An Introductory Guide to Utilization Management in Healthcare
An Introductory Guide to Utilization Management in Healthcare
Utilization management (UM) https://sites.google.com/view/denialmanagement/denial-management is a complex process that works to improve healthcare quality, reduce costs, and improve the overall health of the population. This guide explains how it works, who it helps, and why it’s important.
In this article, you’ll learn about the utilization management types of reviews, the process flow, and how to implement a UM program.
What Is Utilization Management in Healthcare?
Utilization management (UM) is a process that evaluates the efficiency, appropriateness, and medical necessity of the treatments, services, procedures, and facilities provided to patients on a case-by-case basis. This process is run by — or https://sites.google.com/view/denialmanagement/denial-management on behalf of — purchasers of medical services (i.e., insurance providers) rather than by doctors. Hospitals, medical staff, insurers, and patients are all affected by UM.
Medical services evaluated (generally tracked by per thousand patients per year) by utilization management can include the following:
- Inpatient admissions
- Inpatient days
- Skilled Nursing Facility (SNF) admissions
- SNF inpatient days
- Home health visits
- ER visits
- Outpatient visits
Other metrics (usually tracked by number of patients per month or per year) can include primary care physicians visits, specialty referrals, high-cost imaging (MRI, PET, etc.), and cost per visit.
Types of Utilization Management
UM has three main types of reviews: prospective, concurrent, and retrospective. This structure is comparable to the Donabedian model of healthcare quality, developed in the late 20th century by Avedis Donabedian. Each kind of review can impact the process differently.
- Prospective Review: Performed before or at the onset of treatment, on a case-by-case basis, this review is designed to eliminate unneeded services. The chosen treatment should be considered contingent, and may be changed later.
- Concurrent Review: This type of review occurs during the course of treatment and tracks a patient’s progress and resource consumption; which may cause in-process care procedures to stop.
- Retrospective Review: Conducted after treatment is done, the review assess the appropriateness and efficacy of the treatment in order to provide data for future patients.
Let’s take a closer look at each type of review.
A prospective review is an analysis of a patient’s case and their proposed treatment. Its main purpose is to eliminate unneeded, ineffective, or duplicate treatments. A prospective review is used during routine referrals and urgent referrals, but not for ER admissions. The review can occur before or after admission to a facility, but always before treatment begins. In some cases, a doctor’s orders may be overridden, which can cause resentment in the medical staff and patients.
Prospective reviews may also be known as precertification, preadmission certification, admission certification, prior authorization preservice review, or preprocedure review.
A concurrent review occurs while treatment is in progress and usually starts within 24-72 hours of admission to a hospital. The main focuses of the review are to track utilization of resources and the patient's progress, and to reduce denials of coverage after the treatment is complete. The following are included in the review:
- Care Coordination: Syncing the delivery of a patient’s health care when it comes from multiple providers or specialists.
- Discharge Planning: Determining what needs or milestones need to be met for a patient to leave the hospital.
- Care Transition: When a patient moves from one level of care to another (for example, from ICU to standard care).
During a concurrent review, a service or treatment that’s already underway may be stopped, or reviewers may look for alternatives to ongoing inpatient care or try to begin the discharge planning procedure sooner than the doctor would prefer. These actions may cause conflict between the insurer, the treating physician, and the patient.
A concurrent review can also be referred to as a continued stay review or an admission review.
A retrospective review is generally performed after treatment is complete. Its purpose is to assess the appropriateness, effectiveness, and timing of treatments, as well as the setting in which they were delivered.
The goal of a retrospective review is to see what treatments work best, so that those can be prescribed to similar patients in the future. It allows reviewers to find problems and successes, and send that data back to caregivers. You can also use this data in education and during contract negotiations between insurers and hospitals.
If proven treatments are not used, and a claim is denied, the financial burden falls on the caregiver. The process also looks to ensure that reimbursements are accurate, or if a claim should be denied. The review can also be redone if a denial is challenged or to respond to grievances.
A retrospective review can also be used at a key juncture of treatment rather than at the end, and the result may be that the patient’s treatment reverts back to a previous point. This change happens if the patient has not responded or the diagnosis changes, or if a different set of UM criteria comes into play (for example, if the patient’s insurance coverage changes).
Why Utilization Management Is Important
Utilization management began in the 1970s, but became prevalent in the 1980s, as healthcare costs started to rise more significantly than they had in past decades. Insurers and employers were looking for ways to control costs — and one of the key goals of UM is to keep costs down.
Utilization management looks at the effectiveness of treatments for each patient, both while they are occurring and after they are over. This analysis contributes to the second and third goals of UM, which are improving patient care and increasing the overall health of the population.
Reviewing treatments also contributes to the final goal of utilization management, which is to reduce denials. By using data gathered in a retrospective review, you can evaluate the effectiveness of treatments. When caregivers prescribe these treatments, insurers are more likely to approve them.
Below are a few other reasons that utilization management is important for patients, healthcare providers, and insurance companies:
- In the U.S., health insurance is mainly provided by employers. Increases in healthcare costs impact the profitability and competitiveness of the companies that provide these benefits. The private sector pays for the healthcare of most people under 65 (whether employer or individuals); effective treatments help sick or injured people get back to being productive, and also save money.
- Companies that self-insure assume the financial risk of health costs of their employees and dependants. Utilization management can help prevent one person’s health problems from negatively impacting the resources available for other people.
- The costs associated with running a utilization management program are small compared to the savings it can achieve.
- The effectiveness of new and experimental treatments are evaluated and made more available if they are better or cheaper than existing ones.
- Unnecessary or harmful treatments can be discovered and stopped.
- The average age of the population is rising, and so is the demand for effective treatment.
The elevator pitch for utilization management could be something like this: “Ensuring that patients receive effective care at the appropriate time, for the appropriate duration of time, delivered at a reasonable cost.”
Benefits of Utilization Management
A well-run utilization management program has benefits for all parties involved: patients, https://training.farmingadviceservice.org.uk healthcare providers, and insurers. The pros for each are as follows:
- Patients: Get lower costs, more effective treatments, and fewer claim denials.
- Healthcare Providers: Get fewer claim denials, lower costs, more effective treatments, better data, and better resource deployment.
- Insurers: Get lower costs, better data, and the evaluation of the effectiveness of new treatments and protocols.
How Utilization Management Can Reduce Denials
In utilization management, treatment is evaluated and approved either proactively (during prospective review) or while in progress (during concurrent review), creating fewer reasons to deny claims.
For example, after a primary care physician informs a patient that their diagnosis requires surgery (as well as referral to a surgeon), a patient contacts her employer’s insurance provider. The insurance provider contacts the surgeon to discuss the following options:
- In discussing inpatient versus outpatient surgery, they see that inpatient procedures have fewer complications, so they opt for that.
- They determine that pre-surgical tests can be performed on an outpatient basis.
- Based on those conclusions, they settle on the anticipated post-surgery recovery time and scheduled release date.
Having these conversations in advance means the treatment is less likely to be denied.
How Utilization Management Can Improve Care
In a fee-for-service healthcare model, patients will receive unnecessary and inefficient treatment. During the retrospective process of utilization management, examine the results of treatments and compare them to other treatments. Next, evaluate the data collected during this process and apply the findings to future patients in similar situations.
Here is another example of how utilization management improves care: A hospital admits a heart attack patient after they have been stabilized in the ER. The hospital contacts the patient’s insurance provider and they discuss the options for treatment and the optimal length of stay. The insurance provider checks in for progress reports regularly. The doctor says that the original treatment plan is not getting the expected results, so they change to a different treatment that has shown promise in similar patients.
Since the insurance company and doctor https://sites.google.com/view/denialmanagement/denial-management worked together to evaluate progress, they were able to find a course of treatment that could yield better results.
How Utilization Management Can Help Contain Costs
As doctors try new treatments, each are evaluated for efficacy compared to existing options. Treatments that get results will be covered in the future; those that don’t will not be covered going forward. The costs associated with running a UM program are small compared with the savings that one can achieve.
In addition, the following actions by insurance providers can also contribute to the goal of reducing costs:
- Incentives for doctors to prescribe less-costly treatments
- Education and feedback for doctors about effective care standards and practices
- Gatekeeping to manage patient referrals away from expensive services and specialists
- Patient education
- Design benefits to reward patients and healthcare providers that opt for less expensive treatments
- Contracts with providers that have proven records of cost containment
Doctors believe utilization management should recognize that the treating physician is the key role in the healthcare system. However, insurers believe that they, as the payer, should have the biggest say. Physician gatekeeping is a term that describes the process of an insurer having a major role in choosing when patients could be referred to specialists or provided treatments. In their 2002 paper “Utilization Management: Issues, Effects, and Future Prospects,” Thomas M. Wickizer and Daniel Lessler wrote, “Physicians have been outspoken critics of utilization management because it has limited their clinical autonomy and has contributed to an intolerable administrative burden.”
Challenges in Utilization Management
Like any process, utilization management isn’t perfect. There are issues that can create resistance and anger among both patients and healthcare professionals, including the following:
- Costs can fall on patients if post-treatment reviews result in a denial of benefits.
- Patients may have to bear costs if they don’t follow the treatment guidelines of the insurer.
- Patients may sue when coverage is denied, or if an experimental treatment is not permitted.
- Physicians don’t always have the insurer’s medical necessity guidelines as their first consideration when delivering care.
- Concurrent and prospective reviews may overturn wishes of primary care physicians.
- The number of reviews are rising, as are denials of coverage.
- The process steps required by insurers can be perceived as red tape or unnecessary by healthcare workers.
- Physicians may not well-receive the results of retrospective reviews.
- Even with UM in place, the cost of care is still high, so it may be seen as ineffective.
- There is non-response or non-payment from an insurer (sometimes called de facto denial).
- Some tests may reduce uncertainty about the patient’s diagnosis, but not add any information that helps determine if a treatment is effective or not. Doctors may see these tests as important, but insurers might not have the same view.
- The number of insurance providers and the coverage available may cause costs to fluctuate.
- There may be a difference between the best practice and most cost-effective treatment, which can create a conflict between doctors and insurance companies.
- The process can be burdensome on medical staff, taking them away from time that could be better spent with patients.
- Review criteria are often hidden from doctors and patients, so they may not know why coverage is denied.
- UM may not have as big an effect as was once thought. In the same 2002 paper, Wickizer and Lessler found that “evaluations of UM have generated mixed findings, with some studies showing reductions in utilization and costs and others showing little effect.”
Reducing coverage denials is one of the key goals of utilization management, but they will not be completely obliterated. There are a myriad of reasons why insurers deny coverage, including the following:
- Contract exclusions, including services that aren’t covered or having services performed at facilities that aren't in an insurer’s network.
- Prescribed treatments that are unproven or investigational. (However, treatments are constantly under evaluation, so something denied today may be covered in the future.)
- Lack of medical necessity of a treatment.
- Technical errors in the documentation, such as missing or incomplete information.
Utilization Management Process Flow
The UM process is complex. Requirements will vary by location, partners, and focus of the medical organization. It’s impossible to map a process flow that will apply generally, but you can start by following the steps in the prospective, concurrent, and retrospective review.
Steps in Utilization Management
In this section, you’ll learn the basic steps that occur in the prospective, concurrent, and retrospective reviews. Not all steps will happen for all patients (for new.e-gfaop.org example, an emergency room admittance for a heart attack will most likely not have any prospective review steps), and you may need to repeat some of these steps if you appeal a declined treatment.
- Verify the patient’s coverage and eligibility of the proposed treatment.
- Collect the patient’s clinical information to determine the level of care needed and if the proposed treatment is medically necessary.
- Approve the treatment if criteria are met; deny it if not.
- If denied, the physician can appeal.
- Continue to collect patient’s progress, prognosis, cost, and resource usage.
- Insurer reviews data.
- Approve to continue or request to change treatment.
- If a change is requested, the physician can appeal.
- Insurer reviews a patient’s records.
- Based on the results, the insurer may update their criteria for covered treatments.
- In some cases, coverage will be denied at this point.
- If denied, the physician or patient can appeal.
Implementing a Utilization Management Program
It takes a lot of time and effort for a healthcare provider to implement a UM program. You can develop a program in-house, but there are many resources and help available from vendors such as URAC and National Committee for Quality Assurance (NCQA), as well as useful templates and well-known frameworks, like McKesson InterQual criteria or MCG.
The following questions will help guide the implementation of a UM program to ensure it meets goals and operates properly:
- How will the utilization management program limit unneeded utilization and contain costs?
- What are the potential consequences (both positive and negative) of bringing outside parties into the patient care decision-making process?
- Will current processes hold utilization management organizations and purchasers accountable for their actions, or will you require new forms of oversight?
- What are the responsibilities of healthcare providers and patients?
- What are the responsibilities and authority of case managers and care managers on the UM committee?
- How will you educate patients and staff about the value of UM?
UM programs will need to meet all applicable state and federal insurance guidelines and requirements (e.g., California Regional Healthcare Cost & Quality Atlas, ERISA, Medicare Access and CHIP Reauthorization Act, HIPAA), as well as health plan and payer requirements, including third-party payers (like the Inpatient Prospective Payment System). You may also need to consider specialty medical society guidelines.
Any hospital that receives reimbursement from Centers for Medicare and Medicaid Services (CMS) is required to implement a plan that provides for review of services furnished by the hospital and its medical staff.
A utilization management program can be run on a trial basis, but because it may require changes to processes, record keeping methods, and the creation of new roles, it may not make sense to do so.
A UM also needs to be comprehensive. In addition to primary care, pharmacy, advanced care, emergency services, behavioral health, psychiatry and substance abuse, and surgery, you’ll need to include any other relevant specialties. Run utilization management daily, on all cases, and document all key steps in order to provide the best data.
Documentation will need basic information like vital signs, diagnoses, and proposed treatment plan. However, more in-depth data is necessary, such as any lower-level care alternatives (like outpatient care) that were suggested and why they were not appropriate.
UM Components and Techniques
Utilization management is a complex process that has many moving parts. Keep the following in mind:
- Ensure the privacy and confidentiality of patient medical information.
- Internal quality improvement processes and audits will require clinical information, so you’ll need to set up data sharing.
- Treatment decisions will need to be reviewed and communicated in a timely manner, so delegate tasks and create a responsibility matrix that you can manage.
- Justify the medical necessity of admissions, extended stays, and professional services.
- Create a feedback process to evaluate the effectiveness of clinical criteria as well as satisfaction with the process.
- When an insurer denies treatment, having a review board to process and collaborate with patients will expedite responses (i.e., whether to appeal or accept and find another treatment).
- When decisions are appealed, a program should be in place that will allow data to be gathered to support the appeal.
- ICD-10 is a list of codes used to classify symptoms and diseases; because it is used internationally, using it as part of UM will help with communication.
- Incorporate Merit-Based Incentive Payments System (MIPS) and Alternative Payment Models (APM) into your program.
- Proactively work to ensure that clinical documentation supports proposed courses of treatment.
- Processes need to be evidence-based, so they will require data gathering and verification tools.
- Be prepared for external audits.
- Ensure that payers and insurers share data in a timely manner.
- Incorporate tools to identify high-risk patients and their impact on the process.
- Education is crucial for effective utilization management, so set up programs for patients and staff.
- Include administrative requests for clinical case reviews.
- Team-based care works well with UM. Primary care physicians should lead teams that work to their highest level, communicate with patients before, during, and after in-person office visits, have systems in place to identify gaps in care, preventive needs, and clinical pathways, work to support process improvement, and look for system-level trends.
High Cost Case Management
High cost cases — those in which a small number of patients or beneficiaries generate a large portion of covered medical expenses — can cause headaches for insurers. It’s estimated that one to seven percent of patients can account for 30-60 percent of costs. Utilization management case managers focus mainly on reducing costs over other key goals.
While the same steps are used as other cases (assessing needs and circumstances, and then planning, arranging, and coordinating the treatment), these cases will get extra scrutiny in an attempt to find cheaper treatment options. Often, this step happens without the patient's consent. However, there is generally no penalty if a patient is not willing to comply.
Insurers may opt to cover treatment options that they don’t normally cover if it will cost less than treatments that they normally contract.
High cost case management can also be referred to as catastrophic case management, large case management, medical case management, or individual benefits management.
Pharmaceuticals in Utilization Management
There are some aspects of utilization management that are specific to prescribing drugs and tracking their effects. For example, many drugs require prior authorization before they can be dispensed. This authorization step allows the insurer to verify if there are lower-cost or generic options available, and also reduces the chance of addiction and abuse. Quantity limits also prevent waste and reduce the potential for abuse and addiction. Patients can also ask for exceptions and medicines, but these must be approved by the insurer before they will be covered. Insurers can also track patient adherence to a treatment plan by refill rates.
Utilization Management versus Utilization Review
The two terms are occasionally used as synonyms. Utilization review (UR) is a process in which patient records are reviewed for accuracy and completion of treatment, after the treatment is complete. UR, a separate activity, can be a part of UM (specifically during retrospective review), and can drive changes to the UM process.
Utilization Management versus Case Management
Professionals can’t always agree on the definition of case management, but according to the Case Management Body of Knowledge, it’s “…a professional and collaborative process that assesses, plans, implements, coordinates, monitors, and evaluates the options and services required to meet an individual’s health needs.”
Case management promotes patient health, service quality, and cost-effective outcomes.
URAC Standards for Utilization Management
URAC (which originally stood for Utilization Review Accreditation Commission, but now has no official meaning) is a non-profit organization that runs accreditation programs for many areas of healthcare (they also provide education programs). One of their areas of accreditation is utilization management.
URAC works with UM programs to help them improve and meet URAC standards in order to become and stay accredited. You can download a high-level list of URAC’s standards from their website. Among the important parts of these standards include the recommended structure of an organization involved in UM, qualifications needed for key roles, how to manage information, and how to stay in compliance with regulations.
NCQA Utilization Management Standards
NCQA (National Committee for Quality Assurance) is a non-profit that also operates healthcare-related certification and accreditation programs, including utilization management. Their UM offerings include a framework on which to build a program that aligns with state requirements.
You can read about the benefits and the accreditation process on their website.
Utilization Management Plan Template
Because UM is such an involved and intertwined set of processes and procedures, a simple template would not be helpful. However, the Medicare and Medicaid Conditions of Participation Tenent Healthcare website contains extensive templates that will give you an idea of the amount of work required to set up a UM program.
People and Entities Involved in Utilization Management
In addition to the nurses, doctors, hospitals (from small town clinics to well-known facilities like the Mayo Clinic), their staff (including program managers, medical directors, and referral coordinators), private insurance companies (e.g., Aetna and Allstate), there are a number of other entities that are important to UM.
- Medicare: A government-run insurance program for people 65 and older.
- Medicaid: A government-run insurance program for low income people.
- Prefered Provider Organization (PPOs): An example of managed care. They are health insurance companies that contract with healthcare providers for reduced rates. Blue Cross/Blue Shield is the best-known example of a PPO.
- Health Maintenance Organization (HMOs): Another type of managed care that provides both insurance and healthcare, or works with closely-affiliated entities for healthcare. Kaiser Permanente is a well-known HMO. HMOs are sometimes called integrated delivery systems, and they drove the growth of UM in the 1980s. HMOs generally have higher quality and lower costs than PPOs.
- URAC: An organization that accredits utilization management programs and provides education as well.
- National Association of Insurance Commissioners (NAIC): An entity that sets standards and defines regulations for the insurance industry, including how to implement UM.
- American Hospital Association (AHA): A professional association that is one of the drivers behind UM, and acts as a clearinghouse for national healthcare data for their members.
- Iowa Hospital Association (IHA): A regional version of the AHA.
- American Physical Therapy Association (APTA): An entity that provides information and guidance about UM to its members.
- National Academy of Medicine (NAM): Formerly known as IOM (Institute of Medicine), NAM is affiliated with the National Academy of Science. The organization provides information and advice about health and health policy. It ran an advisory board called the Committee on Utilization Management by Third Parties, which helped improve the effectiveness of UM.
- Recovery Audit Contractors: These people review claims for Medicare and Medicaid to find and correct errors, improper reimbursement, incorrect coding of services, non-covered services, and duplicate services. They are partly reimbursed based on the improper payments they identify.
- Centers for Medicare and Medicaid Services (CMS): A federal agency that is involved with the administration of those programs, plus CHIP (Children’s Health Insurance Program), the federal health insurance marketplace, and HIPAA (Health Insurance Portability and Accountability Act) program. CMS provides data on healthcare quality and costs to the public.
- Peer Review Organizations (PROs): Groups of local doctors mandated by the 1982 Tax Equity and Fiscal Responsibility Act that look at the quality and cost of services to ensure they meet Medicare requirements for quality and cost.
- Independent Practice Association (IPA): An association of independent physicians that contracts with care delivery organizations to provide services to managed care organizations like HMOs and PPOs.
- Managed Care Resources: A nurse-owned organization that works with managed care organizations.
- Envolve Healthcare: A private company that provides services to insurance companies and medical service providers to help them manage their UM programs
- UM Reviewers: People who help resolve conflicts that come up when case decisions are disputed or challenged.
- Utilization Management Nurses: Nurses who work for insurers or hospitals, and are involved in deciding the type of treatment patients receive.
- Clinical Documentation Improvement (CDI) Specialists: People who examine documentation used to communicate with insurers to look for any red flags or enhancement opportunities.
- Physician Advisors: People who review cases for which the proposed treatment may not be approved, and make recommendations to improve the chances of approval. They are sometimes tasked with running the overall UM program.
- Independent Review Organizations (IROs): Organizations that can be tasked with looking at denied claims and supporting or overturning the denials.
Future Considerations in Utilization Management
In some ways, UM already looks to the future. During retrospective reviews, the process examines the effectiveness of new and experimental treatments. If they are found to be more effective or cheaper than established ones, they’ll be moved into a preferred position. Trends that may affect utilization management include the following:
- As costs continue to rise, UM may focus more on cost containment and assessing the value of treatments than other goals. This act could have negative impacts on patients and doctors.
- Advancements in technology — not only in medical devices and pharmaceuticals, but also in electronic medical records — will require the UM process to continually adapt, not only in terms of how data is reviewed, but also in determining what is reviewed.
- The way medical services are delivered as the population ages may drive change in UM.
- Changes to organizational relationships and business methods at both hospitals/clinics and insurance providers may force changes in UM procedures.
- AI and big data may remove the need for human input on many cases.