Healthcare Finance Key Terms

Keep abreast of healthcare issues by understanding medical finance language

Anyone that's in the business of healthcare insurance realizes how important it is to stay up-to-date with current happenings in the industry. Faced with financial insecurities and an unsteady market, many once-thriving health care organizations are experiencing difficulties. Although large health systems and hospitals are still receiving financing, smaller units, such as private medical practices, are having a hard time staying up to speed. As the insurance purchasing process can be quite involving, it is easy to become overwhelmed by the whole matter. Those new to the business of healthcare financing will have better leverage by understanding the language of the industry. A few key terms are listed below.

 

Balance billing

In balance billing the provider bills a patient for all charges not paid for by the insurance plan. Most managed care plans prohibit balance billing.
Try: Learn about balance billing and the controversies surrounding it at Business Week.

Capitation

Capitation takes place when the insurer pays the health provider a certain amount for everyone enrolled in the managed care plan. This amount may vary depending on the age and sex of the enrolled member.
Try: Read an article by the American College of Physicians to get a better understanding of capitation and how it works.

Co-payment and co-insurance

Co-payment is the amount of the medical bill that a member of a health plan must pay himself. This is a pre-determined fee, usually no more than $5 or $10 per visit. Co-Insurance is a percent of the expense that the individual must pay that is not covered by the health plan.
Try: Read about the difference between co-payment and co-insurance through Q1 Group LLC.

Fee for service plan

In a "fee for service" plan, the individual agrees to pay premiums in exchange for the freedom to choose his or her own doctors. This is also referred to as an indemnity plan.
Try: Learn more about fee for service plans at Googobits.com.

Deductible

A deductible is the amount of an individual's health care expense that must be paid himself before the insurance coverage applies.
Try: Read about deductibles at HowStuffWorks.

PPOs and HMOs

A Preferred Provider Organization (PPO) allows individuals to receive discounted rates if doctors are used from a pre-selected group. In Health Maintenance Organizations (HMOs) individuals or their employers pay a pre-determined monthly fee for medical services as opposed to separate charges for each service.
Try: Visit Insurelane to better understand the difference between PPOs and HMOs and how to determine which is best for your situation.

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