PriorAuthNow Glossary of Healthcare Terms

PA / Prior Authorization / Preauthorization / Precertification:

These are terms that are often used interchangeably, but which may also refer to specific processes in a health insurance or healthcare context. Prior Authorization is a check run by some insurance companies or third party payers before they will agree to cover certain prescribed medications or medical procedures. There are a number of reasons that insurance providers require prior authorization, including age, medical necessity, the availability of a generic alternative, or checking drug interactions. A failed authorization can result in a requested service being denied, or an insurance company requiring the patient to go through a separate process known as ‘step therapy’, or ‘fail first’. Step therapy dictates that a patient must first see unsuccessful results from a medication or service preferred by the insurance provider, typically considered either more cost effective or safer, before the insurance company will cover a different service.

  • Most commonly, ‘preauthorization’ and ‘precertification’ refer to the process by which a patient is pre-approved for coverage of a specific medical procedure or prescription drug. Health insurance companies may require that patients meet certain criteria before they will extend coverage for some surgeries or for certain drugs. In order to pre-approve such a drug or service, the insurance company will generally require that the patient’s doctor submit notes and/or lab results documenting the patient’s condition and treatment history.
  • The term ‘precertification’ may also be used to the process by which a hospital notifies a health insurance company of a patient’s inpatient admission. This may also be referred to as ‘pre-admission authorization.’
  • Purpose and Costs: Insurers have stated that the purpose of prior authorization is to provide cost savings to consumers by preventing unnecessary procedures as well as the prescribing of expensive brand name drugs when an appropriate generic is available. In addition, a prior authorization for a new prescription may prevent potentially dangerous drug interactions. A 2009 report from the Medical Board of Georgia showed that as many as 800 medical services require prior authorizations. According to Medical Economics, physicians have expressed frustration with the current prior authorization process with regards to time spent interacting with insurance providers and the costs incurred based on that time. A 2009 study published in Health Affairs reported that primary care physicians spent 1.1 hours per week fulfilling prior authorizations, nursing staff spent 13.1 hours per week, and clerical staff spent 5.6 hours. A study in the Journal of the American Board of Family Medicine found that the annual cost per physician to conduct prior authorizations was between $2,161 and $3,430. The cost to health plans has been reported at between $10 and $25 per request. It is estimated that current prior authorization practices cost the US healthcare system between $23 and $31 billion annually.


Automated prior authorizations involves the use of a workflow engine that considers the data entered into the prior authorization and automatically moves the request to the next proper stage based on the rules established in the workflow. The PriorAuthNow platform supports APAs.


Ambulatory Surgery Center. Healthcare facilities focused on providing same-day (outpatient) surgical care, including diagnostic and preventative procedures.


Controlling Health Plan. A health plan that controls its own business activities, actions, or policies. Or is controlled by an entity that is not a health plan and; if it has sub health plans, exercises sufficient control over the sub health plan(s) to direct its/their business activities, actions, or policies.

CPT Code:

Current Procedural Terminology. This is a medical code set maintained by the American Medical Association through the CPT Editorial Panel. The CPT code set describes medical, surgical, and diagnostic services and is designed to communicate uniform information about medical services and procedures among physicians, coders, patients, accreditation organizations, and payers for administrative, financial, and analytical purposes. New additions are released each October.

CPT coding is similar to ICD-9 and ICD-10 coding, except that it identifies the services rendered rather than the diagnosis on the claim. ICD code sets also contain procedure codes, but these are only used in the inpatient setting. CPT is currently identified by the Centers for Medicare and Medicaid Services (CMS) as Level 1 of the Healthcare Common Procedure Coding System.


Durable Medical Equipment. Any equipment that provides therapeutic benefits to a patient in need because of certain medical conditions and/or illnesses. DME includes, but is not limited to, wheelchairs (manual and electric), hospital beds, traction equipment, canes, crutches, walkers, kidney machines, ventilators, oxygen, monitors, pressure mattresses, lifts, nebulizers, bili blankets, and bili lights.


Electronic Data Interchange. Allows providers to submit claims, retrieve claim file acknowledgements and remittance advices from their insurance carrier or clearinghouse electronically. Broadly speaking, EDI is the transfer of data from one computer system to another by standardized message formatting, without the need for human intervention. EDI permits multiple companies, possibly in different countries, to exchange documents electronically.

EDI Health Care Service Review Information (278):

This transaction can be used to transmit healthcare service information, such as subscriber, patient, demographic, diagnosis, or treatment data for the purpose of request for review, certification, notification or reporting the outcome of a healthcare services review.


Exclusive Provider Organization. As a member of an EPO, you can use the doctors and hospitals within the EPO network, but cannot go outside the network for care. There are no out-of-network benefits.


First Point of Contact (Pipedrive – internal PAN definition)

HCPCS Codes:

Healthcare Common Procedure Coding System. The acronym, HCPCS, is often pronounced “hick picks”. is a set of health care procedure codes based on the American Medical Association’s Current Procedural Terminology (CPT).

HCPCS includes three levels of codes:

  • Level I consists of the American Medical Association’s Current Procedural Terminology (CPT) and is numeric.
  • Level II codes are alphanumeric and primarily include non-physician services such as ambulance services and prosthetic devices, and represent items and supplies and non-physician services, not covered by CPT-4 codes (Level I).
  • Level III codes, also called local codes, were developed by state Medicaid agencies, Medicare contractors, and private insurers for use in specific programs and jurisdictions. The Health Insurance Portability and Accountability Act of 1996 (HIPAA) instructed CMS to adopt a standard coding systems for reporting medical transactions. The use of Level III codes was discontinued on December 31, 2003, in order to adhere to consistent coding standards.

Health Care Clearinghouse:

Companies that function as intermediaries who forward claims information from healthcare providers to insurance payers are known as clearinghouses. In what is called claims scrubbing, clearinghouses check the claim for errors and verify that it is compatible with the payer software.

Health Insurance Portability and Accountability Act of 1996:

It has been known as the Kennedy-Kassebaum Act or Kassebaum-Kennedy Act after two of its leading sponsors. It was enacted by Congress on August 21, 1996 and signed by President Bill Clinton. Title I of HIPAA protects health insurance coverage for workers and their families when they change or lose their jobs. Title II of HIPAA, known as the Administrative Simplification (AS) provisions, requires the establishment of national standards for electronic healthcare transactions and national identifiers for providers, health insurance plans, and employers.


Health Maintenance Organization. HMO plans offer a wide range of health services through a network of providers that contract exclusively with the HMO, or who agree to provide services to members at a pre-negotiated rate. As a member of an HMO, you will need to choose a primary care physician (PCP) who will provide most of your health care and refer you to HMO specialists as needed. Some HMO plans require that you fulfill a deductible before services are covered. Others only require you to make a copayment when services are rendered. Health care services obtained outside of the HMO are typically not covered, though there may be exceptions in the case of an emergency.


International Statistical Classification of Diseases and Related Health Problems, 10th Revision. A medical classification list by the World Health Organization (WHO). It contains codes for diseases, signs and symptoms, abnormal findings, complaints, social circumstances, and external causes of injury or diseases. The code set allows more than 14,400 different codes and permits the tracking of many new diagnoses. The codes can be expanded to over 16,000 codes by using optional sub-classifications.

The WHO provides detailed information about ICD online, and makes available a set of materials online, such as an ICD-10 online browser, ICD-10 Training, ICD-10 online training, ICD-10 online training support, and study guide materials for download.

The international version of ICD should not be confused with national modifications of ICD that frequently include much more detail, and sometimes have separate sections for procedures. The ICD-10 Clinical Modification (ICD-10-CM), for instance, has some 68,000 codes. The US also has the ICD-10 Procedure Coding System (ICD-10-PCS), a coding system that contains 76,000 procedure codes that is not used by other countries.

Network PLAN:

A ‘Network’ plan is a variation on a PPO plan. With a Network plan you’ll need to get your medical care from doctors or hospitals in the insurance company’s network if you want your claims paid at the highest level. You will probably not be required to coordinate your care through a single primary care physician, as you would with an HMO, but it’s up to you to make sure that the health care providers you visit participate in the network.


National Provider Identifier. A unique 10-digit identification number issued to healthcare providers in the US by the Centers for Medicare and Medicaid Services (CMS). The NPI has replaced the unique physician identification number (UPIN) as the required identifier for Medicare services, and is used by other payers, including commercial healthcare issuers. The transition to the NPI was mandated as part of the Administrative Simplifications portion of the Health Insurance Portability and Accountability Act of 1996 (HIPAA). All individual HIPAA covered healthcare providers (physicians, pharmacists, physician assistants, midwives, nurse practitioners, nurse anesthetists, dentists, denturists, chiropractors, clinical social workers, professional counselors, physical therapists, occupational therapists, pharmacy technicians, athletic trainers, or organizations (hospitals, home healthcare agencies, nursing homes, residential treatment centers, group practices, laboratories, pharmacies, medical equipment companies, etc.) must obtain an NPI for use in all HIPAA standard transactions, even if a billing agency prepares the transaction. Once assigned, a provider’s NPI is permanent and remains with the provider regardless of job or location changes. NPI data is downloadable from CMS and is updated weekly. As of March 2016, the file size is 569 MB and the full database is over 5.7 GB when extracted.


Insurance carriers, third-party payers, and health plan sponsors (employers or unions).

Payer Mix:

Jargon used to describe the percentage of revenue coming from private insurance versus government insurance versus self-paying individuals. The mix is important because Medicare and Medicaid pay hospitals less than what it costs to treat patients.


Under federal regulations, a ‘healthcare provider’ is defined as: as doctor of medicine or osteopathy, podiatrist, dentist, chiropractor, clinical psychologist, optometrist, nurse practitioner, nurse-midwife, or a clinical social worker who is authorized to practice as defined by State law, or a Christian Science practitioner. A health care provider also is any provider from whom the University or the employee’s group health plan will accept medical certification to substantiate a claim for benefits.


Point of Service. POS plans combine elements of both HMO and PPO plans. As a member of a POS plan, you may be required to choose a primary care physician who will then make referrals to specialists in the health insurance company’s network of preferred providers. Care rendered by non-network providers will typically cost you more out of pocket, and may not be covered at all.


Preferred Provider Organization. As the name implies, a PPO plan requires that you get your medical care from doctors or hospitals on the insurance company’s list of preferred providers if you want your claims paid at the highest level. You will probably not be required to coordinate your care through a single primary care physician, as you would with an HMO, but it’s up to you to make sure that the health care providers you visit participate in the PPO. Services rendered by out of network providers may not be covered or may be paid at a lower level. A broad variety of PPO plans are available, many with low premiums.


Subhealth Plan. A health plan whose business activities, actions, or policies are directed by a controlling plan.


an itemized form used by healthcare providers for reflecting rendered services. Superbill is the main data source for creation of healthcare claims, which will be submitted to payers for reimbursement.


Third-Party Administrator. An organization that processes insurance claims or certain aspects of employee benefit plans for a separate entity. This can be viewed as ‘outsourcing’ the administration of the claims processing, since the TPA is performing a task traditionally handled by the company providing the insurance or the company itself. Often, in the case of insurance claims, a TPA handles the claims processing for an employer that self-insures its employees. Thus, the employer is acting as an insurance company and underwrites the risk. The risk of loss remains with the employer, and not with the TPA. An insurance company may also use a TPA to manage its claims processing, provider networks, utilization review, or membership functions. While some third-party administrators may operate as units of insurance companies, they are often independent.

Title II Transactions and Code Sets Rule:

HIPAA was intended to make the healthcare system in the United States more efficient by standardizing healthcare transactions. HIPAA added a new Part C titled, “Administrative Simplification” to Title XI of the Social Security Act. This is supposed to simplify healthcare transactions by requiring all health plans to engage in healthcare transactions in a standardized way. The HIPAA/EDI provision was scheduled to take effect from October 16, 2003 with a one-year extension for certain ‘small plans’. However, due to widespread confusion and difficulty in implementing the rule, CMS granted a one-year extension to all parties. After July 1, 2005, most medical providers that file electronically did have to file their electronic claims using the HIPAA standards in order to be paid. Under HIPAA, HIPAA-covered health plans are now required to use standardized HIPAA electronic transactions.

Unique Identifiers Rule (National Provider Identifier):

HIPAA covered entities such as providers completing electronic transactions, healthcare clearinghouses, and large health plans, must use only the National Provider Identifier (NPI) to identify covered healthcare providers in standard transactions by May 23, 2007.