Positives and Negatives of Limiting Access to Some Providers With the Utilization Review Yechniquea

Prior to having the cholecystectomy recommended by her physician, Greta Harrison calls an 800 telephone number to notify the organization that does utilization direction for her employer. That organization gets in touch with the surgeon'southward office to discuss various aspects of the intendance that is proposed for her. Is hospitalization necessary or tin can the surgery exist done as an ambulatory procedure? How long will the patient need to exist in the infirmary? In this example, the reviewer agrees that inpatient care is clearly appropriate only questions the plan to admit the patient ii days prior to surgery. Since the patient lives in the same town as the infirmary and tin easily have preoperative tests performed on an outpatient footing, the surgeon agrees to admit her on the day of the surgery.

Afterwards Michael Travers is admitted to the hospital following a myocardial infarction, the infirmary—aware of his benefit plan's requirements—notifies the appropriate utilization direction organisation. The length of stay is discussed, simply no explicit target appointment for discharge is fix. Even so, the hospital is then called every third day by the organisation, which evaluates information about the patient's demand for further hospitalization. The calls go along until Mr. Travers, who has a difficult recovery, is improved enough to be discharged to his dwelling house. The physician has non had to adjust the treatment programme just feels irritated at the "ruby tape" involved. And Mr. Travers has worried on some occasions that payment for part of his hospital stay might be denied.

With their daughter depending on a ventilator to breathe and receiving other hospital care for muscular dystrophy, the parents of Patty Simon are contacted by a example manager for the insurance company that covers the family. The question is whether they and their md would similar to explore arrangements for home care, which is possible in this instance simply considerably more complex than usual. With the parents' and physician'southward cooperation, the case director works out a plan for transfer that includes assessment of the dwelling house'due south wiring (which is acceptable for the equipment), provision for two shifts of home nursing intendance every day, and purchase of appropriate medical equipment and supplies. This requires some expenditures not usually covered by the do good plan, just the employer agrees with the insurer to make an exception in this case considering the arrangements will non just be less costly than infirmary care simply will as well improve the quality of life for the family.

With great rapidity and relatively little public awareness, a significant change has taken place in the way some decisions are made nigh a patient's medical care. Many decisions like those but described, one time the exclusive province of the physician and patient, now accept to exist examined in advance by an external reviewer, someone who is accountable to an employer, insurer, health maintenance system (HMO), preferred provider organization (PPO), or other entity responsible for paying all or most of the cost of the intendance. Depending upon the circumstances, this outside party may be involved in discussions about whether a service is needed, how treatment will be provided, and where care will occur.

This preliminary Institute of Medicine (IOM) report describes the nature of this change in medical decision-making and assesses its impact on patients, providers, and purchasers of medical services. Information technology focuses on the utilization management efforts of the private sector, which provides health benefits for nigh Americans nether age 65.¹

Prior review of proposed medical care is not entirely new in the 1980s. Review organizations for Medicare were performing some preadmission review in the 1970s, and some individual payers made limited apply of the technique even earlier. However, widespread application of this approach to managing health care utilization is a phenomenon of the 1980s.

A survey conducted in 1983 reported that just fourteen pct of corporate benefit plans required prior approval of nonemergency admissions to hospitals (Equitable Life Assurance Gild of the United States, 1983). By 1988, another survey found 95 of 100 large firms had such programs (Corporate Health Strategies, 1988). Perhaps half to three-quarters of employees nationwide are now covered by such programs, up from just 5 pct in 1984 (Foster Higgins, 1987; Gabel et al., 1988).

What accounts for this rapid spread of utilization direction through external assessments of the need for proposed medical services? The about obvious factor is quickly ascent wellness intendance costs. Purchasers' search for effective ways to limit their financial liability for health benefits stems straight from their conventionalities that costs are out of control.

The trends responsible for this view are painfully familiar to everyone concerned with health care financing. In 1987, the latest twelvemonth for which statistics are available, full spending on wellness intendance reached an estimated $500 billion, up from $234 billion just 5 years earlier (Levit and Freeland, 1988). This spending has been increasing at a charge per unit considerably higher up the charge per unit of general aggrandizement (Table 1-1), and the share of the gross national product attributed to wellness services went from v.ix per centum in 1965 to xi.1 percent in 1987. Spending for health intendance by business as a percentage of the gross private domestic product grew from one.1 percent in 1965 to iii.4 percent in 1987 (Levit et al., 1989).

Tabular array 1-one

Consumer Price Index in the The states (Almanac Average, 1967 = 100.0).

Loftier health care costs for employers take been cited as 1 gene impairing American competitiveness in world markets and a reason why many pocket-size firms do not provide wellness benefits for workers. In 1987, spending for health care past business equaled nearly 6 percent of total labor compensation compared with about 2 percent in 1965 (Figure one-1) (Levit et al., 1989). A recent survey of nearly 800 employers of all sizes reported average premium increases from 1987 to 1988 of 11 percent for conventional insurance plans and between 8 and 10 percent for HMOs (Gabel et al., 1989). Another survey cited boilerplate increases from 1987 to 1988 of fourteen percent for employers with insured programs and 25 per centum for employers with self-insured programs (Foster Higgins, 1989). Companies that self-insure assume all or most of the fiscal risk of paying for covered medical services used past employees and their dependents instead of paying an outside insurance to have that risk. In the private insurance sector, many commercial insurers, Bluish Cross and Blue Shield plans, and HMOs take seen significant underwriting losses—$3.half-dozen billion for commercial carriers and $1.ane billion for Blue Cantankerous and Blue Shield plans in 1988 (Donahue, 1989). Some commercial insurers, for example, Kemper, Provident Mutual, Allstate (for large groups just), and Transamerica Occidental, are withdrawing from the group health insurance market (Meyer and Page, 1988).

Figure 1-1

Expenditures by individual industry for health services and supplies as a percent of total labor bounty, 1965-1987. Source: Levit et al. (1989, p. 9).

To the dismay over rising health care costs has been added a growing perception that much medical care is unnecessary and sometimes harmful. The studies that have contributed to this perception have also produced some optimism that external review of physician practice decisions could detect unnecessary care, influence medico behavior, and reduce costs without jeopardizing admission to needed services (Eisenberg, 1986; Schwartz, 1984; Wennberg, 1984; Wennberg et al., 1977). In addition, experience has suggested that review of some intendance prospectively—prior to its provision— would exist more than palatable and effective than retrospective review has been. This set of perceptions and expectations is, in essence, the hypothesis of utilization direction, a hypothesis of interest to patients, practitioners, purchasers, and policymakers.

The IOM Committee on Utilization Management by Third Parties has examined the utilization direction hypothesis by request several questions.

How effective is utilization management in limiting utilization and containing costs?
Are there unintended positive and negative consequences of bringing an outside political party into the process of making decisions about patient care?
Are utilization management organizations and purchasers sufficiently accountable for their actions, or are new forms of oversight, peradventure regime regulation, needed?
What are the responsibilities of health intendance providers and patients for the advisable use of health services?

The commission'south investigatory approach has been described in the preface. Capacity ii through 5 talk over the committee'due south findings about why utilization management has get so widespread, how utilization management actually operates and appears to exist evolving, and what is known well-nigh its effects. In Affiliate 6, the committee assesses the current status of utilization management, including its strengths and shortcomings, and recommends near-term and longer-range actions that could aid utilization management realize its objectives of controlling costs and reducing inappropriate services without undermining patient access to needed care.

What Is Utilization Management?

In its study of utilization management, the commission found that the term has no single, well-accepted definition. Equally with the labels cost containment and managed care, unlike people may mean unlike things by the same term. In this study, the committee considers utilization management as a set of techniques used by or on behalf of purchasers of health care benefits to manage health care costs past influencing patient care controlling through case-past-case assessments of the ceremoniousness of care prior to its provision.

3 points about the committee'south focus are worth underscoring. First, the commission examines methods that rely on case-by-case assessments of care. Second, the focus is on review prior to the provision of services. Third, this report stresses actions taken to reduce costs for third-party purchasers of care. The get-go characteristic distinguishes utilization management from methods that analyze aggregate utilization patterns to identify potential issues or that rely on across-the-board limits on wellness care benefits that accept no business relationship of individual patient characteristics. The second characteristic differentiates utilization direction from the retrospective review of claims or medical records submitted after intendance has been provided. The third characteristic directs attending to purchaser-sponsored—rather than provider-sponsored—utilization direction efforts, except when providers explicitly share the financial risk with purchasers of intendance, every bit they exercise in HMOs.

The ascendant utilization management strategy is prior review of proposed medical services, which includes several related techniques. A second, more focused, strategy is high-toll case management (see Table 1-2).

Prior Review

Prior review provides advance evaluation of whether medical services proposed for a specific person conform to provisions of health plans that limit coverage to medically necessary intendance.² Most prior review programs include an integrated set of review steps, non all of which will apply to any single patient. The focus may be on the site of intendance, the timing or elapsing of care, or the need for a specific process or other service.

The first indicate of cess, ofttimes chosen preadmission review, may occur before an constituent hospital admission. This is what Greta Harrison and her doc experienced in one of the vignettes that opened this chapter. In this case, the review did not challenge the need for the procedure itself or the need for hospital intendance, but it did challenge the proposed admission 2 days before surgery. The terms preservice review and preprocedure review are sometimes used to indicate that the focus of review is the need for a procedure, regardless of whether information technology is to be performed on an inpatient or an outpatient basis.

For emergency or urgent admissions to the hospital when prior review is not reasonable or feasible, admission review may be required within 24 to 72 hours later hospitalization to check the ceremoniousness of the admission as early on as possible. The vignette describing Mr. Travers involved this technique as well as continued-stay review or concurrent review, which assesses the length of stay for both urgent and nonurgent admissions. Reviewers may press for timely discharge planning past hospital staff and, in some instances, assist in identifying and arranging appropriate alternatives to inpatient care.

In add-on, a patient may be required to get a second stance on the need for certain proposed treatments from a practitioner other than the patient'due south dr.. Increasingly, preadmission review or preservice review is used to screen patients and then that referrals for second opinions are focused on patients for whom the clinical indications for a service are dubious.

To encourage patients covered by a health plan to cooperate in the prior review procedure, a financial penalty, such as higher cost-sharing, may apply when individuals neglect to obtain necessary certifications. Chapter 3 provides more details about the mechanisms of prior review.

Although terms like prior review, predetermination, precertification, and prior authorization of benefits are often used interchangeably, the approving of benefits in advance of service provision may exist contingent rather than concluding. For example, if a retrospective claims review suggests that the information on which the predetermination was based was seriously flawed, payment of a merits may be denied upon further investigation. Or if a utilization direction house does not have admission to the details of the benefit plan for a group, it might authorize services not covered past the contract. A review of claims prior to payment might then event in denial of benefits. Since this latter practice commonly makes patients unhappy, many utilization management firms try to consider restrictions in a client's health plan in their determinations. Retrospective denials of claims following prior certification appear to be rare, as are refusals to preauthorize services.

High-Price Example Management

High-toll example direction—also called large case management, medical case direction, catastrophic instance direction, or individual benefits management—focuses on the relatively few beneficiaries in any group who take generated or are probable to generate very high expenditures. This pocket-size percentage of individuals—peradventure i to 7 percentage of a grouping—may business relationship for xxx to 60 per centum of the group'due south total costs. For the United States as a whole in 1980, 1 percent of the population accounted for 29 percent of total wellness intendance spending (Berk et al., 1988).

Case management for individuals with high-cost illnesses is similar to other forms of social and health case management, in that it involves assessing a person'southward needs and personal circumstances and then planning, arranging, and coordinating the recommended services. It differs in its targets, those very expensive cases for which specialized attention may encourage appropriate just less costly alternative forms of treatment.

In contrast to prior review programs, high-toll case management programs are usually voluntary, with no penalties for patient failure to become involved in the procedure or comply with its recommendations. (In the tertiary vignette, Patty Simon's parents could take refused the alternative course of care suggested for her.) In addition, more effort is generally devoted to reviewing the patient'due south particular condition and circumstances and exploring, even arranging, alternative modes of treatment. Finally, exceptions to limitations in do good contracts may be authorized in advance if this will permit advisable merely less expensive care. For instance, additional home nursing benefits may be arranged and so that an individual can avoid further hospitalization. In unusual cases, benefits may be provided for other than health care services, such every bit structure of a wheelchair ramp or rewiring a patient'due south dwelling house, if these expenditures will permit habitation care or self-care to be substituted for institutional services at a lower total cost. (The assessment of the wiring in Patty Simon's abode would accept been covered in this fashion.)

Retrospective Utilization Review

Utilization management techniques, peculiarly prior review methods, try to overcome the disadvantages and unhappiness associated with retrospective review and deprival of claims after services accept already been provided. Retrospective claims and medical record reviews tin can, however, support and reinforce utilization management by

monitoring the accuracy of information provided during prior review and identifying problem areas,
examining claims that are unsuitable for predetermination (generally those with loftier volume and depression unit of measurement costs), and
analyzing patterns of practitioner or institutional intendance for utilise in provider education programs and selective contracting arrangements.

Retrospective utilization review methods accept a longer history of general application than exercise prospective methods (Blum et al., 1977; Congressional Upkeep Office, 1979, 1981; Institute of Medicine, 1976; Police force, 1974). Its strengths and weaknesses have been scrutinized in a number of studies before this one and are non explicitly considered in this report. Nonetheless, constraints on retrospective review have been a cardinal stimulus for the development of prior review methods. Many of the concerns raised by the committee near the clinical soundness of review criteria, the fairness of procedures, and other matters described employ to both prospective and retrospective reviews.

Other Cost-Containment Methods

The techniques of prior review and high-toll case management are but a subset of the toll-containment methods that tin influence decisions about patient care. Other methods, some of which are discussed in Chapter 2 and Appendix B, include the post-obit:

benefit design (including patient price-sharing and coverage exclusions), consumer instruction, and other approaches that shape patient demand for care;
financial incentives (for example, capitation or bonuses) that are designed to reward physicians or institutions for providing less costly care;
contracts with health care practitioners and institutions that institute limits on payment for care provided to health plan enrollees;
utilize of gatekeeping, triaging, and other devices to manage patient menstruation to specialists and expensive services; and
physician teaching and feedback on standards of care and patterns of practice.

Utilization direction shares with the final four strategies a recognition of the physician's central role as the actor-managing director of the health intendance team who is responsible for organizing and directing the product process and providing some of the productive input (Eisenberg, 1986). The different strategies for influencing decisions about patient intendance, however, vary in their accent or reliance on different models of control (such as professional person cocky-regulation, informed consumerism, or prudent purchasing), their techniques of influence (such as education, financial incentives, peer pressure, or external oversight), and the parties involved (that is, patients, main intendance practitioners, or specialists).

Every bit volition be described in Chapter 2, different strategies for cost containment accept been tried, abandoned, and revived equally third-party financing of wellness care has expanded. This history reflects both the difficulties of the job and an appreciation that there is no single solution to problems of health intendance costs, quality, or admission. Many strategies take a place, each of which has unlike strengths and weaknesses and each of which needs monitoring and adjustment as circumstances change and people adapt to diverse attempts to shape their behavior.

Two Notes of Caution

Obstacles To Evaluation

This written report laments the limited evidence on utilization management and calls repeatedly for more and ameliorate assessments. Nonetheless, the commission is well enlightened that sound evaluation of utilization management programs faces several obstacles. Some are intrinsic to the research problem, some reflect common organizational behaviors, and some involve item pressures faced by marketplace-driven organizations. Rigorous evaluation also tends to exist quite expensive. In Appendix B of this report, the commissioned paper past Joan B. Trauner notes that evidence about the impact of physician fiscal incentives on patient intendance decisions and quality of care is also quite express.

Intrinsic Conceptual and Methodological Problems

A number of issues in evaluating utilization direction and other cost-containment programs are predictable difficulties faced, to one caste or another, in much social and evaluation research (Boil and Billings, 1988; Wennberg, 1987). One such problem is that there are no uniformly accustomed and applied rules for measuring health care utilization or adjusting data for differences in the characteristics of groups being compared. Other methodological difficulties involve (i) data quality and availability; (ii) definitions and measurements of program characteristics, grouping characteristics, outcomes, and other variables; (3) projections of what would have happened without the interventions; and (4) generalizations to other programs and settings.

Common Behavioral Biases Against Evaluation

Under this heading come obstacles to systematic evaluation that are typical of organizations whether they be public or private, for-profit or not-for-profit, big or small (Eddy and Billings, 1988; Hatry et al., 1973; March and Simon, 1958; Suchman, 1967). They include preferences for

activeness over evaluation, for case, developing, selling, and running a program rather than seeing if it works;
quick payoff rather than long-term products or results;
easy rather than difficult actions (for example, using data on inputs and procedures that are simpler to collect rather than data on outputs or outcomes);
compelling anecdotes, consensus, or tradition over careful and circuitous analyses; and
positive rather than negative results.

In addition, faced with limited resource, managers are often reluctant to allocate funds for evaluation instead of wages and benefits, shareholder dividends, or other activities. The commission has no information nigh what utilization management firms spend on evaluation (for internal use or for clients) or how much unlike employers invest in systematically assessing the bear upon of prior review or other cost-containment strategies.³

Competition and Evaluation

The normal private and organizational biases against systematic evaluation may exist both mitigated and intensified in competitive environments. Certainly, competition tin exist a powerful stimulus for internal evaluation of how well a product is working and what makes it work better. Too, clients of utilization management organizations have a strong interest in obtaining reports on results and in shifting their business to other firms if they cannot get such reports.

Balanced confronting these forces are several threats posed by evaluation. Most obviously, an evaluation may be negative and thereby reduce a business firm'due south chances for retaining clients or winning new clients.⁴ Moreover, when an evaluation is publicly available, a firm's competitors proceeds information that could help them build a example to inform potential clients that the competitor could provide meliorate results or, at least, better reports. Farther, evaluations of utilization management programs may provide competitors with statistical norms or even provider-specific data that would not be readily bachelor to them otherwise. Likewise, if firms that invest in relatively sophisticated research and development reveal their work, they may requite a costless ride for competitors to re-create or build on the resulting review criteria, analytic methodologies, or other products. In a new and rapidly evolving manufacture, this can seem a meaning issue for more experienced organizations.

Forces Behind Rising Health Care Costs

The Committee on Utilization Direction by Third Parties also recognizes that the forces behind rising health care costs are uncommonly strong and difficult to constrain through moderate ways. Many believe that, for the foreseeable future, health care costs will continue to increase faster than costs in the remainder of the economy.

Clinical judgments about the value of treatment for various categories of patients are changing as new treatments or new evidence of treatment impact emerges. For example, women who underwent mastectomy for breast cancer and had no evidence that the cancer had spread were until recently not expected to do good from chemotherapy, but some new analyses suggest such handling does increase survival rates. It too increases initial treatment costs (Early Breast Cancer Trialists' Collaborative Grouping, 1988). Recent guidelines for the utilise of mammography screening could greatly aggrandize the corporeality of such screening just some professional sources question whether the guidelines are clinically warranted (McIlrath, 1989).

New tests may reduce diagnostic doubtfulness but non add whatsoever information that aids in handling controlling (Kassirer, 1989). Advances in screening techniques may catch individuals much earlier in the course of disease and reduce the numbers who volition receive later expensive treatments. The question is, will the costs of screening and early on handling beginning the savings? Will real survival rates increment? Researchers involved with cancer point to methods nether development to screen for very early traces of dozens of different kinds of cancer, not all of which are more successfully treated if they are detected earlier.
The work force and the general population are aging, and the use of both acute-care and long-term-care services is higher for people in the older age groups.
Betwixt 1980 and 2000, the number of physicians has been projected to increase from 171 to 260 per 100,000 population (Graduate Medical Educational activity National Advisory Committee, 1981; U.South. Department of Wellness and Human Services, 1985). Whether this will bring a surplus of physicians is a matter for contend (Ginsburg, 1989; Schwartz et al., 1989). Even so, one judge, at present many years out of engagement, is that every additional physician results in $400,000 in additional yearly expenditures for medical services.
The concern about the millions of Americans who have no routine wellness insurance coverage is generating various proposals to protect these individuals through, for instance, state-sponsored insurance pools, mandated employer-based insurance, expansions of Medicaid, and universal federal wellness insurance (Congressional Research Service, 1988). What are the short-term costs (and for whom) of increasing access? What long-term costs and benefits can be expected?

Reducing increases in health intendance costs such that they are much closer to the level of general aggrandizement would appear to demand radical changes in American wellness policy, either major restructuring of the financing and delivery systems or major cutbacks through large shifts in costs to patients, astringent limitations on patients' choices of hospitals and physicians, and explicit rationing of some technologies for all or some individuals. Gild may non be willing to make such changes, specially in the short run (Curran, 1987). It may continue the search, described in the next chapter, for more moderate strategies to command wellness care expenditures. Utilization direction is i such strategy.

It is an unfortunate reality, however, that most cost-containment strategies eventually disappoint their supporters and evaluators to some degree. Even when these strategies seem to reduce costs initially, trend projections exercise not appear to show an appreciably lower increase in total costs over the longer term (Prospective Payment Assessment Committee, 1989). Given the effort and optimism it generally takes to commit a corporation or a government to a new program, information technology is non surprising that excessively high expectations ofttimes give fashion eventually to disillusionment. Unwarranted or excessive negativism can, in turn, be counterproductive and pb to premature abandonment of minor merely still helpful strategies.

Cognizant of these hazards, the Commission on Utilization Direction by Third Parties has tried to approach its initial evaluation of utilization management with reasonable expectations. To this end, the committee has reviewed the evolution of third-party financing of health care in the United states and the ways in which various strategies to manage costs have evolved. The adjacent chapter summarizes this review.

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1: Public programs have been the subject of several reports in recent years (for instance, General Bookkeeping Office, 1983, 1988a, 1988b; Health Care Financing Assistants, 1979; Doctor Payment Review Commission, 1988, 1989, and Project Hope, 1987).
2: Medical necessity is another term that is used differently by unlike people in different contexts. Some use information technology generally to encompass assessments of the site and duration of care likewise as the clinical demand for a particular procedure, whereas others apply it just in the latter sense. Those who apply the term more than restrictively tend to apply the term ceremoniousness to the quondam assessments. For a discussion of legal interpretations of medical necessity, see the paper past William A. Helvestine in Appendix A of this report.
three: The private sector is not lone in providing meager resource for program evaluation. The utilization and quality review components of Medicare's peer review organisation (PRO) plan take not been very rigorously examined (General Accounting Office, 1988a; Physician Payment Review Committee, 1988). The Health Care Financing Administration does have functioning standards for PROs, but they tend to emphasize process rather than issue and tend to involve measures of impact that are more than appropriate for ongoing monitoring rather than systematic evaluation of the review techniques.
4: Even when the reported results were positive, the committee encountered considerable reluctance past review organizations to have their analyses published.

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Source: https://www.ncbi.nlm.nih.gov/books/NBK234995/