# ICE-T Inpatient Cost Evaluation Tool

# Glossary

**25th Quartile (Q1)**

Q1 is the median of the bottom half of the data set. This means that 25% of the numbers in the data set lie below Q1 and 75% lie above Q1.

**50th Quartile (Q2)**

Q2 is the median of the data. This means that 50% of the numbers in the data set lie below Q2 and 50% lie above Q2. The 50^{th} quartile is different from the average or mean of the data.

**75th Quartile (Q3)**

Q3 is the median of the upper half of the data set. This means that 75% of the numbers in the data set lie below Q3 and 25% lie above Q3.

**Accountable Care Organization (ACO****)**

An *alternative payment model* where groups of doctors, hospitals, and other health care providers voluntarily come together to give coordinated high quality care to the patients they serve.

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**Alternative Payment Model (APM)**

A catch-all term for payment methods other than *fee-for-service* (FFS). APMs include several models, including *ACOs* and *bundled payments*.

**Benchmark Rate**

A reimbursement rate for *bundled payments* set by a payer. CMS uses the *expected value* of the episode minus 5 percent of costs as their benchmark rate. Providers can negotiate around this benchmark rate.

**Beneficiaries**

Patients eligible to receive medical services as part of Medicare Part A and Medicare Part B.

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**Box Plot**

A graphical rendition of statistical data displaying the minimum, 25th quartile, 50th quartile, 75th quartile, and maximum values of the data.

**Bundled Payments**

A payment model which provides a single payment for all services associated with a specific episode of care. Although there are multiple models for bundled payments, the most common models are *retrospective bundle payments* and *prospective bundle payments*.

**Bundled Payments for Care Improvement (BPCI)**

An initiative by CMS comprised of four broadly defined models of care, which link payments for the multiple services that *beneficiaries* receive during an episode of care.

**Centers for Medicare and Medicaid Services (CMS)**

CMS is part of the U.S. Department of Health and Human Services (HHS), and manages several programs, including Medicare and Medicaid.

**Diagnosis-Related Group (DRG) **

A classification system used by CMS which organizes inpatient visits into groups for the purpose of payment.

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**Episode of Care**

A method of categorizing the services provided to a given patient for a specific medical issue over time. The ICE-T app defines an episode of care as all services provided to a patient from the date of admission to 90 days after the patient is discharged.

**Expected Value**

A technique which predicts the value of a variable. It is calculated by multiplying each of the values in a sample by the likelihood that the value will occur, and then summing those values. The expected value reflects the underlying probability distribution of the sample. Also see *benchmark rate*.

** ****Fee-For-Service (FFS)**

FFS is a payment model where health care providers are reimbursed by payers for each individual service included in an episode of care, such as an office visit, test, or procedure.

**Frequency**

The number of episodes for a given DRG. It is easier to develop a bundle for a DRG with higher frequencies as practices are more likely to face the true average cost for an episode.

**Imaging **

Also known as medical imaging. Medical procedures for the diagnosing and treatment of disease and injuries using techniques such as radiography, computed tomography, magnetic resonance imaging, nuclear medicine, positron emission tomography and ultrasound.

**Imaging Cost **

The sum of all imaging-related costs associated with a specific *episode of care*.

**Imaging Share of Cost **

The percent of total costs associated with imaging for a specific *episode of care*.

**Inpatient Care **

Medical treatment for a patient who is admitted to a hospital with a doctor’s order. The patient’s last day of inpatient care is the day before they are formally discharged.

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**Maximum**

The highest value of the data.

**Mean **

The average value of the data, calculated by summing the values and dividing that by the number of observations. The ICE-T app reports the mean cost for DRGs.

**Medicare Part A **

Health care coverage which pays for hospital care, skilled nursing facility care, nursing home care, hospice, and home health services.

**Medicare Part B **

Health care coverage which pays for medically necessary services and preventive services not covered by Medicare Part A or Part D.

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**Minimum**

The lowest value of the data.

** ****Outpatient Care**

Medical treatment for a patient who receives services but is not formally admitted to the hospital with a doctor’s order.

** ****Prospective Bundle Payments**

Providers are reimbursed for episodes of care based on a fixed, pre-negotiated price. Providers retain all savings but also must incur any losses that may occur.

** ****Quartile**

Breakpoints dividing a set of observations into four equal sized groups. These groups are the 25^{th}, 50^{th}, and 75^{th} quartiles.

** ****Re-Insurance**

An insurance policy that providers purchase to cover the risk associated with high cost episodes of care. The policy reimburses providers for all episode costs above a designated threshold.

** ****Retrospective Bundle Payments**

Providers file traditional *fee-for-service* claims and reconcile the bundle with payers later by comparing the total episode cost to an established benchmark rate. Providers share savings with payers but must return portions of reimbursements received that are above the established benchmark rate. There are multiple methods for managing the risk for potential losses.

** ****Stop-Loss**

This is a risk mitigation technique for *retrospective bundled payments*. A stop-loss threshold is designated for the bundle, such as the top 1% of episodes by cost. If an episode cost falls above that threshold, payers will reimburse providers for the total cost of the episode, instead of the negotiated bundled price.

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**Total Cost**

The sum of all costs associated with a specific *episode of care*.

**Value**

The mean cost of a DRG. When a DRG has a high mean cost, it may not be profitable to bundle the DRG, especially if there is high variance or a low frequency.

**Variance**

A measure of how dispersed the values in a sample are from the mean of the sample. Understanding the variance in the cost of a DRG is important to understanding if a bundled payment price risk will cover the average risk. Higher variance in the DRG cost suggests that bundled payments will not cover the costs of these claims. A claim has higher variance in the Compare tool when the interquartile box is longer.

**Winsorized Mean**

An alternative method of calculating the mean of a sample. Values above and below a designated threshold are set equal to the new minimum and maximum values. With bundled payments, payers will then reimburse values above the new maximum and below the new minimum at a pre-negotiated rate.