this drug and the reference drug price.


This is a separate policy purchased by an insurer that will cover possible losses incurred by them. For instance, if an insurance company experiences higher-than-expected expenses associated with a group of covered members, then the reinsurance policy will cover a portion of or all the losses in exchange for premium payments. Reinsurance can be considered an insurance policy for insurance companies.

Retail Clinic

A walk-in medical facility located inside retail pharmacies where care is delivered typically by nurse practitioners or physician assistants, often without a physician on the premises. These clinics typically treat uncomplicated minor illnesses as well as provide a huge array of preventive healthcare services, such as vaccinations, immunizations, and wellness physicals. With more than 2200 retail clinics currently in the United States, the growth trend for new retail clinics is expected to be more than 25% annually, cresting over 2800 clinics by the end of 2015. MinuteClinic (CVS), Healthcare Clinic (Walgreens), and The Little Clinic (Kroger) are the largest retail clinic chains in the country.

Risk Corridor

Under the Affordable Care Act, risk corridors were created to help encourage insurer participation in state- and federal-run exchanges. Risk corridors are payments by the government to help offset the insurer’s expected losses. The assignment of risk corridors is based on how allowable costs compare with a target amount. Health cooperatives were hit particularly hard when the government failed to make expected risk corridor payments, forcing several cooperatives out of business.

Risk Evaluation and Mitigation Strategy (REMS)

The US Food and Drug Administration may require a REMS as a condition for approving the use of certain medicines. The REMS could be as simple as a communication document to health providers detailing specific toxicities or potential adverse effects of the drug or it could restrict how the drug is distributed (e.g., through limited specialty pharmacies).

Risk Sharing

In contrast to fee-for-service payments, in a financial risk-sharing arrangement, the provider receives a set payment for services provided to a specific population of patients, but the provider assumes risk for excess costs or utilization of services for those patients. Examples include capitated agreements with physicians and bundled payments to hospitals. Outcomes-based contracting for pharmaceuticals is another example of risk sharing.


Also known as self-insurance, it refers to a healthcare plan funded entirely by employers; that is, the employer assumes the financial risk for claims incurred by workers/dependents. Self-funded plans may be self-administered, or the employer may contract with an outside (third-party) administrator for an administrative-services–only arrangement.


Employers, not the health insurance company, have a plan that bears the risk for any expenses incurred for health coverage in which health services are delivered. These employer plans usually contract with a third-party administrator, or an insurance company through an Administrative Services Only arrangement, to administrate the plan, including paying claims, determining eligibility, etc. These self-funded or self-insured plans are typically purchased by major employers such as IBM, GE, Ford, etc.

Self-Insured Employer

An employer that chooses to provide health, disability, and/or workers’ compensation insurance benefits to employees itself, assuming the financial risk and paying all claims from its own funds, rather than pay a fixed premium and file claims through a typical insurance provider. A self-insured employer will typically contract with a third-party administrator or insurance company through an administrative services–only arrangement and set up a special trust fund to pay incurred claims.

Specialty Drugs/Pharmaceuticals

Medications generally prescribed for people with complex or ongoing medical conditions such as multiple sclerosis, hemophilia, hepatitis, and certain cancers. These medications typically have 1 or more of the following characteristics: injected or infused (but some may be taken by mouth); unique storage or shipment requirements; additional education and support required from a healthcare professional; usually not stocked at retail pharmacies.

Specialty Pharmacy

Distinct from traditional retail pharmacies in coordinating patient care and disease management, specialty pharmacies are designed to efficiently deliver medications with specialized handling, storage, and distribution requirements. Patients with complex, often chronic and rare conditions, typically require scheduled contact and management by clinicians to improve adherence and desired outcomes. Although specialty pharmacies have historically focused on injectable and infused formulations, a significant number of specialty pharmaceuticals in oral dosage forms have recently entered the market. With the emergence of oral oncolytics, this trend is only expected to continue. Because of the high cost of specialty pharmaceuticals, ancillary support systems often coordinate to help patients in locating resources to provide financial assistance with out-of-pocket expenditures.

Specialty Tier

With the rising cost of specialty pharmaceuticals and the number being approved for use, health plans and insurers have increasingly instituted a specialty tier in their pharmacy benefit. Usually the fourth (and possibly fifth) tier, medications in the specialty tier require a substantial copayment (eg, $100) or coinsurance (eg, 20% of the total cost of the drug).

State Pharmacy Acts

Each state passes legislation that outlines the responsibilities and authority of various healthcare professionals. State pharmacy acts regulate whether, for instance, a pharmacist can automatically substitute a generic drug for a branded product. This also has implications for the extent to which pharmacists can provide professional, clinical services, as well as whether they can automatically substitute biosimilar agents deemed interchangeable by the US Food and Drug Administration for reference biologics.

Step Therapy

One of the basic managed care tools, step therapy is an automated protocol to ensure that patients try the most cost-effective drugs for their disorder. If the preferred drug does not produce the desired effect, progressively more advanced therapy may be prescribed.

Targeted Therapy

Targeted medicine is a class of chemotherapies that is based on genetic differences or mechanistic differences between cancer cells and healthy cells. These treatments are an attempt to better spare normal cells from chemotherapy toxicity, thereby raising efficacy and lowering side effects.

Technology Assessment Committee

For a medical intervention (medicine, medical device, or diagnostic) that would be under the medical benefit, many hospitals, insurers, and plans have a Technology Assessment Committee that analyzes the intervention’s clinical effects and value. In these cases, the Pharmacy and Therapeutics Committee evaluates products to be covered only under the pharmacy benefit.

Third-Party Administrator

Synonymous with an administrative services only (ASO) provider, a third-party administrator handles administration and adjudication of claims and sometimes utilization review. They are used by employers and other purchasers that fund their own health benefits but do not find it cost effective to administer the benefits themselves.

Tiered Copayment Benefits

A pharmacy benefit design in which patients are financially rewarded for using generic and preferred drugs. Under this design, patients are required to pay progressively higher copayments for preferred brand name and nonpreferred brand name drugs. For example, in a 3-tiered benefit structure, copayments may be $10 for a generic, $25 for a preferred brand product, and $60 for a nonpreferred brand product. In this design, the consumer (patient) assumes more of the financial risk should they elect to use a nonformulary drug.

Tiered Provider Networks

In a tiered provider network, a patient has a choice of different physicians or hospitals, usually differentiated by the amount of cost-sharing required. For example, a patient may visit a tier 1 provider (whom the health plan has negotiated the best rates) and pay the least copayment or coinsurance. Conversely, a tier 3 provider may carry the highest cost-sharing burden for patients.

Urgent Care Center

A category of walk-in clinics focused on the delivery of ambulatory care in a dedicated medical facility outside of a traditional emergency department. These clinics primarily treat injuries or illnesses requiring immediate care, but not serious enough to require an emergency department visit. Ambulatory patients can be treated on a walk-in basis, without an appointment, and receive immediate, nonemergent care. Since urgent care centers may be open 24 hours a day, patients calling their health insurance plan after hours with urgent, but not emergent, clinical problems are often referred to these facilities.

Value Assessment Committee

When evaluating whether to include a new pharmaceutical on its formulary, some health plans and insurers split the decision-making process into 2 parts: (1) Value Assessment Committee (VAC) evaluation and (2) Pharmacy and Therapeutics (P&T) Committee evaluation. The VAC weighs heavily the cost of the medication and its possible economic benefits. In this scenario, the P&T Committee refrains from cost considerations, restricting its evaluation to a review of the product’s efficacy and safety.

Value Frameworks

Value frameworks refer to ways in which healthcare organizations try to measure and enhance how medical interventions contribute to patient (and population) health. Value Frameworks is also the name of the tool developed by the American Society of Clinical Oncology to serve this purpose.

Value-Based Benefit Design (VBBD)

VBBD comprehensively addresses the way health benefits are structured and utilized by employees. The purpose is to encourage the consumer to utilize high-value services that produce better health. For example, an employer-sponsored wellness program that an employee would pay a reduced health insurance premium for actively participating 3 times a week in a fitness program.

Value-Based Insurance Design (V-BID)

This is a method of encouraging the use of medical/pharmaceutical interventions found to increase healthcare quality and lower costs. The use of financial incentives is a primary tool of V-BID, eliminating copayments for preventive care, wellness visits, and waiving or reducing patient cost-sharing treatments for antidiabetic or antihypertensive medications. Treatments not proven to offer adequate benefit would be associated with higher cost-sharing.

Withhold Fund

The portion of the monthly payment to physicians withheld by the health insurance plan until the end of the year of other time period to create an incentive for efficient care. If the physician exceeds utilization norms set by the health plan, he or she loses a percentage of the withhold. The concept of the withhold fund may be applied to hospital services, specialty referrals, laboratory usage, etc.

Wholesale Acquisition Cost

The wholesale acquisition cost (WAC) is the estimated price paid by a wholesaler for a drug purchased from the wholesaler’s supplier or other direct purchaser, typically the manufacturer of the drug. Publicly disclosed WAC amounts generally do not reflect all available discounts, such as prompt-pay (cash) discounts or rebates.
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