Jean-Patrick Tsang, PhD & MBA (INSEAD)
Tel: (847)920-1000

Igor Rudychev, PhD
Tel: (847) 679-8278


A Ca Co D E F H I J Ma Me N Pa Ph R U Medical Coding HCPCS


Degree to which patient care exactly follows study protocol. The goal is to ensure that the patient takes a medication at the right time, in the right doses and in the right way.


Any process by which a claim or dispute gets settled is called adjudication. In the case of medical claims, adjudication generally means the process used to get a claim paid. This can involve re-billing, appealing, or using legal means to reach a payment settlement.

Affiliated Provider

A healthcare provider or facility that is paid by a health plan to give service to plan members.

Ambulatory Care

All types of health services that do not require an overnight hospital stay.

Ambulatory Surgical Center

A place other than a hospital that does outpatient surgery. At an ambulatory (in and out) surgery center, a patient may stay for only a few hours or for one night.


APCs are Ambulatory Payment Classifications, a Medicare prospective payment system for the hospital outpatient clinic. APCs do not impact physicians' offices. APCs are clinically consistent groups that receive pre-defined payment. APCs have a weight, a conversion factor, and, then, a geographic adjustment for many services. Patients may pay 20% or more of the APC. The maximum amount that the patient may pay for any APC, including multiple drug units, is the inpatient deductible for a specific year (for 2002, this equals $812). Multiple APCs may be paid for a single encounter in a calendar day.


A method of reimbursement in which a fixed amount is paid to a provider in advance per member served. Payment is made regardless of the number or types of services used by the member.

Captive agents

Agents that represent only one health plan or insurer.


An itemized statement of healthcare services and their costs provided by a hospital, physician's office, or other provider facility. Claims are submitted to the insurer or managed care plan by either the plan member or the provider for payment of the costs incurred.


They gather claims information electronically from various sources via modem. Clearinghouses edit, format and submit this information directly to insurance companies for payment. Clearinghouses have the ability to meet the specific requirements of each insurance company and their particular computer formats. Therefore, they submit electronic claims to any insurance company in a format that will exactly match that of the insurance company's computers. This task is essential for electronic claims as it is too complex and costly for independent billing services to perform on every claim.

Centers for Medicare and Medicaid Services (CMS) (HCFA prior to July 1, 2001)

This agency's mission is to serve Medicare and Medicaid beneficiaries. It helps consumers identify the agency that administers their health insurance and helps develop a more consumer-friendly association. CMS is a part of the Department of Health and Human Services (HHS).

CMS-1450 and CMS-1500

The uniform professional claim form. The CMS-1500 form and instructions are used by non-institutional providers and suppliers to bill Medicare, Part B covered services. It is also used for billing some Medicaid covered services. CMS-1450 (Formerly HCFA 1450): This form, also known as the UB-92 or UB, is the claim form used by hospitals to summarize detailed charges for insurance billing. Almost all payers accept the CMS-1450.

Cohort of Patients

A group of patients united by some criteria (e.g. by location or symptoms) usually for medical research purposes.


Comorbidity is the technical term for having more than one chronic condition or disorder at the same time.


Patient compliance with a prescribed drug regimen is the extent to which the patient's dosing history corresponds to the prescribed drug regimen.

Computer-based patient record (CPR)

An electronic patient record that resides in a system designed to support users through availability of complete and accurate data, practitioner reminders and alerts, clinical decision support systems, links to bodies of medical knowledge, and other aids. CPR is a representation of all of a patient's data that one would find in what today still dominates the industry, the paper-based patient record, but in a coded and structured, machine-readable form.


A situation where certain conditions accompany drug usage or treatment. Concomitant drugs are used as a supplement for the primary medication.

Consolidated Medical Group

A large single medical practice that operates in one or a few facilities rather than in many independent offices. The single-specialty or multi-specialty practice group may be formed from previously independent practices and is often owned by a parent company or a hospital. Also known as a medical group practice or clinic model.

Continuing patient


A fixed-dollar amount, set by a client or plan sponsor that a member must pay each time he or she receives a healthcare service or a covered prescription. A technique used by medical and pharmacy providers that helps defer the cost of prescription drugs. If a co-payment applies to a member, he/she will pay a percentage of the drug cost to the pharmacist. The copay amount is determined by the member’s health plan and is administered at the benefit level.

CPT-4 Current Procedural Terminology, Version 4

CPT is a uniform coding system for health care procedures that was developed by the American Medical Association (AMA). The coding system which is used when submitting claims for health care has been adopted by third-party payers. The CPT system originated in 1966 and is revised annually based on changes in medical practices and updates in technology. The Department of CPT Editorial Research and Development within the AMA adds, modifies, and deletes CPT codes as needed. The CPT Editorial Panel meets four times a year to review proposed changes. That 16-member panel is supported by an Advisory Committee which represents over 90 medical specialty and professional health organizations. The most recently published codes are in CPT 2002 (American Medical Association, 2002).

Diagnosis related groups (DRG)

DRGs are a system of categorizing patients based on the primary and secondary diagnoses, primary and secondary procedures, age, and length of stay. Each DRG is only one of 503 possible classifications of diagnoses in which patients with similar lengths of stay and resource use are grouped together for billing purposes. The categories establish a uniform cost for each category. DRGs set a maximum amount that would be paid for the care of Medicare patients. In 1983, DRGs were implemented in all acute care, non-specialty hospitals throughout the United States . They were implemented to contain the costs for the Medicare Program. Instead of hospital reimbursement being based on retrospective charges (after the delivery of care), the reimbursement system changed to a DRG fixed payment or "prospective payment" system, meaning hospitals are compensated for a patient's care based on the qualifying DRG.

DEA (Drug Enforcement Agency) Number

The number assigned to a physician by the agency for tracking purposes and identification with respect to all drugs prescribed by that physician.

DDD Data (Source Non-Retail)


The amount an insured person must pay before coverage of services begins. For example, an insurance plan might require the insured to pay the first $250 of covered expenses during a calendar year before the insurance company will begin payment.

Discharge planning

Planning that identifies a patient's healthcare needs after discharge from inpatient care.


An amount or periodicity of taking drugs. For example, “one-day dosing” refers to taking a drug just for a day.

Electronic Medical Record (EMR)

A computerized record of a patient's clinical, demographic, and administrative data. Also known as a computer-based patient record.


Provisions contained in each health benefits plan that specify who qualifies for coverage under that plan.

Employer Group

A group that chooses, in lieu of insurance, to reserve funds for payment of covered benefits incurred by their employees.

Exclusive Provider Organization (EPO)

A healthcare benefit arrangement that is similar to a preferred provider organization in administration, structure, and operation, but which does not cover out-of-network care.

Fee-For-Service (FFS)

A benefit payment system in which an insurer reimburses the group member or pays the provider directly for each covered medical expense after the expense has been incurred.


List of drugs or groups of drugs designated by therapeutic class meant to limit or influence usage of drugs as a cost containment measure.

Freestanding facility

A freestanding facility, such as an ambulatory surgical center, freestanding surgical-center, freestanding dialysis center, or freestanding ambulatory medical facility, that:

1) Provides services in an outpatient setting;

2) Contains permanent amenities and equipment primarily for the purpose of performing medical, surgical, and/or renal dialysis procedures;

3) Provides treatment performed or supervised by doctors and/or nurses, and may include other ancillary professional services performed at the facility; and

4) Is not, other than incidentally, an office or clinic for the private practice of a doctor or other professional.

Full-time Equivalent (FTE)

The number of hours worked by an employee divided by 2,080 (8 hours x 5 days x 52 weeks).

HCFA-1450 (institutional claim)

HCFA's name for the institutional uniform claim form, or UB-92.

HCFA-1500 (office-based claim)

HCFA's name for the professional uniform claim form. Also known as the UCF-1500 (Uniform Claim Form).

>Health Maintenance Organization (HMO)

A healthcare plan that provides or arranges comprehensive health services for its enrolled participants.

  • "Group" is an HMO that contracts with one or more independent group practices providing health services exclusively to HMO patients.
  • "IPA" (Independent Practice Association) is an HMO that contracts directly with physicians in an independent practice, or with one or more associations of physicians in independent practice.
  • "Network" is an HMO that contracts with two or more independent group practices providing health services to HMO patients and patients covered by other payers.
  • "Staff" is an HMO that delivers health services through a salaried physician group employed by the HMO unit.


Health Insurance Portability and Accountability Act of 1996. HIPAA included provisions designed to encourage electronic transactions and also required new safeguards to protect the security and confidentiality of health information. The final regulation covers health plans, healthcare clearinghouses, and those healthcare providers who conduct certain financial and administrative transactions (e.g., enrollment, billing and eligibility verification) electronically. Most health insurers, pharmacies, doctors and other healthcare providers were required to comply with these federal standards beginning April 14, 2003 . As provided by Congress, certain small health plans have an additional year to comply.


Physicians who spend a substantial amount of their time in a hospital setting where they accept admissions to their inpatient services from local primary care providers.


The number of instances of illness commencing, or death occurring, during a given period in a specified population. Usually used as age-standardized rate per 100,000 population.

Independent Pharmacy

An independent entrepreneur or small chain (less than 10 units under one ownership) pharmacy, often viewed as the traditional ''corner drug store.'' These pharmacies range from prescription-dominated clinic and apothecary pharmacies to pharmacies with the traditional mix of prescriptions, over-the-counter drugs, sundries, and general merchandise. For most independent pharmacies, prescriptions are the dominant share of total store sales (typically, 70% to 80% of sales or more).

Independent Practice Association, IPA

An IPA is an association of physicians and other healthcare providers, including hospitals, who contract with an HMO to provide services to enrollees, but usually still see non-HMO patients and patients from other HMOs. Physicians in IPA are paid on a fee-for-service basis. IPA’s are capable of assuming greater degrees of financial risks than individual physicians.

Indemnity plan

A type of health benefits plan under which the covered person pays 100% of all covered charges up to an annual deductible. The health benefits plan then pays a percentage of covered charges up to an out-of-pocket maximum.

Influence Networks of Physicians

Inpatient Care

Inpatient care means that a patient is hospitalized as an inpatient upon order of a physician. Inpatient care usually denotes that the patient is at an acute level of care in a short-term facility for medical, psychiatric, or rehabilitative care.

Institute of Medicine(IOM)

Published two landmark reports on the poor state of healthcare in the country (“To Err is Human: Building a Safer Health System” and “Guidance for Development of Patient Safety Data Standards”). The IOM, a nonprofit organization chartered in 1970 as a component of the National Academy of Sciences (NAS), provides a public service by working outside the framework of government to ensure independent guidance on matters of science and medicine.

JUDY DIAMOND ASS. / Form 5500 / 401k

Judy Diamond Associates, Inc. is the premiere publisher of pension and welfare plan data for the financial services market. They publish plan data from the form 5500 filings at the Department of Labor. The Form 5500 is an annual return/report of employee benefit plan. A 401(k) is a type of retirement plan that allows employees to save and invest for their own retirement. Through a 401(k), an employee can authorize their employer to deduct a certain amount of money from his/her paycheck before taxes are calculated, and to invest it in the 401(k) plan. Employee’s money is invested in investment options that he/she chooses from the ones offered through company's plan. The federal government established the 401(k) in 1981 with special tax advantages, to encourage people to prepare for retirement. They get their name from the section of the Internal Revenue Code that established them (section 401(k)).

KOL (Key Opinion Leader)
Longitudinal Data

Managed Care

Managed Care plans are corporations serving large groups of people through a "capitated" system. Managed Care is a method of financing and delivering healthcare for a set fee using a network of physicians and other healthcare providers. The network coordinates and refers patients to its health providers and hospitals, and monitors the amount and patterns of care delivered. Managed care plans usually limit which services patients may receive by using "gatekeepers" to make sure services considered unnecessary or referrals outside the network are kept to a minimum.

Management Services Organization (MSO)

An organization, owned by a hospital or a group of investors, that provides management and administrative support services to individual physicians or small group practices in order to relieve physicians of non-medical business functions so that they can concentrate on the clinical aspects of their practice.


Medicaid is a federal program (Title XIX of the Social Security Act) that pays for health services for certain categories of people who are poor, elderly, blind, disabled, or who are enrolled in certain programs, including Medicaid Waivers. Medicaid also covers children whose families receive assistance.


Medicare is a federally funded program (Title XX of the Social Security Act) that pays for healthcare for the elderly, for adults who are disabled and those who have end-stage renal disease (ESRD).

Medicare Part A

The Medicare component that provides basic hospital insurance to cover the costs of inpatient hospital services, confinement in nursing facilities or other extended care facilities after hospitalization, home care services following hospitalization, and hospice care.

if 65+, a patient can receive either free or monthly-paid Medicare if the patient is:
  • eligible for SS or Railroad Retirement Board (free)
  • enrolled in Medicare Part B and US resident for 5+ years (purchased)

if 65-, a patient can receive premium-free Medicare if the patient:

  • received Railroad Retirement disability benefits and meet SS disability requirements

  • has End-Stage Renal Disease (ESRD)

Medicare Part B

The Medicare component that provides benefits to cover the costs of physicians' professional services, whether the services are provided in a hospital, a physician's office, an extended-care facility, a nursing home, or an insured's home.


A patient is eligible for Medicare Part B if:

  • eligible for Part A (automatically)
  • not eligible for Part A, but is 65+ and has been a US resident for 5+ years
Medicare Part C
Medicare Part D

National Council for Prescription Drug Programs, Inc. (NCPDP)

Organization that promotes data interchange and processing standards to the pharmacy service sector of the healthcare industry.

New Patient Start

Outpatient Care

Outpatient care is care rendered to patients who are not admitted upon order of a physician to acute care, skilled nursing, or custodial facility. No overnight stay.

The Outpatient Code Editor (OCE)

OCE and Ambulatory Payment Classification (APC) develop a program that edits patient data to help identify possible errors in coding, and assigns Ambulatory Payment Classification numbers based on Healthcare Common Procedure Coding System (HCPCS) codes for payment under the mandated Medicare Outpatient Prospective Payment System (OPPS). The software was developed to ensure accurate coding by detecting potential problems in the coding of claims data. It also assigns APC numbers for services.

Patient-Centric Data
Patient-Level Data

Patient Registry

A database that includes information on the patients, centered over a specific disease, location or other variable. For example, University of Washington Alzheimer's Disease Patient Registry (ADPR) is a model clinical and epidemiologic database for dementia and Alzheimer’s disease (AD).


The general term used to indicate the party responsible for the payment of medical care service expenses.


Persistency refers to the prescription renewal rates. High persistency means that a patient gets all the refills prescribed by the doctor while low persistency means that the patient does not get all the refills prescribed by the doctor.

Pharmacy Benefit Manager (PBM)

An organization that provides programs and services designed to help maximize drug effectiveness and contain drug expenditures by influencing the behaviors of prescribing physicians, pharmacists, and members.

Pharmacy Network

A group of pharmacies that agrees to dispense cost-effective medications at a special reimbursement formula. This term refers to all of the pharmacies that participate in a particular network. To utilize their prescription coverage, a member must have their prescriptions filled at a network pharmacy.

Physicians-Level Data

Physician Hospital

A Physician Hospital Association is an organization that includes hospitals and physicians contracting with one or more HMOs, insurance plans, or directly with employers to provide healthcare services.

Point-of-Service (POS) plan

A health plan allowing the member to choose to receive a service from a participating or non-participating provider, with different benefits levels associated with the use of participating providers.

Preferred Provider Organization (PPO)

A managed care organization, MCO, that contracts with a network of doctors, hospitals and other healthcare providers who deliver services for set fees, usually at a discount to the MCO. In a PPO, consumers must choose their primary health provider from an approved list and must pay extra for specialty services received outside the PPO group.


Prevalence is the number of cases of a disease, number of infected people, or number of people with a given attribute present during a particular interval of time. It is often expressed as a rate or percentage (for example, the prevalence of arthritis per 100 people during a year).

Primary Care Case Management (PCCM)

Primary Care Case Management (PCCM) is a Medicaid healthcare delivery system that lies between traditional fee-for-service and risk-based HMO managed care. Under PCCM, consumers are linked to a Primary Care Provider (PCP) who coordinates their healthcare. Providers are paid on a fee-for-service basis, and receive additional dollars to compensate for care management responsibilities. Providers are not at financial risk for the services they provide or authorize.

Primary Care Provider (PCP)

A physician or other medical professional who serves as a group member's first contact with a plan's healthcare system. Also known as a primary care physician, personal care physician, or personal care provider.


The process of getting a valid, approved prescription filled one or more times after the initial prescription without consulting the prescribing physician again.


Refers to the actual payments received by providers for benefits covered under an insurance plan.

Sources of Business


A change in the drug used by a patient, authorized by a physician.


Managed care plans have multiple tiers for the drugs they endorse. Below is an example of a 3-tier formulary from Kaiser Permanente System (KPS).

  • Tier 1, Generic Drugs:

    Names of drugs as they appear in the pharmacopoeia of medical drugs. These are drugs that do not have a trade name. For example: Diazepam is the generic form of Valium.

  • Tier 2, Preferred Drugs:

    Brand-name drugs on the preferred provider’s drug list.

  • Tier 3, Non-Preferred Drugs:

    Any covered drug that is not covered under Tier 1 or Tier 2, including brand-name drugs that are also available in generic form.

Traveling scripts

Uniform Billing form 92 (UB-92)

The UB-92 consists of fixed-length (192 bytes) records. Each record has an unique identifier and logically related data elements. It was designed to standardize and increase the submission of electronic claims and coordination of benefits exchange. The UB-92 is used to electronically submit claims for healthcare received in an institutional setting to payers. It is also used to exchange healthcare claims and payment information between payers with different payment responsibility.

Xponent Data (Source Prescriber)

Medical Coding

About Medical Coding

What exactly is medical coding?

Medical coding is used to process insurance claims more efficiently. Medical insurance claims coders generally work in hospitals, clinics, physicians' offices, health maintenance organizations, mental healthcare facilities, nursing homes, and other healthcare facilities and review forms and related documents for completeness and accuracy before transmitting them for insurance processing.

How does medical coding work?

Every service (test, office visit, injection, surgical procedure, etc.) in the provision of medical care has a numerical code associated with it so that the companies who pay the claims (health insurance companies, HMOs, etc.) can easily identify the patient's condition, the service, and can then reimburse the service provider on a predetermined basis. Medical coding exists for an office call, a simple check of the urine, right on to the most detailed brain surgery. By the same token, all diagnoses and even patient complaints (headache, upset stomach, etc.) have numerical codes. The combination of using these numbers tells the payer what was diagnosed and what service was performed. The physician's computerized billing software sends information showing what was done and the insurance company's software interprets it accurately, since they use the same medical coding system. This speeds up the reimbursement process so doctors are paid faster and more accurately - if the medical coding and billing is done correctly. The Office of the Inspector General may review medical coding of evaluation and management services, physician credit balances and correct use of diagnosis codes (ICD-9-CM). Doctors may be fined up to $10,000 for each item or service incorrectly billed.

Drug Reimbursement Codes are a component of the CMS (formerly HCFA) Healthcare Common Procedural Coding System (HCPCS) and AMA's Current Procedural Terminology (CPT) for Vaccines, Toxoids and Immune Globulins. The HCPCS and CPT Drug Codes are designed to bill for drugs that are administered in the provider's office, clinic or home health agency and includes drugs which are injected subcutaneously, intramuscularly, or intravenously as well as selected orally administered chemotherapeutic and antiemetic agents. The Drug Reimbursement Code Price only covers the cost of the medication and is calculated using CMS (formerly HCFA) guidelines. Office charges associated with the administration of the medication are not included and must be billed separately.

Definitions of the medical codes below are taken from the following web site:

A Codes

Administrative codes that relate to transportation services, medical and surgical supplies and also includes radiopharmaceuticals.

C Codes

Temporary Codes for use with Outpatient PPS (Prospective Payment System). These codes identify items that may qualify for "pass through" payments under the HOPPS (Hospital Outpatient Prospective Payment System). C Codes are used exclusively for services paid under the Outpatient PPS and may not be used to bill services paid under other Medicare payment systems.

CDT Codes (Current Dental Terminology)

Created by American Medical Association (AMA) to provide a description of services for purposes of billing third-party payers

D Codes

Subset of the HCPCS Level II medical codes identifying certain dental procedures. It replicates many of the CDT codes and will be replaced by the CDT.

G Codes

Identify professional healthcare procedures and services that would be coded as CPT-4, but for which no CPT-4 code exists.

H Codes

Used by state Medicaid agencies to identify mental health services.

J Codes

A subset of the HCPCS Level II code set with a high-order value of "J" that has been used to identify drugs administered other than by oral method.

K Codes

Medicare claims for K Codes fall under the jurisdiction of the durable medical equipment regional carrier (DMERC), unless otherwise noted.

Q Codes

CMS (formerly HCFA) assigns Q Codes to procedures, services and supplies on a temporary basis. The correspond to services that would not be given a CPT-4 code such as drugs, biologicals, and other medical equipment or services.  If a permanent code is subsequently assigned (J Code), the Q Code is deleted and cross-referenced. Examples are drugs for End-Stage Renal Disease and agents used as oral anti-emetics.

S Codes

Temporary Non-Medicare National Codes. They were developed by Blue Cross/Blue Shield and other commercial payers to report drugs, services, and supplies. They may not be used to bill services paid under any Medicare payment system.

T Codes

Used by state Medicaid agencies for Medicaid Program administration.

CPT Codes (Current Procedural Terminology)

A medical code set of physician and other services, maintained and copyrighted by the American Medical Association (AMA), and adopted by the Secretary of HHS as the standard for reporting physician and other services on standard transactions. The CPT coding communicates a claim for the procedures and services provided to the patient. Insurance carriers need the medical CPT code to determine provider’s reimbursement amount.

ICD-9 codes

Describe medical or psychiatric procedures performed by physicians and other health providers. They were developed by the Healthcare Financing Administration (now CMS) to assist in the assignment of reimbursement amounts to providers by Medicare carriers. A growing number of managed care and other insurance companies, however, base their reimbursements on the values established by CMS.

Add-on Codes

Usually used for service not covered by ICD-9 codes or for a slight reversal of operation. The add-on code is billed in addition to the primary ICD-9 code.

About HCPCS Codes

Healthcare insurers process over 5 billion claims every year. HCPCS codes were developed to help ensure claims could be processed in a consistent and simplified way. HCPCS codes are divided into three subsystems: level I, level II and level III, each designated for a specific purpose.

HCPCS Codes - Level I

Level I HCPCS codes are made up of CPT-4 codes (a numeric coding system devised by the American Medical Association). Healthcare professionals use this notation to identify services and procedures, for which they bill insurance programs. Level I HCPCS codes consist of 5 numeric digits.

HCPCS Codes - Level II

Level II HCPCS codes identify products, supplies, materials and services that are not included in the CPT-4 code, such as durable medical equipment prosthetic, orthotics and supplies (DMEPOS) when used outside a medical office. Level II HCPCS codes are also called alphanumeric codes because they consist of one letter followed by 4 numeric digits.

National Permanent Level II HCPCS Codes

National Permanent Level II HCPCS Codes are maintained by the HCPCS National Panel, a group comprised of representatives from the Blue Cross/Blue Shield Association (BCBSA), the Health Insurance Association of America (HIAA), and CMS. Permanent Level II HCPCS Codes provide a standardized coding system that is managed jointly by public and private insurers, thus providing a stable system for claims processing. These codes can be used by all private and public insurers.

Temporary Level II HCPCS codes

Temporary Level II HCPCS codes make up 35% of all level II codes. These codes help insurers meet operational needs that are not met with existing codes. In the case of Medicare, the HCPCS workgroup makes decisions regarding temporary HCPCS codes. Even though temporary HCPCS codes are established to meet the needs of a particular insurer, they can also be used by other insurers. These codes can remain "temporary" indefinitely.


Also called local codes, level III HCPCS codes are developed by Medicaid State Agencies, Medicare contractors and private insurers for use in specific programs and jurisdictions. These codes allow insurers to electronically process claims for new services for which a level I or level II code has not yet been established.