Healthcare Policy and Economics
Expert-defined terms from the Professional Certificate in Healthcare Management course at London School of Planning and Management. Free to read, free to share, paired with a professional course.
Accountable Care Organization (ACO) – A network of physicians and hospita… #
Related terms: shared savings, bundled payments. Example: An ACO may track patient outcomes across primary and specialty care to reduce readmissions. Practical application includes negotiating contracts that reward cost reductions while maintaining quality standards. Challenges involve aligning incentives among diverse providers and managing data sharing securely.
Adverse Selection – The tendency of individuals with higher health risks… #
Related terms: moral hazard, risk pooling. Example: A marketplace plan may see rising costs if only sicker patients purchase it. Policymakers may address this through mandates or risk adjustment mechanisms. The main challenge is balancing individual choice with market stability.
Affordable Care Act (ACA) – Comprehensive health‑reform legislation enact… #
Related terms: health insurance exchanges, Medicaid expansion. Example: The ACA established marketplaces where individuals can compare plans. Practical applications include the implementation of value‑based payment models. Challenges include political opposition, state‑level variability, and ongoing litigation.
Benefit‑Cost Ratio (BCR) – A metric that compares the monetary benefits o… #
Related terms: cost‑effectiveness analysis, return on investment. Example: A vaccination program may have a BCR of 3, meaning every dollar spent yields three dollars in avoided health expenditures. Practical use guides resource allocation decisions. Challenges include quantifying intangible benefits such as improved quality of life.
Bundled Payment – A single, predetermined payment covering all services r… #
Related terms: episode-based payment, global budgeting. Example: A hospital receives a fixed amount for a hip‑replacement episode, incentivizing efficient care coordination. Practical application encourages providers to reduce unnecessary services. Challenges involve accurate episode definition and risk adjustment for patient complexity.
Capitation – A payment arrangement where providers receive a fixed amount… #
Related terms: prepaid contracts, risk‑sharing. Example: A primary‑care practice is paid $30 per member per month to manage all routine health needs. Practical use promotes preventive care and cost containment. Challenges include potential under‑service and the need for robust quality monitoring.
Case Mix Index (CMI) – A relative value that reflects the average severit… #
Related terms: DRG weight, payer mix. Example: A hospital with a CMI of 1.5 treats more complex cases than one with a CMI of 0.9. Practical application assists in budgeting and reimbursement negotiations. Challenges arise from coding accuracy and variations in clinical documentation.
Certificate of Need (CON) – A regulatory process that requires health‑car… #
Related terms: health‑care licensing, market entry barriers. Example: A hospital must submit a CON application to add a cardiac surgery unit. Practical use aims to prevent unnecessary duplication of services. Challenges include potential suppression of competition and delayed access to care.
Clinical Practice Guidelines (CPGs) – Evidence‑based recommendations that… #
Related terms: standard of care, evidence‑based medicine. Example: Guidelines for hypertension advise first‑line therapy with ACE inhibitors. Practical application improves consistency and quality. Challenges involve keeping guidelines current and adapting them to diverse patient populations.
Cost‑Effectiveness Analysis (CEA) – An economic evaluation comparing the… #
Related terms: incremental cost‑effectiveness ratio, health technology assessment. Example: A CEA may show that a new drug provides an additional 0.2 QALYs at $10,000 per QALY, deemed acceptable under many thresholds. Practical use informs formulary decisions. Challenges include data availability and ethical considerations about valuing life.
Cost‑Utility Analysis (CUA) – A form of CEA that incorporates patient pre… #
Related terms: utility weights, health state valuation. Example: A CUA might compare two surgical techniques, finding one yields 0.5 more QALYs at a marginal cost increase. Practical application supports allocation of limited resources. Challenges include eliciting reliable utility values and addressing cultural differences in health preferences.
Deductible – The amount a policyholder must pay out‑of‑pocket before the… #
Related terms: coinsurance, out‑of‑pocket maximum. Example: A health plan with a $1,200 deductible requires the enrollee to spend that amount before benefits apply. Practical use influences consumer cost‑sharing behavior. Challenges involve balancing affordability with risk protection.
Demand‑Side Management – Strategies that influence patient behavior to re… #
Related terms: utilization review, patient engagement. Example: Implementing a step‑therapy protocol for chronic pain medications. Practical application can lower costs while maintaining outcomes. Challenges include potential delays in care and provider resistance.
Electronic Health Record (EHR) – A digital version of a patient’s paper c… #
Related terms: health information exchange, interoperability. Example: Clinicians document encounters in an EHR, which can be shared with specialists. Practical benefits include improved coordination and data analytics. Challenges encompass high implementation costs, privacy concerns, and workflow disruption.
Evidence‑Based Medicine (EBM) – The conscientious integration of the best… #
Related terms: systematic review, clinical guidelines. Example: Using randomized trial data to select antiplatelet therapy after stent placement. Practical use improves treatment effectiveness. Challenges include translating evidence into practice and addressing gaps in research.
Fee‑for‑Service (FFS) – A traditional reimbursement model where providers… #
Related terms: volume‑based payment, service utilization. Example: A physician bills separately for each office visit, lab test, and procedure. Practical application is straightforward but can incentivize over‑utilization. Challenges involve rising costs and limited focus on outcomes.
Formulary – A list of prescription drugs covered by a health‑plan sponsor… #
Related terms: drug tiering, prior authorization. Example: A health plan’s formulary places generic antihypertensives on Tier 1 with low copays. Practical use guides prescribing behavior and controls expenditures. Challenges include balancing clinical need with cost containment and managing patient adherence.
Global Budget – A fixed total amount of money allocated to a health‑care… #
Related terms: capitation, spending target. Example: A regional health authority receives a $500 million budget to cover all inpatient and outpatient care for a year. Practical application encourages efficiency and population health focus. Challenges include setting realistic budgets and ensuring quality does not suffer.
Health Maintenance Organization (HMO) – A type of managed‑care plan that… #
Related terms: gatekeeper, provider network. Example: Members must select a primary‑care physician who coordinates referrals. Practical benefits include lower premiums and coordinated care. Challenges involve limited provider choice and potential for network restrictions.
Health Technology Assessment (HTA) – A multidisciplinary evaluation of me… #
Related terms: comparative effectiveness, reimbursement decision. Example: An HTA may conclude that a new imaging device offers marginal benefit at high cost, influencing coverage decisions. Practical use informs policy and formulary inclusion. Challenges include data gaps and differing stakeholder priorities.
Health‑Care Utilization Review (UR) – The process of evaluating the appro… #
Related terms: prior authorization, case management. Example: An insurer’s UR department reviews a request for an MRI to confirm it meets clinical criteria. Practical application controls costs and promotes evidence‑based care. Challenges involve administrative burden and potential delays for patients.
Health‑Care Workforce Planning – Strategic analysis of supply and demand… #
Related terms: provider shortage, training pipeline. Example: A state health department projects a shortage of primary‑care physicians by 2025 and develops incentives for residency programs. Practical use supports long‑term system sustainability. Challenges include forecasting accuracy and aligning educational capacity with market needs.
Health‑Care Quality Measures – Standardized metrics that assess the degre… #
Related terms: performance indicators, patient safety. Example: The HEDIS measure for diabetes control tracks the percentage of patients with HbA1c < 8 %. Practical application drives quality improvement initiatives. Challenges include data collection consistency and risk adjustment.
Health‑Equity – The pursuit of fair and just opportunities for health acr… #
Related terms: social determinants of health, disparity reduction. Example: A city health department implements mobile clinics in underserved neighborhoods to improve access. Practical use informs policy targeting. Challenges involve measuring equity and addressing deep‑rooted structural factors.
Hospital Readmission Rate – The proportion of patients who return to a ho… #
Related terms: post‑acute care, transitional care. Example: Medicare penalizes hospitals with excessive readmission rates for heart failure. Practical application encourages discharge planning and follow‑up. Challenges include distinguishing preventable readmissions from disease progression.
Incentive Alignment – Designing payment structures and performance metric… #
Related terms: pay‑for‑performance, shared savings. Example: A bundled payment contract includes quality bonuses for low complication rates. Practical use improves coordination and cost control. Challenges include balancing multiple incentives and avoiding unintended consequences.
International Classification of Diseases (ICD) – A globally accepted syst… #
Related terms: coding standards, disease surveillance. Example: A patient diagnosed with type 2 diabetes is assigned ICD‑10 code E11. Practical use enables uniform data collection for billing and epidemiology. Challenges include transition to newer versions and ensuring accurate documentation.
Joint Commission Accreditation – A voluntary process by which health‑care… #
Related terms: accreditation, quality assurance. Example: A hospital attains Joint Commission accreditation after meeting patient‑safety criteria. Practical benefits include improved reputation and eligibility for certain reimbursements. Challenges involve maintaining compliance and the cost of preparation.
Key Performance Indicator (KPI) – A measurable value that demonstrates ho… #
Related terms: dashboard, benchmarking. Example: A clinic tracks average wait time as a KPI to improve patient satisfaction. Practical application provides actionable insight for managers. Challenges include selecting relevant metrics and avoiding data overload.
Likelihood Ratio – A statistic used in diagnostic testing that indicates… #
Related terms: sensitivity, specificity. Example: A positive troponin test with a likelihood ratio of 10 greatly increases suspicion for myocardial infarction. Practical use aids clinical decision‑making. Challenges include interpreting ratios in low‑prevalence settings.
Managed Care Organization (MCO) – An entity that provides or arranges hea… #
Related terms: HMO, PPO. Example: A regional MCO contracts with local hospitals to deliver services at negotiated rates. Practical application promotes coordinated care and cost control. Challenges involve member satisfaction and provider negotiations.
Medicaid – A joint federal‑state program that offers health coverage to l… #
Related terms: eligibility, state expansion. Example: A family qualifies for Medicaid based on income below 138 % of the federal poverty level. Practical use expands access to essential services. Challenges include reimbursement rates and variability across states.
Medicare – A federal health‑insurance program primarily for people aged 6… #
Related terms: Part A, Part B, Part C. Example: Beneficiaries enroll in Medicare Part D for prescription‑drug coverage. Practical application provides a safety net for seniors. Challenges involve rising costs, sustainability, and coverage gaps.
Medical Necessity – A criterion used by insurers to determine whether a s… #
Related terms: prior authorization, coverage determination. Example: An insurer may deem a knee arthroscopy non‑necessary for osteoarthritis without mechanical symptoms. Practical use guides reimbursement decisions. Challenges include subjective interpretation and potential denial of needed care.
Mixed‑Payment Model – A reimbursement approach that combines elements of… #
Related terms: hybrid payment, blended financing. Example: A provider receives a base capitation fee plus performance bonuses for quality metrics. Practical application aims to harness strengths of multiple models. Challenges involve complexity in contract design and administration.
National Health Expenditure (NHE) – The total amount spent on health‑care… #
Related terms: health‑care spending, macro‑economics. Example: The United States’ NHE reached 18 % of GDP in 2023. Practical use informs policy debates on affordability. Challenges include accurate data collection and attributing cost drivers.
Network Adequacy – The ability of a health‑plan’s provider network to sup… #
Related terms: provider directory, access standards. Example: Regulations may require that primary‑care appointments be available within 15 days. Practical application ensures enrollee access to needed care. Challenges involve maintaining sufficient provider participation and geographic coverage.
Outcome Measures – Indicators that assess the results of health‑care inte… #
Related terms: clinical endpoints, quality metrics. Example: The 30‑day mortality rate after cardiac surgery is an outcome measure. Practical use drives improvement initiatives. Challenges include risk adjustment and data capture.
Patient‑Centered Medical Home (PCMH) – A model of primary‑care delivery t… #
Related terms: team‑based care, continuity. Example: A PCMH practice uses health‑IT tools to track preventive services for each patient. Practical benefits include improved chronic‑disease management. Challenges involve transformation costs and provider buy‑in.
Patient‑Reported Outcome Measures (PROMs) – Standardized tools that captu… #
Related terms: health‑related quality of life, survey instruments. Example: The PROMIS fatigue scale measures self‑reported fatigue in cancer survivors. Practical application supports value‑based contracting. Challenges include ensuring cultural relevance and minimizing response burden.
Pay‑for‑Performance (P4P) – A reimbursement strategy that ties provider p… #
Related terms: quality incentives, bonus payments. Example: A hospital receives a bonus for maintaining a low central‑line infection rate. Practical use promotes accountability and improvement. Challenges involve metric selection, gaming, and the impact on safety‑net providers.
Pharmacy Benefit Manager (PBM) – An intermediary that administers prescri… #
Related terms: rebate, drug utilization review. Example: A PBM secures a rebate from a manufacturer for a high‑volume generic drug. Practical benefits include cost savings and formulary management. Challenges include transparency concerns and potential conflicts of interest.
Population Health Management (PHM) – Strategies that aim to improve healt… #
Related terms: risk stratification, care coordination. Example: An insurer uses analytics to identify high‑risk diabetics and enrolls them in intensive case‑management programs. Practical application reduces costly complications. Challenges involve data integration and aligning incentives across providers.
Quality Adjusted Life Year (QALY) – A measure that combines life expectan… #
Related terms: utility weight, cost‑utility analysis. Example: A therapy that adds 0.5 QALY at $20,000 per QALY may be considered cost‑effective under many thresholds. Practical use guides resource allocation. Challenges include ethical debates over valuing life and methodological consistency.
Risk Adjustment – A statistical process that modifies payments based on t… #
Related terms: hierarchical condition category, case‑mix adjustment. Example: Medicare Advantage plans receive higher payments for beneficiaries with multiple chronic conditions. Practical application mitigates incentives to select healthier members. Challenges involve accurate coding and preventing upcoding.
Risk Pool – A collective group of individuals whose health‑care costs are… #
Related terms: insurance pool, actuarial fairness. Example: An employer group creates a risk pool for its employees to negotiate better rates. Practical benefits include predictability of costs. Challenges arise when adverse selection skews the pool composition.
Scope of Practice – The defined range of services that a health‑care prof… #
Related terms: licensure, credentialing. Example: Nurse practitioners in some states have full practice authority, allowing independent diagnosis and prescribing. Practical implications affect workforce utilization. Challenges include variability across jurisdictions and resistance from other professional groups.
Social Determinants of Health (SDOH) – Non‑medical factors such as income… #
Related terms: health equity, community health. Example: Poor housing conditions contribute to higher asthma rates in a neighborhood. Practical application involves cross‑sector collaborations to address root causes. Challenges include data collection and aligning health‑care incentives with social interventions.
Supply‑Side Economics – An economic theory emphasizing that increasing th… #
Related terms: provider competition, market entry. Example: Expanding the number of outpatient surgery centers may reduce procedure costs. Practical relevance informs policy on deregulation. Challenges include ensuring quality and avoiding oversupply that leads to unnecessary services.
Telehealth – The delivery of health‑care services and information via ele… #
Related terms: virtual care, remote monitoring. Example: A patient conducts a video visit for a follow‑up of hypertension management. Practical benefits include increased access and convenience. Challenges involve reimbursement parity, licensure across state lines, and technology adoption.
Third‑Party Payer – An entity other than the patient or provider that fin… #
Related terms: insurer, health plan. Example: Medicare acts as a third‑party payer for services rendered by hospitals. Practical relevance shapes contract negotiations. Challenges include complex claim processing and policy variations.
Total Cost of Care (TCOC) – The aggregate expense incurred for all health… #
Related terms: episode cost, cost accounting. Example: An accountable care organization measures TCOC for diabetic patients to assess the impact of care‑coordination programs. Practical use supports budgeting and performance evaluation. Challenges include capturing all cost components and attributing savings accurately.
Utilization Management (UM) – A set of techniques used by payers to evalu… #
Related terms: prior authorization, case review. Example: A UM program may require authorization for high‑cost imaging studies. Practical application reduces unnecessary utilization. Challenges involve administrative burden and potential delays in care.
Value‑Based Purchasing (VBP) – A strategy that links provider reimburseme… #
Related terms: pay‑for‑performance, quality incentives. Example: Medicare’s VBP program adjusts hospital payments based on readmission rates and patient satisfaction scores. Practical benefits include promoting higher‑quality care. Challenges involve data integrity, risk adjustment, and unintended gaming.
Vertical Integration – The consolidation of health‑care entities across t… #
Related terms: health‑system consolidation, merger. Example: A health system integrates a network of primary‑care offices to steer referrals. Practical implications include coordinated care pathways and potential cost savings. Challenges involve antitrust scrutiny and preserving competition.
Willingness‑to‑Pay (WTP) – The maximum amount an individual is prepared t… #
Related terms: contingent valuation, cost‑benefit analysis. Example: Survey respondents may indicate a WTP of $1,200 for a new vaccine that reduces infection risk by 50 %. Practical use informs pricing and reimbursement decisions. Challenges include eliciting reliable preferences and accounting for income effects.