Encounter Lifecycle: From Estimate to Settlement

The encounter lifecycle in Turquoise TEP is a deterministic, multi-stage process that transforms a clinical intention into a financial settlement. Unlike traditional claims processing, where pricing is unpredictable and adjudication happens after service, TEP guarantees pricing upfront and executes settlement in real time. Understanding this lifecycle is critical for providers, payers, and plan sponsors.

The Full Lifecycle

The encounter lifecycle consists of nine stages:

1. Estimate Request — A patient schedules a service. A provider or payer initiates a request for a Good Faith Estimate (GFE), specifying procedure codes, patient cost-sharing responsibility, and expected service date.

2. Good Faith Estimate (GFE) — TEP retrieves the applicable Direct Contract between the provider and payer, validates bundling rules, and generates a GFE with itemized pricing for all services expected to be included (facility, surgeon, anesthesia, pathology, etc.). This is a "pre-claim"—it reflects estimated pricing but is not yet a financial commitment.

3. Convened Estimate — The provider and payer review the GFE together. If pricing or scope requires adjustment, the GFE is revised. This stage ensures both parties agree on what will be billed and at what rate.

4. Advanced Explanation of Benefits (AEOB) — The payer issues an AEOB, which is a "pre-EOB"—a binding forecast of what the patient will owe (Maximum Cost Share) and what the payer will cover. The AEOB serves as a price lock: once issued, the patient's out-of-pocket cost cannot exceed the Maximum Cost Share, even if the actual claim is higher.

5. Voucher & Price Lock — The payer issues a voucher (a signed authorization) confirming the AEOB pricing. The patient receives the voucher and redeems it at the point of service. From this moment forward, the price is locked.

6. Service Rendered — Clinical services are delivered. Multiple providers may be involved (surgeon, facility, anesthesia, pathologist). Clinical documentation is captured and linked to the encounter.

7. Claim Submission — Professional claims (from surgeon, anesthesiologist) and institutional claims (from facility) are submitted simultaneously. Claims are grouped by encounter and mapped to Standard Service Packages (SSPs) defined in the Direct Contract.

8. ClaimResponse & EOB — TEP validates each claim against the contract, applies bundled pricing, and generates a ClaimResponse with pricing details, payment approval, and settlement instructions. This is the actual EOB—the real financial obligation.

9. Settlement & True-Up — Payment is transferred to provider accounts via Stripe Connect. If the actual claim cost differs from the AEOB forecast, a True-Up reconciliation occurs (see below).

Sequence Diagram

GFE vs. AEOB vs. EOB: Pre-Claims and Pre-EOBs

Understanding the distinction between these three artifacts is central to TEP's design:

Good Faith Estimate (GFE) is an estimate of what services will be performed and what they will cost. It is not a financial commitment; it is a proposal. The GFE is generated based on the Direct Contract's bundled rates and expected scope of service. A GFE is a "pre-claim"—it precedes actual service delivery.

Advanced Explanation of Benefits (AEOB) is the payer's binding forecast of cost-sharing responsibility. Once issued, the AEOB's Maximum Cost Share becomes a price lock—the patient cannot be billed more than this amount, period. The AEOB is a "pre-EOB"—it precedes the actual claim and EOB, but it is contractually binding.

Explanation of Benefits (EOB) is the actual financial outcome after service is rendered and claims are submitted. The EOB is generated from a ClaimResponse, which is calculated from the actual claim data. The EOB reflects what was actually billed, what is allowed under the contract, and what the patient owes (subject to the AEOB Maximum Cost Share cap).

info

Key Insight: GFE and AEOB are issued before service. Claim and EOB are issued after service. Once an encounter occurs (voucher redeemed), the pre-claims and pre-EOBs convert to real financial obligations. If there is a mismatch between forecast and reality, True-Up reconciliation resolves it.

FHIR Resource Mapping

Turquoise TEP uses FHIR R4 (Fast Healthcare Interoperability Resources) to represent these stages. Here is how TEP artifacts map to FHIR resources:

TEP Artifact	FHIR Resource	FHIR Profile	Key Fields
Good Faith Estimate (GFE)	Claim (status: draft)	Estimate	claim.type = "institutional" or "professional", claim.total.amount
Convened Estimate	Claim (status: active)	Estimate	updated scope/pricing in claim.item[]
AEOB + Price Lock	Claim (status: billed)	Predetermination	claim.total, claim.supportingInfo[costShare]
Voucher	Communication	Authorization	referencesClaim, voucherID, price-lock timestamp
Claim (Professional)	Claim (status: active)	Professional	claim.type = "professional", provider.reference, claim.item[].service
Claim (Institutional)	Claim (status: active)	Institutional	claim.type = "institutional", claim.item[].revenue, claim.hospitalization
ClaimResponse	ClaimResponse	Payment	claimResponse.status = "active", processing[], addItem[]
EOB	ExplanationOfBenits	Post-payment	eob.claim.reference, eob.total[]

tip

Developer Note: In FHIR R4, the Claim resource is polymorphic—it can represent professional claims (for individual providers) and institutional claims (for facilities). Turquoise TEP uses claim.type and claim.provider.reference to distinguish them. For institutional claims, claim.item[].revenue (the four-digit revenue code, e.g., "0360" for OR) is mandatory.

Price Lock Mechanics

The AEOB's Maximum Cost Share is the centerpiece of TEP's price lock. Once issued, this amount becomes an enforceable ceiling on patient liability. Here is how it works:

When the AEOB is issued, the Maximum Cost Share is calculated as:

Maximum Cost Share = (Patient Cost Share % × Negotiated Rate) + (Fixed Copay if any)

This value is communicated to the patient via the AEOB and voucher. The patient is guaranteed that their out-of-pocket cost will not exceed this amount, regardless of claim complications, emergent services, or adjudication surprises.

When the actual claim is submitted and priced:

• If the negotiated cost is lower than forecast (e.g., fewer items billed than expected), the patient's actual cost-share is recalculated downward.
• If the negotiated cost is higher (e.g., additional services required), the patient's cost-share is capped at the AEOB Maximum Cost Share. Any overage is handled by True-Up reconciliation.

warning

Critical: Once an AEOB is issued and communicated to the patient, the Maximum Cost Share is legally binding. The patient cannot be billed more than this amount without a new, separate AEOB for additional services (e.g., emergent procedures not in the original scope).

True-Up Reconciliation

At the end of an encounter, the actual claim cost may differ from the AEOB forecast. TEP handles three scenarios:

Scenario A: AEOB > Actual Claim Cost (Overpayment)

The AEOB forecast $1,200 in total cost. The actual claim totals only $1,000 (e.g., fewer items billed, better negotiated pricing). The patient was quoted a cost-share of $300 (25% of $1,200). However, the patient's actual liability is only $250 (25% of $1,000).

Resolution: TEP automatically refunds the patient $50. The refund is processed via Stripe and completes within 24 hours. The provider receives the negotiated rate ($1,000), and the payer absorbs the difference.

Scenario B: Actual Claim Cost > AEOB (Underpayment)

The AEOB forecast $1,200. The actual claim totals $1,500 (e.g., additional procedures, complex case). The patient was quoted a cost-share of $300 (25% of $1,200). The true cost-share should be $375 (25% of $1,500), but the patient is capped at $300 per the AEOB.

Resolution: The patient pays $300 (as promised in AEOB). The provider receives $1,200 (negotiated bundled rate). The remaining $200 (the delta between $1,500 claim and $1,200 contracted rate) is a "Fiduciary Adjustment" negotiated between the provider and payer. This is settled as a separate transaction, logged in the fiduciary ledger, and reconciled monthly.

Scenario C: AEOB = Actual Claim Cost (Perfect Match)

The forecast matches reality. No adjustment is needed. Settlement proceeds as planned.

info

Fiduciary Adjustment Definition: A Fiduciary Adjustment is a payment adjustment between provider and payer when actual claim cost exceeds the original AEOB forecast. It is not passed to the patient (patient is protected by the AEOB cap) and is reconciled separately in the fiduciary ledger with full audit trail.

Emergent & Out-of-Scope Services

If a patient requires services outside the original scope of the estimate (e.g., a post-operative complication, an undiagnosed condition requiring additional pathology), those services are out of scope and require a new Estimate Request and AEOB. They are billed separately and do not affect the original price lock.

If an emergency service is rendered within the original encounter window but is not in the original bundled rate (e.g., an emergency blood transfusion during colonoscopy), it can be handled one of two ways:

1. Inclusive: The service is considered part of the bundle, and the True-Up Fiduciary Adjustment covers the delta.
2. Separate: A new claim is submitted for the emergency service with its own Estimate Request and AEOB.

The choice is made by the provider and payer at the time the service is rendered and communicated to TEP via claim metadata.

Settlement & Payment

Once all claims are processed and priced, settlement occurs via Stripe Connect. Multiple providers (surgeon, facility, anesthesia, pathologist) are paid from a single encounter-level payment instruction. Each provider's share is calculated deterministically based on the Standard Service Package (SSP) definition and the bundled rate.

Payment to the patient (refund or cost-share collection) is handled separately. Refunds are initiated by TEP and processed within 24 hours. Cost-share collection (if any) is the responsibility of the provider per normal billing procedures.

All payment transfers are tagged with an opaque trace_id and linked back to the encounter in TEP's fiduciary ledger. No patient-identifiable information (PHI) is stored in Stripe.

Next Steps

See Bundled Pricing & SSPs to understand how rates are defined and packaged at different levels. Then explore Fast FHIR R4 Mapping for the detailed FHIR schema and Fiduciary Ledger for the settlement orchestration model.