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How Utilization Review Works
Elaine Hinzey is a registered dietitian, writer, and fact-checker with nearly two decades of experience in educating clients and other healthcare professionals.
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Utilization review is the process of making sure healthcare services are being used appropriately and efficiently, which is a key component of a value-based approach to paying for health care .
This article will explain how utilization review works, where it's used, and how it affects your medical care and insurance coverage.
The goal of utilization review is to make sure patients get the care they need, that it’s administered via proven methods, provided by an appropriate healthcare provider , and delivered in an appropriate setting. The process should result in high-quality care administered as economically as possible and in accordance with current evidence-based care guidelines.
Who Does Utilization Review?
UR is done by health insurance companies , but also by hospitals, home health companies, and myriad other types of healthcare providers.
The government requires hospitals to have an effective utilization review program in order to participate in Medicare and Medicaid. And there are also drug utilization review protocols in place for both Medicare and Medicaid, in an effort to reduce abuse and misuse of certain medications, particularly opioids.
Utilization review can be done while the care is being given, known as concurrent UR, or after the care has been completed, known as retrospective UR. Utilization reviews can also be done prospectively, as part of the prior authorization process , when a patient needs approval from their health insurer before a test or treatment can be performed.
UR is frequently, but not always, done by nurses. UR nurses have protocols that define what high-quality care is and by whom and in what setting it should be administered. This includes an analysis of whether a patient should be admitted as an inpatient or kept under observation , which changes how some types of health insurance cover the hospital stay.
UR nurses at hospitals and home health companies work closely with their UR nurse counterparts at health insurance companies, as well as with the quality improvement team, the social work team, the discharge planning team, and the clinical staff caring for the patient.
Sometimes, the hospital UR nurse is also the discharge planner. When UR and discharge planning are combined into one job, it's known as case management .
An Example of Utilization Review
Sam is admitted to the ICU through the emergency room in the middle of the night after a car accident. The next morning, the hospital’s UR nurse looks at Sam’s medical record and notes all of his medical problems and treatments.
She consults her protocols to make sure that the ICU is the best place for Sam to be treated. For example, it could be that Sam would benefit from being transferred to a specialty trauma ICU at the regional trauma center. Alternatively, it could be that Sam’s injuries aren’t so severe and his treatments not so complex as to warrant being in the ICU; he might be more efficiently and economically cared for in the ICU step-down unit or on a surgical floor.
Most of the time, she’ll find that patients are being cared for at the correct level of service, and that Sam should be in the ICU right where he is. However, if her protocols suggest a different level of care would be more appropriate, she would discuss this with the doctors and nurses who are providing Sam's medical care.
Those doctors and nurses may provide additional information which makes it clear that Sam is right where he needs to be. But it might also become clear that Sam would be cared for more appropriately in a different setting, like the ICU step-down unit or the regional trauma center’s trauma ICU. If this is the case, the UR nurse works with the physician and the nursing staff to get Sam where he can receive the best and most efficient care to meet his medical needs.
The hospital UR nurse communicates with the UR nurse at Sam’s health insurance company. The health plan UR nurse compares Sam’s clinical findings and treatments with the health plan’s protocols. She then communicates back to the hospital UR nurse something to the effect that the health plan approves Sam’s admission and treatment and is authorizing four days of hospitalization. She might add instructions to contact her if it becomes apparent Sam will need more than four days of hospitalization.
The hospital UR nurse follows along with Sam’s progress every day or two. If it becomes clear to her that Sam won’t be healthy enough to be discharged before the four days approved by the health plan’s UR nurse are up, she’ll contact the health plan’s UR nurse with an update on Sam’s condition and treatments.
If the hospital notifies the health plan’s UR nurse that Sam won’t be ready to go home when anticipated, the health plan’s UR nurse will consult her protocols and either approve more days of hospitalization or suggest a more appropriate alternative care setting.
For example, if Sam needs intensive physical therapy but not the other medical services that acute-care hospitals provide, the health plan’s UR nurse might suggest transferring Sam to an inpatient rehabilitation facility where he can get the physical therapy and nursing care he needs more economically.
Utilization Review in Your Health Plan
UR done by your health plan is similar to UR done in a hospital but with a few differences. For example, if a hospital admission doesn't pass UR at the health plan, the health plan will likely deny the claim when the hospital sends the bill. Your health plan won't pay for care it doesn't believe is medically necessary or care not delivered in an appropriate setting.
Part of the reason hospitals tend to have such robust internal utilization review protocols—and a line of communication with the UR teams at the health plans that contract with the hospital—is to avoid claim denials in the first place. Hospital protocols are designed to ensure that the care they're providing is appropriate, efficient, and linked to improved patient outcomes.
That said, there are appeals processes in place that you and your healthcare provider or hospital can use if your health plan denies a claim.
States can and do regulate how health insurance companies conduct utilization review, for health plans that are regulated at the state level (ie, health plans that aren't self-insured). The National Association of Insurance Commissioners has a utilization review model act that states can use as-is or modify as necessary to meet state laws and regulations.
State insurance commissioners are responsible for overseeing the insurance companies that offer coverage within the state, and you can reach out to your state's insurance commissioner if you have a question or comment about your health plan's utilization review process.
Utilization review is a process designed to ensure that medical care is effective, efficient, and in line with evidence-based standards of care. Utilization review specialists are often nurses. They work for health insurance companies, hospitals, and various other medical providers. Utilization review teams at hospitals tend to work in tandem with their counterparts at health insurance companies, to ensure that everyone is on the same page in terms of the care that each patient needs. This helps to expedite prior authorization from health plans and ensure that patients' claims are covered.
A Word From Verywell
Utilization review is done to ensure that your medical care is as effective and efficient as possible. Your health plan doesn't want to pay for care that's not necessary or that's overly expensive, but both the health plan and the medical providers want you to recover as quickly as possible. If you're worried that utilization review might be compromising your access to certain types of care, you can reach out to the team that's reviewing your case to discuss it with them. And in most cases, you can appeal a decision that your health plan makes regarding the care they'll authorize.
Centers for Medicare and Medicaid Services. CMS manual system pub.100-07 state operations provider certification .
Centers for Medicare and Medicaid Services. Improving Drug Utilization Review Controls in Part D .
Medicaid.gov. Drug Utilization Review Guidance .
MCG Health. The utilization review process and the origins of medical necessity .
American Medical Association. Inpatient versus observation care .
RegisteredNursing.org. What is discharge planning and utilization review ?
Healthcare IT News. Reinventing utilization management .
- Jacqueline LaPointe
LaPointe, Jacqueline. RevCycle Intelligence. Hospital Utilization Management Can Reduce Denials, Improve Care .
HealthCare.gov. How to appeal an insurance company decision .
National Association of Insurance Commissioners. Utilization Review and Benefit Determination Model Act .
MCG.com. The Utilization Review Process and the Origins of Medical Necessity .
By Elizabeth Davis, RN Elizabeth Davis, RN, is a health insurance expert and patient liaison. She's held board certifications in emergency nursing and infusion nursing.
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The Utilization Review Process and the Origins of Medical Necessity
According to the Centers for Medicare & Medicaid Services Glossary (2016) , medical necessity is defined as “services or supplies that: are proper and needed for the diagnosis or treatment of a medical condition, are provided for the diagnosis, direct care, and treatment of a medical condition, meet the standards of good medical practice in the local area, and aren’t mainly for the convenience of the patient or doctor.”
An Introduction to Utilization Review
Healthcare has changed drastically in the last 100 years. Healthcare costs continue to rise, quality of care is questioned, and chronic diseases are evident now more than ever before. These challenges must be addressed by the industry, and effective solutions are a must.
Utilization review (UR) is one solution to the obstacles we face today in the healthcare industry. Utilization review is a method used to match the patient’s clinical picture and care interventions to evidence-based criteria such as MCG care guidelines . This criteria helps to guide the utilization review nurse in determining the appropriate care setting for all levels of services across the arc of patient care.
History of Utilization Review
Due to rising costs after the induction of health insurance in the 1960s, President Lyndon B. Johnson and the U.S. Congress responded with programs we now call Medicare and Medicaid . Medicare/Medicaid allowed for reimbursement to the physician for a reasonable and customary charge. Due to rising costs, and the offering of healthcare insurance from employers to employees, utilization review was presented.
Utilization review, as a process, was introduced in the 1960s to reduce overutilization of resources and identify waste. The utilization review function was initially performed by registered nurses (RNs) in the acute hospital setting. The skillset gained popularity within the health insurance industry, mainly due to growing research about medical necessity, misuse, and overutilization of services. Therefore, health plans began to review claims for medical necessity, and the hospital length of stay (LOS). To contain costs, some health plans required the physician to certify the admission and any subsequent days after the admission.
Utilization Review Process
There are three activities within the utilization review process: prospective, concurrent and retrospective.
- Prospective review includes the review of medical necessity for the performance of services or scheduled procedures before admission.
- Concurrent reviews include a review of medical necessity decisions made while the patient is currently in an acute or post-acute setting.
- Retrospective reviews involve a review of coverage after treatment is provided.
The complete utilization review process consists of precertification, continued stay review, and transition of care.
When a patient is admitted to the facility, a first level review is conducted for appropriateness; this includes medical necessity, continued stay, level of care, potential delays in care and progression of care.
Medical necessity determines whether the hospital admission is appropriate, justifiable and reimbursable. Continued stay determines if each day of the stay is necessary and if the level of care is appropriate for that day. Level of care determination identifies the most appropriate and needed level of care such as intensive or intermediate versus a medical-surgical floor level of care. System delays are assessed and monitored to identify any potentially avoidable delays in care.
Progression of care, utilizing the guideline’s Optimal Recovery Course, moves the patient through the continuum of care without delays and determines if services are appropriate, justifiable and reimbursable.
Applying the activities within the utilization review process, the nurse must accurately document the medical necessity and level of care based on evidenced-based criteria (such as MCG). The chart documentation must display the patient’s current condition, and why the condition cannot be safely treated outpatient, and the risk associated if care is not provided at that level of care.
In conclusion, although this is an overview of the utilization review technique, it is important to note the process includes other methods such as physician second level review, CMS regulatory requirements, and in some cases clinical documentation improvement. Today, utilization review is one method used to demonstrate the quality of care and protect revenue integrity. Because quality and costs are of paramount importance, utilization review nurses must possess clinical judgment and critical thinking skills to proactively mitigate overutilization and misuse of resources.
– India Watson, RN, MSN, BSN, CCM, CTT+ (June 21, 2018)
The information contained in this article concerns the MCG care guidelines in the specified edition and as of the date of publication, and may not reflect revisions made to the guidelines or any other developments in the subject matter after the publication date of the article.
Image courtesy Shutterstock/Monkey Business Images
Daniels, S. & Hirsch, R. (2015). The Hospital Guide to Contemporary Utilization Review . HCPro.
Cesta, T. G., & Tahan, H. M. (2017). The case managers survival guide: Winning strategies in the new healthcare environment (Third ed.). Lancaster, PA: Destech Publications.
Centers for Medicare & Medicaid Services Glossary (2016, 0514) Retrieved from https://www.cms.gov/apps/glossary/default.asp?Letter=M&Language=English
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Institute of Medicine (US) Committee on Utilization Management by Third Parties; Gray BH, Field MJ, editors. Controlling Costs and Changing Patient Care? The Role of Utilization Management. Washington (DC): National Academies Press (US); 1989.
Controlling Costs and Changing Patient Care? The Role of Utilization Management.
- Hardcopy Version at National Academies Press
1 Utilization Management: Introduction and Definitions
Prior to having the cholecystectomy recommended by her physician, Greta Harrison calls an 800 telephone number to notify the organization that does utilization management for her employer. That organization gets in touch with the surgeon's office to discuss various aspects of the care that is proposed for her. Is hospitalization necessary or can the surgery be done as an ambulatory procedure? How long will the patient need to be in the hospital? In this case, the reviewer agrees that inpatient care is clearly appropriate but questions the plan to admit the patient two days prior to surgery. Since the patient lives in the same town as the hospital and can easily have preoperative tests performed on an outpatient basis, the surgeon agrees to admit her on the day of the surgery. After Michael Travers is admitted to the hospital following a myocardial infarction, the hospital—aware of his benefit plan's requirements—notifies the appropriate utilization management organization. The length of stay is discussed, but no explicit target date for discharge is set. However, the hospital is then called every third day by the organization, which evaluates information about the patient's need for further hospitalization. The calls continue until Mr. Travers, who has a difficult recovery, is improved enough to be discharged to his home. The physician has not had to adjust the treatment plan but feels irritated at the "red 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 case manager for the insurance company that covers the family. The question is whether they and their physician would like to explore arrangements for home care, which is possible in this case but considerably more complex than usual. With the parents' and physician's cooperation, the case manager works out a plan for transfer that includes assessment of the home's wiring (which is adequate for the equipment), provision for two shifts of home nursing care every day, and purchase of appropriate medical equipment and supplies. This requires some expenditures not normally covered by the benefit plan, but the employer agrees with the insurer to make an exception in this case because the arrangements will not only be less costly than hospital care but will also 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 about a patient's medical care. Many decisions like those just described, once the exclusive province of the doctor and patient, now have to be examined in advance by an external reviewer, someone who is accountable to an employer, insurer, health maintenance organization (HMO), preferred provider organization (PPO), or other entity responsible for paying all or most of the cost of the care. 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. It focuses on the utilization management efforts of the private sector, which provides health benefits for most Americans under 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 private payers made limited use 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 only 14 percent of corporate benefit plans required prior approval of nonemergency admissions to hospitals (Equitable Life Assurance Society 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 only 5 percent in 1984 (Foster Higgins, 1987; Gabel et al., 1988).
What accounts for this rapid spread of utilization management through external assessments of the need for proposed medical services? The most obvious factor is rapidly rising health care costs. Purchasers' search for effective ways to limit their financial liability for health benefits stems directly from their belief 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 year for which statistics are available, total spending on health care reached an estimated $500 billion, up from $234 billion just 5 years earlier (Levit and Freeland, 1988). This spending has been increasing at a rate considerably above the rate of general inflation ( Table 1-1 ), and the share of the gross national product attributed to health services went from 5.9 percent in 1965 to 11.1 percent in 1987. Spending for health care by business as a percentage of the gross private domestic product grew from 1.1 percent in 1965 to 3.4 percent in 1987 (Levit et al., 1989).
Consumer Price Index in the United States (Annual Average, 1967 = 100.0).
High health care costs for employers have been cited as one factor impairing American competitiveness in world markets and a reason why many small firms do not provide health benefits for workers. In 1987, spending for health care by business equaled about 6 percent of total labor compensation compared with about 2 percent in 1965 ( Figure 1-1 ) (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 average increases from 1987 to 1988 of 14 percent for employers with insured programs and 25 percent for employers with self-insured programs (Foster Higgins, 1989). Companies that self-insure assume all or most of the financial risk of paying for covered medical services used by employees and their dependents instead of paying an outside insurance to accept that risk. In the private insurance sector, many commercial insurers, Blue Cross and Blue Shield plans, and HMOs have seen significant underwriting losses—$3.6 billion for commercial carriers and $1.1 billion for Blue Cross and Blue Shield plans in 1988 (Donahue, 1989). Some commercial insurers, for example, Kemper, Provident Mutual, Allstate (for large groups only), and Transamerica Occidental, are withdrawing from the group health insurance market (Meyer and Page, 1988).
Expenditures by private industry for health services and supplies as a percent of total labor compensation, 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 physician behavior, and reduce costs without jeopardizing access to needed services (Eisenberg, 1986; Schwartz, 1984; Wennberg, 1984; Wennberg et al., 1977). In addition, experience has suggested that review of some care prospectively—prior to its provision— would be more palatable and effective than retrospective review has been. This set of perceptions and expectations is, in essence, the hypothesis of utilization management, a hypothesis of interest to patients, practitioners, purchasers, and policymakers.
The IOM Committee on Utilization Management by Third Parties has examined the utilization management hypothesis by asking several questions.
- How effective is utilization management in limiting utilization and containing costs?
- Are there unintended positive and negative consequences of bringing an outside 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, perhaps government regulation, needed?
- What are the responsibilities of health care providers and patients for the appropriate use of health services?
The committee's investigatory approach has been described in the preface. Chapters 2 through 5 discuss the committee's findings about why utilization management has become so widespread, how utilization management actually operates and appears to be evolving, and what is known about its effects. In Chapter 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 help 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 committee found that the term has no single, well-accepted definition. As with the labels cost containment and managed care , different people may mean different things by the same term. In this report, 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 by influencing patient care decision-making through case-by-case assessments of the appropriateness of care prior to its provision.
Three points about the committee's focus are worth underscoring. First, the committee 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 first characteristic distinguishes utilization management from methods that analyze aggregate utilization patterns to identify potential problems or that rely on across-the-board limits on health care benefits that take no account of individual patient characteristics. The second characteristic differentiates utilization management from the retrospective review of claims or medical records submitted after care has been provided. The third characteristic directs attention to purchaser-sponsored—rather than provider-sponsored—utilization management efforts, except when providers explicitly share the financial risk with purchasers of care, as they do in HMOs.
The dominant utilization management strategy is prior review of proposed medical services, which includes several related techniques. A second, more focused, strategy is high-cost case management (see Table 1-2 ).
Utilization Management Methods.
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 care. 2 Most prior review programs include an integrated set of review steps, not all of which will apply to any single patient. The focus may be on the site of care, the timing or duration of care, or the need for a specific procedure or other service.
The first point of assessment, often called preadmission review , may occur before an elective hospital admission. This is what Greta Harrison and her physician 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 care, 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 it 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 after hospitalization to check the appropriateness of the admission as early 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 by hospital staff and, in some instances, assist in identifying and arranging appropriate alternatives to inpatient care.
In addition, a patient may be required to get a second opinion on the need for certain proposed treatments from a practitioner other than the patient's physician. Increasingly, preadmission review or preservice review is used to screen patients so 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 process, a financial penalty, such as higher cost-sharing, may apply when individuals fail 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 approval of benefits in advance of service provision may be contingent rather than final. For example, if a retrospective claims review suggests that the information on which the predetermination was based was seriously flawed, payment of a claim may be denied upon further investigation. Or if a utilization management firm does not have access to the details of the benefit plan for a group, it might authorize services not covered by the contract. A review of claims prior to payment might then result in denial of benefits. Since this latter practice usually 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-Cost Case Management
High-cost case management —also called large case management, medical case management, catastrophic case management , or individual benefits management —focuses on the relatively few beneficiaries in any group who have generated or are likely to generate very high expenditures. This small percentage of individuals—perhaps 1 to 7 percent of a group—may account for 30 to 60 percent of the group's total costs. For the United States as a whole in 1980, 1 percent of the population accounted for 29 percent of total health care 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's 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 but less costly alternative forms of treatment.
In contrast to prior review programs, high-cost case management programs are usually voluntary, with no penalties for patient failure to become involved in the process or comply with its recommendations. (In the third vignette, Patty Simon's parents could have refused the alternative course of care suggested for her.) In addition, more effort is generally devoted to reviewing the patient's particular condition and circumstances and exploring, even arranging, alternative modes of treatment. Finally, exceptions to limitations in benefit contracts may be authorized in advance if this will permit appropriate but less expensive care. For instance, additional home nursing benefits may be arranged so that an individual can avoid further hospitalization. In unusual cases, benefits may be provided for other than health care services, such as construction of a wheelchair ramp or rewiring a patient's home, if these expenditures will allow home care or self-care to be substituted for institutional services at a lower total cost. (The assessment of the wiring in Patty Simon's home would have been covered in this fashion.)
Retrospective Utilization Review
Utilization management techniques, particularly prior review methods, attempt to overcome the disadvantages and unhappiness associated with retrospective review and denial of claims after services have already been provided. Retrospective claims and medical record reviews 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 high volume and low unit costs), and
- analyzing patterns of practitioner or institutional care for use in provider education programs and selective contracting arrangements.
Retrospective utilization review methods have a longer history of general application than do prospective methods (Blum et al., 1977; Congressional Budget Office, 1979, 1981; Institute of Medicine, 1976; Law, 1974). Its strengths and weaknesses have been scrutinized in a number of studies before this one and are not explicitly considered in this report. However, constraints on retrospective review have been a key stimulus for the development of prior review methods. Many of the concerns raised by the committee about the clinical soundness of review criteria, the fairness of procedures, and other matters described apply to both prospective and retrospective reviews.
Other Cost-Containment Methods
The techniques of prior review and high-cost case management are but a subset of the cost-containment methods that can influence decisions about patient care. Other methods, some of which are discussed in Chapter 2 and Appendix B , include the following:
- benefit design (including patient cost-sharing and coverage exclusions), consumer education, 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 establish limits on payment for care provided to health plan enrollees;
- use of gatekeeping, triaging, and other devices to manage patient flow to specialists and expensive services; and
- physician education and feedback on standards of care and patterns of practice.
Utilization management shares with the last four strategies a recognition of the physician's central role as the player-manager of the health care team who is responsible for organizing and directing the production process and providing some of the productive input (Eisenberg, 1986). The different strategies for influencing decisions about patient care, however, vary in their emphasis or reliance on different models of control (such as professional self-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, primary care practitioners, or specialists).
As will be described in Chapter 2 , different strategies for cost containment have been tried, abandoned, and revived as third-party financing of health care has expanded. This history reflects both the difficulties of the task and an appreciation that there is no single solution to problems of health care costs, quality, or access. Many strategies have a place, each of which has different strengths and weaknesses and each of which needs monitoring and adjustment as circumstances change and people adapt to various attempts to shape their behavior.
- Two Notes of Caution
Obstacles To Evaluation
This report laments the limited evidence on utilization management and calls repeatedly for more and better assessments. Nonetheless, the committee is well aware 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 particular pressures faced by market-driven organizations. Rigorous evaluation also tends to be quite expensive. In Appendix B of this report, the commissioned paper by Joan B. Trauner notes that evidence about the impact of physician financial incentives on patient care decisions and quality of care is also quite limited.
Intrinsic Conceptual and Methodological Problems
A number of problems in evaluating utilization management and other cost-containment programs are predictable difficulties faced, to one degree or another, in much social and evaluation research (Eddy and Billings, 1988; Wennberg, 1987). One such problem is that there are no uniformly accepted and applied rules for measuring health care utilization or adjusting data for differences in the characteristics of groups being compared. Other methodological difficulties involve (1) data quality and availability; (2) definitions and measurements of program characteristics, group 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
- action over evaluation, for example, 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 complex analyses; and
- positive rather than negative results.
In addition, faced with limited resources, managers are frequently reluctant to allocate funds for evaluation instead of wages and benefits, shareholder dividends, or other activities. The committee has no information about what utilization management firms spend on evaluation (for internal use or for clients) or how much different employers invest in systematically assessing the impact of prior review or other cost-containment strategies. 3
Competition and Evaluation
The normal individual and organizational biases against systematic evaluation may be both mitigated and intensified in competitive environments. Certainly, competition can be a powerful stimulus for internal evaluation of how well a product is working and what makes it work better. Also, 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 against these forces are several threats posed by evaluation. Most obviously, an evaluation may be negative and thereby reduce a firm's chances for retaining clients or winning new clients. 4 Moreover, when an evaluation is publicly available, a firm's competitors gain information that could help them build a case to inform potential clients that the competitor could provide better results or, at least, better reports. Further, evaluations of utilization management programs may provide competitors with statistical norms or even provider-specific information that would not be readily available to them otherwise. Likewise, if firms that invest in relatively sophisticated research and development reveal their work, they may give a free ride for competitors to copy or build on the resulting review criteria, analytic methodologies, or other products. In a new and rapidly evolving industry, this can seem a significant issue for more experienced organizations.
Forces Behind Rising Health Care Costs
The Committee on Utilization Management by Third Parties also recognizes that the forces behind rising health care costs are exceptionally strong and difficult to constrain through moderate means. Many believe that, for the foreseeable future, health care costs will continue to increase faster than costs in the rest 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 benefit from chemotherapy, but some new analyses suggest such treatment does increase survival rates. It also increases initial treatment costs (Early Breast Cancer Trialists' Collaborative Group, 1988). Recent guidelines for the use of mammography screening could greatly expand the amount of such screening but some professional sources question whether the guidelines are clinically warranted (McIlrath, 1989).
- New tests may reduce diagnostic uncertainty but not add any information that aids in treatment decision-making (Kassirer, 1989). Advances in screening techniques may catch individuals much earlier in the course of disease and reduce the numbers who will receive later expensive treatments. The question is, will the costs of screening and early treatment offset the savings? Will real survival rates increase? Researchers involved with cancer point to methods under 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.
- Between 1980 and 2000, the number of physicians has been projected to increase from 171 to 260 per 100,000 population (Graduate Medical Education National Advisory Committee, 1981; U.S. Department of Health and Human Services, 1985). Whether this will bring a surplus of physicians is a matter for debate (Ginsburg, 1989; Schwartz et al., 1989). Nonetheless, one estimate, now many years out of date, 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 health insurance coverage is generating various proposals to protect these individuals through, for example, state-sponsored insurance pools, mandated employer-based insurance, expansions of Medicaid, and universal federal health 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 care costs such that they are much closer to the level of general inflation would appear to demand radical changes in American health policy, either major restructuring of the financing and delivery systems or major cutbacks through large shifts in costs to patients, severe limitations on patients' choices of hospitals and physicians, and explicit rationing of some technologies for all or some individuals. Society may not be willing to make such changes, particularly in the short run (Curran, 1987). It may continue the search, described in the next chapter, for more moderate strategies to control health care expenditures. Utilization management is one 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 do not appear to show an appreciably lower increase in total costs over the longer term (Prospective Payment Assessment Commission, 1989). Given the effort and optimism it generally takes to commit a corporation or a government to a new program, it is not surprising that excessively high expectations often give way eventually to disillusionment. Unwarranted or excessive negativism can, in turn, be counterproductive and lead to premature abandonment of modest but still helpful strategies.
Cognizant of these hazards, the Committee on Utilization Management by Third Parties has tried to approach its initial evaluation of utilization management with reasonable expectations. To this end, the committee has reviewed the development of third-party financing of health care in the United States and the ways in which various strategies to manage costs have evolved. The next chapter summarizes this review.
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Public programs have been the subject of several reports in recent years (for example, General Accounting Office, 1983, 1988a, 1988b; Health Care Financing Administration, 1979; Physician Payment Review Commission, 1988, 1989, and Project HOPE, 1987).
Medical necessity is another term that is used differently by different people in different contexts. Some use it generally to cover assessments of the site and duration of care as well as the clinical need for a particular procedure, whereas others use it only in the latter sense. Those who use the term more restrictively tend to apply the term appropriateness to the former assessments. For a discussion of legal interpretations of medical necessity, see the paper by William A. Helvestine in Appendix A of this report.
The private sector is not alone in providing meager resources for program evaluation. The utilization and quality review components of Medicare's peer review organization (PRO) program have not been very rigorously examined (General Accounting Office, 1988a; Physician Payment Review Commission, 1988). The Health Care Financing Administration does have performance standards for PROs, but they tend to emphasize process rather than outcome and tend to involve measures of impact that are more appropriate for ongoing monitoring rather than systematic evaluation of the review techniques.
Even when the reported results were positive, the committee encountered considerable reluctance by review organizations to have their analyses published.
- Cite this Page Institute of Medicine (US) Committee on Utilization Management by Third Parties; Gray BH, Field MJ, editors. Controlling Costs and Changing Patient Care? The Role of Utilization Management. Washington (DC): National Academies Press (US); 1989. 1, Utilization Management: Introduction and Definitions.
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What is Utilization Management and What are the Benefits?
Eden Health Team August 1, 2022
The rising cost of healthcare is perhaps one of the biggest issues in the world today.
For far too many people, life-saving treatment is getting further out of reach. On the flipside, hospitals are also struggling to manage their costs and stay profitable.
The answer to this dilemma is utilization management (UM). With UM, hospitals can manage their resources much more effectively while helping patients get their claims approved by their insurance providers.This article will answer the question, “what is utilization management?” as well as how it’s applied to modern healthcare.
What is Utilization Management in Healthcare?
In healthcare, utilization management is the techniques and policies for evaluating the necessity of medical treatments and services on a case-to-case basis.
The typical utilization management process flow looks like this:
It all starts with a proposed treatment or procedure. A nurse or physician will evaluate a patient’s healthcare plan to see if it can cover the proposed procedure. They will also assess if the treatment is indeed necessary and how much of it is needed. The reviewer will then submit the proposal to the healthcare plan for approval. If approved, treatment pushes through. Otherwise, the physician can appeal the decision.
Of course, not all hospitals will follow this series of steps. Some institutions might have a different approach.
The review process is perhaps the most crucial part of utilization management. There are three types available: prospective, concurrent, and retrospective. Each of these will have a different utilization review process flowchart and use cases.
The first is the prospective review, which happens before treatment starts. The goal here is to evaluate the procedure’s necessity and rule out duplicate treatments. It’s often used during routine or urgent treatment but never for emergency room (ER) cases. In many cases, insurance companies can overturn a doctor’s orders for treatment, which can cause resentment among patients and staff. A prospective review is also called prior authorization pre-service review, pre-procedure review, or a pre-admission certification.
The second type is the concurrent review , which happens if treatment is already in progress. The goal here is to monitor the patient’s progress and the resources used during treatment. This is important because insurance companies can still deny coverage later on. Reviewers may also stop treatment prematurely or discharge a patient earlier than planned.
A concurrent review consists of three major areas. First, discharge planning lays out the criteria for the patient to complete treatment and leave the healthcare facility. Next, care coordination assesses the patient’s care if multiple providers are involved. Finally, care transition looks at the process of transferring patients from one facility to another.
The third type is a retrospective review . As the name suggests, this review is performed after the treatment is completed. It focuses on the effectiveness and appropriateness of the treatment, which can be used in various situations.
For example, doctors can use the findings of a retrospective review to determine if they can be given to similar patients. Hospitals can also use findings as leverage when negotiating contracts with insurance companies.
But the most important use of retrospective reviews is in terms of claims. For instance, you can use the results to check if the reimbursements on the procedure are accurate. It can also be used to challenge the denial of claims.We’ve so far given a picture of what utilization management is in a healthcare setting. Before we move further, let’s provide a more formal definition of the term.
What is the Utilization Management Definition?
According to the book Controlling Costs and Changing Patient Care? The Role of Utilization Management , the definition of utilization management is:
A set of techniques used by or on behalf of purchasers of health care benefits to manage health care costs by influencing patient care decision-making through case-by-case assessments of the appropriateness of care prior to its provision.
Note the term case-by-case assessments . That means utilization management practitioners must evaluate each patient case to see if it’s necessary to perform medical procedures and services per a health insurance plan. Often, reviewers use evidence-based guidelines in their analysis.
The responsibility of reviewing cases often falls to a registered nurse (RN) with a utilization management background, sometimes in partnership with a physician adviser. If they cannot resolve an issue independently, they can escalate it further to a UM manager.Using this definition, you can deduce any utilization management program’s goals. Let’s talk about these in the next section.
The Goals of Utilization Management
The goal of utilization management is three-fold.
One is that it helps lower costs. Utilization management is crucial due to the rising costs of healthcare. The procedure helps hospital management evaluate every procedure done on patients, before and after, to check if it’s efficient and necessary. It can also benefit insurance companies, as it allows them to approve only legitimate claims.
The second goal of utilization management is better patient care. Utilization management can help verify if a procedure has an impact on the patient’s health. These findings can then be used to inform the decision-making of similar treatment in the future. This is especially useful for assessing new or experimental medical treatments.The third goal of utilization management is to reduce the denial of claims. UM reviews can gather data from procedures, giving healthcare providers insights to back up their claims.
Challenges of Utilization Management
Of course, utilization management isn’t without its challenges. One of the risks of UM is that it can create animosity and resentment between patients, healthcare providers, and insurance companies.
For example, if the insurance provider rejects treatment, the burden of paying it falls on the patient. This can happen after treatment has been done, at which the patient will have no choice but to cover the often high hospital bill.
Utilization management also tends to favor safer and more cost-effective treatments. If a patient requires an experimental procedure, getting the insurance company to approve it will take more legwork. At worse, the patient will have to bear the treatment cost.
The insurer’s guidelines might also not be doctors’ primary concern when giving care. At worst, they can conflict with each other. Of course, the doctor will prioritize health over costs in these cases, but that might create tension later on when claims are denied, and patients need to shoulder the cost of treatment.
Utilization management can also be a massive burden to staff. Instead of just delivering care, nurses need to do review and analysis tasks. This can also introduce delays in decision-making, which is unsuitable in life-or-death situations. In fact, staff might even resist utilization management procedures, which they might see as unnecessary red tape imposed by insurance companies.
Implementing a utilization management program can be challenging and time-consuming. It will require an overhaul of hospital procedures and policies. It can’t be done overnight, and certainly without buy-in from everyone, from management to nurses. Staff must realize the value of utilization management if they are to commit their effort to do it.
To develop a utilization management program, hospitals must consider several things. For example, they must consider the consequences of involving third-party insurance companies in healthcare decisions. This is challenging since the two entities have drastically different aims; for utilization management to work, they must reach a compromise.
Hospitals must also clearly define the roles and responsibilities of providers, patients, and members of the UM Committee. They must also have policies in place to tackle any complaints and disagreements that are guaranteed to surface.
Utilization management must be considered in every hospital’s treatment and service, including both primary and tertiary care. This can be incredibly difficult, as some specialties require a different perspective during the review process.
Utilization management also needs approval from several state and federal agencies, including Medicare. In addition, you’ll need to integrate with various insurance companies and conform to their rules and regulations.And in the end, utilization management might not effectively lower costs. Studies have shown that the effort and time spent doing UM isn’t worth the minimal result it gives. Of course, it still depends on the hospital’s operation and costs.
What are the Basic Three Components of Utilization Management?
Proper utilization management is composed of three distinct components.
The first component is step therapy. The concept here is that patients should always try a lower-cost but effective treatment first. If it does not produce the intended outcome, then the patient can switch or step up to a higher-tier drug or procedure.
Step therapy is crucial because it ensures that patients will always get the most economical treatment for their condition. It also helps make treatments safer by not trying a more expensive or experimental procedure or drug as a default.
The second component is a prior authorization. This is where a healthcare plan or insurance provider requires prior approval before covering claims for a treatment or procedure. This component of utilization management can help make treatments safer for the patients, as it prevents drug misuse or overdose. For various reasons, some doctors might also prefer a drug that’s not in the best interest of the patient’s health; prior authorizations avoid these occurrences.
The last component is quantity limits. This sets the amount of drug a patient can get for a period. Quantity limits are essential for both safety and economic reasons. It guarantees that patients only consume the proper dosage. At the same time, it helps the hospital reduce waste.
Utilization Management Examples
After thoroughly discussing utilization management, let’s end this article with an example.
But first, let’s talk about some more review methods.
A continued stay review evaluates whether every day that a patient is in the hospital is necessary for their recovery. This is important because stays are huge cost drains for the patient and the hospital. Moreover, patients might be withholding their room from another patient who needs it more. This was quite apparent during the COVID-19 pandemic, where there was a shortage of hospital beds worldwide.
Going hand in hand with a continued stay review is the discharge planning. This method lays out how a patient will transition from one level of care to another (for example, when the patient needs to move from an ICU bed to a regular room after a procedure). From a utilization perspective, discharge planning ensures that the patient gets the proper level of care they need while regulating the hospital’s resources.
A second opinion is a review gathered from another doctor or physician stating whether a treatment or procedure is necessary to perform. This review is required to eliminate biases or mistaken diagnoses. As such, it’s often done or required for high-cost procedures, such as complex surgeries.
Now, let’s look at a utilization management example.
Let’s say a patient got admitted to the ER due to a car accident. The utilization management reviewer (a nurse) check’s on the patient’s health information and condition to determine the appropriate treatment.
For example, the nurse’s protocols might tell her to transfer the patient to a trauma center instead of the hospital’s ICU. This might be the decision if the patient’s injuries are severe. Otherwise, the patient might be transferred to a regular hospital room for recovery if the condition is not urgent or life-threatening.
The nurse will do this initial review but might consult with the patient’s physicians and healthcare providers. They might inform the nurse that the patient should be rightfully in the ICU due to additional information that the reviewer might not know.
Once the utilization management reviewer has finalized the patient’s treatment plan, they would then coordinate with the insurance company. The insurer would then deny or approve the treatment plan. Often, they would add conditions for approval, such as a set number of days for hospitalization.
The utilization management reviewer then regularly checks up on the patient using a concurrent or retrospective review procedure. This helps determine if the treatment plan suggested by the insurance company is still suitable. If not, the reviewer might recommend an alternative procedure for approval.Once the patient is discharged, the reviewer can submit their findings to the utilization management team for analysis. This can be used in internal meetings to improve the operations and diagnosis of doctors.
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This blog is intended to be informational in nature. The information and other content provided in this blog, or in any linked materials, are not intended and should not be construed as medical advice, nor is the information a substitute for professional medical expertise or treatment.
If you have any questions or concerns, please talk to your Care Team or other healthcare provider. Never disregard professional medical advice or delay in seeking it because of something you have read on this blog or in any linked materials.
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Utilization Review: What It Is and How to Get Involved
If you’re a nurse looking for a career change, but still want to stay in healthcare, utilization review (UR) could be a great fit for you. This administrative line of work relies heavily on clinical knowledge and experience, and nurses make up the majority of utilization review employees. UR nurses review treatment plans, offer recommendations and help determine typical care guidelines for hospitals and insurance companies. Read on to discover what utilization review is and how to launch a career in it.
What Is Utilization Review?
Utilization review involves conducting case reviews, checking medical records, speaking with patients and care providers and analyzing the care plan. UR nurses may make recommendations for care plans based on established guidelines for the diagnosed condition. They also help figure out whether or not the treatment is eligible for reimbursement from the insurance plan.
Utilization review is most closely associated with health insurance companies, but it may also be performed by hospitals, home health care services and other types of providers. (Hospitals must have an effective utilization review program in order to participate in Medicare and Medicaid. ) Utilization is usually performed by nurses, though it may sometimes be done by a physician or another medical professional. Utilization review may sometimes be referred to as “utilization management” as well.
Utilization review may occur before, during or after patient care. Pre-care utilization review is known as prospective utilization and takes place when patients need prior authorization for a treatment or procedure (for example, the insurer needs to determine that a procedure is medically necessary before agreeing to cover it).
Concurrent utilization review occurs while a patient is receiving care. It’s used to ensure that patients are receiving high-quality care and to confirm that no changes need to be made to their treatment plans. In many cases, the UR nurse will give the proverbial thumbs-up on the patient’s care plan, but, in some situations, they may recommend improvements.
Retrospective utilization review occurs after a patient’s treatment has taken place. While this type of UR doesn’t affect patient care in the moment, it is helpful for insurers and hospitals seeking to establish treatment guidelines and protocols for a given condition.
UR nurses working for hospitals may sometimes also handle the discharge management for the patient in addition to the utilization review. When these two jobs are combined, the position is known as “charge management” instead.
How to Get Started in Utilization Review
If you’re looking to transition to utilization review, you’ll need to be licensed as a registered nurse and have a good base of experience in medical-surgical nursing, so don’t throw out those surgical scrubs quite yet . Many employers require that you at least have a BSN (as opposed to an associate’s degree), so you might need additional schooling as well. Some also look for specific certifications in areas such as utilization review or risk management. UR nurses also need to demonstrate many of the same skills that they used during their clinical nursing careers: attention to detail, great communication skills and the ability to work well under pressure.
Many types of nurses may transition into a career in utilization review for several reasons. For one, the more administrative work can be easier than clinical work, both physically and mentally, while still providing a challenge. UR nurses work more regular schedules, which means that their pay is predictable as well. Some UR nurses are even able to do part of their work remotely–an extra perk.
Example of Utilization Review
Let’s say that a patient, named Rob, is hospitalized overnight with a really severe case of the flu. The UR nurse visits him in the morning to review the medical record and take stock of the treatment Rob has received so far. Rob was admitted as inpatient care, a designation that means the patient requires more technical, skilled care. However, after reviewing his symptoms, the UR nurse decides that observation status is a more appropriate designation since Rob is too sick to be treated at his regular doctor’s office, but not sick enough to require full inpatient admission.
Other examples of utilization reviews might include determining whether or not a patient should be transferred to a specialty trauma ICU at a regional center or getting insurance approval for an extended hospital stay that goes beyond the typical guidelines.
Utilization review isn’t for every nurse, but if you’re ready to take on a more administrative role that draws on your clinical experience, becoming a UR nurse could be a great choice. If you can, reach out to UR nurses at your company to learn more about their work and whether or not it’s what you’re looking for.
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What You Need to Know About the Utilization Review Process
Analysis | By PSQH | June 05, 2020
UR nurses speak a different language than most other bedside nurses.
This article was originally published June 5, 2020 on PSQH by Sandra Salley, RN, MSN, CHCQM.
Why do we care about patient status, documentation, and complying with recommended guidelines?
It’s how the hospital and therefore “we” get paid. Although patient care is the number one priority, I like to say that most nurses wouldn’t be caring for patients if they didn’t get a paycheck. Utilization review (UR) is the process of reviewing an episode of care. The review confirms that the insurance company will provide appropriate financial coverage for medical services. The UR process and the UR nurse facilitate minimizing costs.
What do UR nurses do?
UR nurses speak a different language than most other bedside nurses. In all settings, to justify payment or suggest an alternative status, the hospital UR nurse and the insurance UR nurse first discuss medical necessity criteria. If there is disagreement between the nurses about status and therefore payment, then the physicians discuss medical necessity during a scheduled peer-to-peer conference. If there is still a disagreement between the physicians, then the hospital appeals the case with the insurance company.
Why do we follow a UR process?
The UR process is necessary to treat patients. Hospitals cannot admit Medicare beneficiaries without a UR plan. The Code of Federal Regulations (42 CFR 456 and 42 CFR 482.30) and the Medicare Benefit Policy Manual provide the guidelines that the hospital and the insurance company must follow (U.S. Government Publishing Office, 2020; Centers for Medicare and Medicaid Services, n.d.).
What are the most common guidelines that hospitals use?
Acute inpatient hospitals use Milliman and InterQual criteria to help determine the appropriateness of care. Both sets of criteria are evidence-based screening tools used by providers and insurance companies. They do not substitute for the physician advisors’ professional opinions when determining medical necessity. If there is a disagreement between the insurance company and the provider, the insurance company may issue a denial. If so, physician advisors discuss the case during a peer-to-peer conference. If after this conference there is still a disagreement, the hospital can file a written second-level appeal with the patient’s permission. Some insurance companies (e.g., United, Aetna, Cigna, AvMed, Humana) use the Milliman language, while others (e.g., TRICARE, Blue Cross, Sunshine State) use the InterQual language. It is beneficial to know how to use both tools.
What do all nurses need to know about this process?
Documentation is of the utmost importance. It is important to document objective information. Often, reviews will start with the present situation provided by the nurse’s note. This note often includes oxygen saturation, oxygen administration mode, pain, intake, output, and abnormal signs or symptoms. The physician note should contain past medical history and other relevant information such as the plan of care. This information is consulted when deciding status/payment. Although nurses treat all patients equally despite payment, it is important for nurses to be conscious of payment and for patients to know how they will be billed. Also, insurance companies usually pay substantially more when the patient is in inpatient status.
Does Medicare/CMS (Centers for Medicare and Medicaid Services) care about Milliman or InterQual criteria?
CMS recommends admission guidelines as one of many factors to consider when making an admission decision, but it does not endorse any particular criteria or assign specific authority to them. Medicare started issuing a paper notification to observation (Medicare Part B) patients, called the Medicare Outpatient Observation Notice (MOON). Patients in observation status usually pay a percentage of the hospital stay cost (usually 20%), known as a coinsurance payment (Medicare.gov, n.d.). Patients in inpatient status (Medicare Part A) pay a deductible for their stay, which for 2020 is $1,408 (Centers for Medicare and Medicaid Services, 2019). Commercial insurance has similar guidelines. Sometimes the inpatient deductible can be less than the 20% coinsurance in observation status. A Medicare patient has to have a three-day qualifying stay for Medicare to pay for a SNF stay. Neither the hospital stay nor the SNF stay can be considered custodial in nature. Medicare pays for the first 20 days of a hospital stay. After 20 days, the patient is responsible for a daily deductible for days 21–100 (currently $176 per day). If the patient has secondary insurance, both Medicare and the secondary insurance will cover the 100 days per episode of care.
Sandra Salley works in utilization management at Baptist Medical Center in Jacksonville, Florida. She has 12 years’ experience in utilization review covering acute medical, inpatient rehabilitation, behavioral health, and acute pediatric patients.
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Utilization Review (UR) is the evaluation of medical care services for the treatment provided to an injured worker. This evaluation is done to ensure that the services are necessary, appropriate, and likely to be effective.
If an authorized treating physician’s recommended treatment cannot be approved by the adjuster, the adjuster may seek an opinion from another physician through a utilization review organization. The decision reached by the URO agent only addresses medical necessity (not causation and/or compensability). When recommended treatment is not certified (approved), they are reported back to the injured worker and the physician. Either can appeal the denial. Denials must be based on the Official Disability Guidelines (ODG) by MCG which are independent, evidence-based guidelines for treating common work injuries.
Required Use of UR
The following treatments are required to be sent to UR:
- In-patient hospital admissions
- Non-emergency ground and air ambulance services
- When the adjuster cannot approve the treatment
Requirements for a Denial by the Utilization Review Organization
Recommended treatment can be denied only by a Utilization Review Physician who is of the same or similar specialty and licensed in the state of Tennessee. Denials must be accompanied by a utilization review report that gives the reasons for denial and the name and credentials of the utilization review physician.
Appealing Denied Treatment
- The injured worker, their attorney or treating physician has thirty (30) calendar days from receipt of the denial letter to appeal the utilization review decision to the Bureau of Workers’ Compensation at the address listed on the form.
- If appealed to the Bureau and the necessary medical records are received , the Bureau's Medical Director will make a determination to approve, modify, or deny the treatment. This decision is final for administrative purposes.
- The fee charged by the Bureau is paid by the insurer.
- The adjuster has four (4) business days after being notified by the provider of the recommended treatment to approve the treatment or send the recommendation to its utilization review organization (URO).
- If the URO does not possess all necessary information in order to render the utilization review determination, the agent may request additional information, in writing, from the authorized treating physician.
- That physician shall send the request within five (5) business days of receipt of the written request.
- The number of business days is extended until the URO receives the necessary information or until the five (5) business day timeframe expires, whichever occurs first.
An employer, insurer, third party administrator, or UR Organization who is found to have violated the UR rules may be subjected to a penalty of not less than $50 nor more than $5,000 per violation. The Bureau may also institute a temporary or permanent suspension of the right to perform utilization review services for workers’ compensation claims, if the utilization review agent has established a pattern of violations.
Parties who are not satisfied with the appeal may file for mediation . Reviewing the denial, understanding its reasoning and gathering information might result in agreement. If mediation is not successful, a judge may rule on whether the ATP’s recommended treatment was appropriate.
- UR Program Rules (effective September 29, 2022)
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