Which of the Following Situations Is an Example of Prospective Utilization Review?

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 system gets in bear on with the surgeon'southward office to discuss various aspects of the care that is proposed for her. Is hospitalization necessary or can the surgery be washed as an ambulatory procedure? How long will the patient need to be in the infirmary? In this case, the reviewer agrees that inpatient intendance is clearly appropriate but questions the plan to admit the patient two days prior to surgery. Since the patient lives in the aforementioned town every bit 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 programme'due south requirements—notifies the appropriate utilization direction organization. The length of stay is discussed, but no explicit target date for discharge is set. Still, the hospital is then called every 3rd day by the organization, which evaluates information about the patient'southward need for further hospitalization. The calls continue until Mr. Travers, who has a difficult recovery, is improved plenty to exist discharged to his abode. The medico has not had to adjust the treatment plan but feels irritated at the "cherry tape" involved. And Mr. Travers has worried on some occasions that payment for part of his infirmary stay might be denied.

With their daughter depending on a ventilator to breathe and receiving other hospital treat 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 intendance, which is possible in this case but considerably more complex than usual. With the parents' and medico's cooperation, the case director works out a plan for transfer that includes assessment of the dwelling house'south wiring (which is acceptable for the equipment), provision for two shifts of home nursing care every day, and buy of appropriate medical equipment and supplies. This requires some expenditures non normally covered by the benefit programme, but the employer agrees with the insurer to brand an exception in this case because the arrangements will not merely be less costly than hospital intendance only will also ameliorate the quality of life for the family.

With great rapidity and relatively little public awareness, a significant change has taken identify in the way some decisions are made about a patient'due south medical care. Many decisions similar those but described, once the exclusive province of the dr. 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 arrangement (PPO), or other entity responsible for paying all or near of the price of the care. Depending upon the circumstances, this exterior party may be involved in discussions about whether a service is needed, how treatment will be provided, and where intendance will occur.

This preliminary Institute of Medicine (IOM) report describes the nature of this modify in medical conclusion-making and assesses its affect on patients, providers, and purchasers of medical services. It focuses on the utilization management efforts of the private sector, which provides health benefits for about Americans under age 65.¹

Prior review of proposed medical intendance 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. Notwithstanding, widespread application of this arroyo 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 Balls Society of the Us, 1983). By 1988, another survey found 95 of 100 large firms had such programs (Corporate Health Strategies, 1988). Perhaps one-half to 3-quarters of employees nationwide are at present covered past such programs, upward from only 5 per centum in 1984 (Foster Higgins, 1987; Gabel et al., 1988).

What accounts for this rapid spread of utilization management through external assessments of the demand for proposed medical services? The virtually obvious factor is chop-chop rise health care costs. Purchasers' search for effective ways to limit their financial liability for wellness benefits stems directly from their conventionalities that costs are out of control.

The trends responsible for this view are painfully familiar to anybody concerned with health care financing. In 1987, the latest year for which statistics are available, full spending on health care reached an estimated $500 billion, upwardly from $234 billion just 5 years before (Levit and Freeland, 1988). This spending has been increasing at a rate considerably to a higher place the rate of full general inflation (Table 1-1), and the share of the gross national product attributed to health services went from 5.ix percent in 1965 to 11.one percentage in 1987. Spending for wellness care by business every bit a percentage of the gross individual domestic production grew from 1.one percent in 1965 to 3.4 percent in 1987 (Levit et al., 1989).

Tabular array i-ane

Consumer Price Index in the U.s.a. (Annual Average, 1967 = 100.0).

High health care costs for employers have been cited every bit one gene impairing American competitiveness in world markets and a reason why many small firms practise not provide health benefits for workers. In 1987, spending for wellness care by business equaled near vi percent of full labor compensation compared with about 2 pct in 1965 (Figure 1-i) (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). Some other survey cited average increases from 1987 to 1988 of fourteen percent for employers with insured programs and 25 pct for employers with self-insured programs (Foster Higgins, 1989). Companies that cocky-insure assume all or nigh of the financial risk of paying for covered medical services used by employees and their dependents instead of paying an exterior 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 Cantankerous and Bluish 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-i

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 accept contributed to this perception have besides produced some optimism that external review of dr. practice decisions could notice unnecessary intendance, influence physician behavior, and reduce costs without jeopardizing access to needed services (Eisenberg, 1986; Schwartz, 1984; Wennberg, 1984; Wennberg et al., 1977). In add-on, feel has suggested that review of some care prospectively—prior to its provision— would be more palatable and effective than retrospective review has been. This gear up 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 past Third Parties has examined the utilization management hypothesis by asking several questions.

How effective is utilization management in limiting utilization and containing costs?
Are at that place unintended positive and negative consequences of bringing an outside political party into the procedure of making decisions about patient care?
Are utilization direction organizations and purchasers sufficiently answerable for their actions, or are new forms of oversight, maybe government regulation, needed?
What are the responsibilities of wellness care providers and patients for the appropriate use of health services?

The commission'due south investigatory arroyo has been described in the preface. Capacity ii through 5 discuss the committee'southward findings nearly why utilization management has go and so widespread, how utilization management really operates and appears to exist evolving, and what is known about its effects. In Affiliate vi, the committee assesses the electric current status of utilization direction, including its strengths and shortcomings, and recommends virtually-term and longer-range actions that could help utilization direction realize its objectives of controlling costs and reducing inappropriate services without undermining patient access to needed care.

What Is Utilization Management?

In its report of utilization management, the committee institute that the term has no single, well-accepted definition. As with the labels cost containment and managed care, different people may mean different things past the same term. In this report, the commission considers utilization direction every bit a set up of techniques used by or on behalf of purchasers of health care benefits to manage wellness care costs past influencing patient care decision-making through case-past-case assessments of the appropriateness of intendance prior to its provision.

3 points virtually the committee's focus are worth underscoring. Beginning, the committee examines methods that rely on case-past-case assessments of care. Second, the focus is on review prior to the provision of services. Tertiary, this report stresses deportment taken to reduce costs for tertiary-party purchasers of care. The first characteristic distinguishes utilization management from methods that clarify aggregate utilization patterns to identify potential problems or that rely on across-the-board limits on wellness 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 feature directs attention to purchaser-sponsored—rather than provider-sponsored—utilization direction efforts, except when providers explicitly share the financial risk with purchasers of care, as they practise 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-price case management (run into Table 1-2).

Prior Review

Prior review provides accelerate evaluation of whether medical services proposed for a specific person arrange to provisions of health plans that limit coverage to medically necessary care.² Near prior review programs include an integrated gear up of review steps, not all of which will employ to any unmarried patient. The focus may be on the site of intendance, the timing or duration of care, or the need for a specific procedure or other service.

The first indicate of cess, often chosen preadmission review, may occur before an constituent 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 demand for infirmary care, but it did claiming 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 demand 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 exist required within 24 to 72 hours after hospitalization to cheque the appropriateness of the access equally early as possible. The vignette describing Mr. Travers involved this technique every bit well as continued-stay review or concurrent review, which assesses the length of stay for both urgent and nonurgent admissions. Reviewers may printing 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 past a health plan to cooperate in the prior review process, a financial penalty, such every bit higher cost-sharing, may use when individuals neglect to obtain necessary certifications. Chapter three provides more details about the mechanisms of prior review.

Although terms like prior review, predetermination, precertification, and prior dominance of benefits are oft used interchangeably, the approval of benefits in accelerate of service provision may be contingent rather than final. For example, if a retrospective claims review suggests that the data on which the predetermination was based was seriously flawed, payment of a claim may exist 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 non covered by the contract. A review of claims prior to payment might then outcome in denial of benefits. Since this latter exercise usually makes patients unhappy, many utilization management firms try to consider restrictions in a client's wellness plan in their determinations. Retrospective denials of claims post-obit prior certification appear to be rare, as are refusals to preauthorize services.

Loftier-Cost Instance Management

High-toll case management—too called large case direction, medical case direction, catastrophic case management, or private benefits direction—focuses on the relatively few beneficiaries in any group who have generated or are likely to generate very loftier expenditures. This small per centum of individuals—perchance ane to 7 pct of a group—may account for 30 to 60 percent of the grouping's total costs. For the United States as a whole in 1980, one per centum of the population accounted for 29 percent of total health care spending (Berk et al., 1988).

Instance management for individuals with high-price illnesses is similar to other forms of social and health case direction, in that it involves assessing a person's needs and personal circumstances and so planning, arranging, and coordinating the recommended services. It differs in its targets, those very expensive cases for which specialized attention may encourage advisable merely less costly culling forms of treatment.

In contrast to prior review programs, loftier-price instance direction programs are usually voluntary, with no penalties for patient failure to get involved in the procedure or comply with its recommendations. (In the third vignette, Patty Simon's parents could accept refused the alternative form of care suggested for her.) In add-on, more try is more often than not devoted to reviewing the patient's detail 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 volition permit advisable merely less expensive care. For case, additional home nursing benefits may be bundled and then that an individual can avoid further hospitalization. In unusual cases, benefits may exist provided for other than health care services, such as structure of a wheelchair ramp or rewiring a patient'due south home, if these expenditures volition allow home care or self-intendance to exist substituted for institutional services at a lower full cost. (The assessment of the wiring in Patty Simon's home would accept been covered in this fashion.)

Retrospective Utilization Review

Utilization management techniques, particularly prior review methods, endeavor to overcome the disadvantages and unhappiness associated with retrospective review and denial of claims later services have already been provided. Retrospective claims and medical tape reviews can, however, support and reinforce utilization management by

monitoring the accuracy of data 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 teaching programs and selective contracting arrangements.

Retrospective utilization review methods accept a longer history of general application than practice prospective methods (Blum et al., 1977; Congressional Budget 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 not explicitly considered in this written report. However, constraints on retrospective review have been a key stimulus for the evolution of prior review methods. Many of the concerns raised past the committee nearly 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 direction are just a subset of the cost-containment methods that can influence decisions about patient intendance. Other methods, some of which are discussed in Affiliate 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 intendance;
financial incentives (for example, capitation or bonuses) that are designed to reward physicians or institutions for providing less plush care;
contracts with health intendance practitioners and institutions that establish limits on payment for care provided to health programme enrollees;
use of gatekeeping, triaging, and other devices to manage patient flow to specialists and expensive services; and
physician educational activity and feedback on standards of intendance and patterns of practise.

Utilization management shares with the last iv strategies a recognition of the physician's primal office as the player-managing director of the health care 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 care, notwithstanding, vary in their emphasis or reliance on unlike models of control (such equally professional self-regulation, informed consumerism, or prudent purchasing), their techniques of influence (such as education, financial incentives, peer force per unit area, or external oversight), and the parties involved (that is, patients, main intendance practitioners, or specialists).

As will be described in Chapter 2, different strategies for price containment have been tried, abased, and revived as third-party financing of health intendance 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 suit to diverse attempts to shape their beliefs.

Two Notes of Caution

Obstacles To Evaluation

This report laments the limited evidence on utilization management and calls repeatedly for more and better assessments. Withal, the committee is well enlightened that sound evaluation of utilization management programs faces several obstacles. Some are intrinsic to the research problem, some reverberate common organizational behaviors, and some involve particular pressures faced by market-driven organizations. Rigorous evaluation also tends to exist quite expensive. In Appendix B of this report, the deputed paper past Joan B. Trauner notes that show nigh the touch on of dr. financial incentives on patient care decisions and quality of intendance is also quite limited.

Intrinsic Conceptual and Methodological Problems

A number of issues in evaluating utilization management and other price-containment programs are predictable difficulties faced, to one degree or another, in much social and evaluation inquiry (Eddy and Billings, 1988; Wennberg, 1987). 1 such problem is that there are no uniformly accustomed and applied rules for measuring health intendance utilization or adjusting information for differences in the characteristics of groups being compared. Other methodological difficulties involve (1) data quality and availability; (two) 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 up obstacles to systematic evaluation that are typical of organizations whether they be public or private, for-turn a profit or non-for-turn a 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 add-on, 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 dissimilar employers invest in systematically assessing the impact of prior review or other cost-containment strategies.³

Contest and Evaluation

The normal individual and organizational biases confronting systematic evaluation may be both mitigated and intensified in competitive environments. Certainly, contest tin be a powerful stimulus for internal evaluation of how well a product is working and what makes it work ameliorate. Too, clients of utilization direction organizations accept a strong interest in obtaining reports on results and in shifting their business concern to other firms if they cannot become such reports.

Balanced against these forces are several threats posed past evaluation. Near obviously, an evaluation may be negative and thereby reduce a business firm'south chances for retaining clients or winning new clients.^iv Moreover, when an evaluation is publicly available, a firm's competitors proceeds information that could assistance them build a case to inform potential clients that the competitor could provide better results or, at least, better reports. Farther, evaluations of utilization direction programs may provide competitors with statistical norms or fifty-fifty provider-specific information that would non exist readily available to them otherwise. Likewise, if firms that invest in relatively sophisticated research and evolution reveal their work, they may give 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 significant issue for more experienced organizations.

Forces Behind Rising Health Intendance Costs

The Committee on Utilization Management by Third Parties also recognizes that the forces behind rising health care costs are exceptionally strong and hard to constrain through moderate ways. Many believe that, for the foreseeable future, health care costs volition keep to increase faster than costs in the rest of the economic system.

Clinical judgments nearly the value of treatment for diverse 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, just some new analyses advise such treatment does increase survival rates. Information technology too increases initial treatment costs (Early Breast Cancer Trialists' Collaborative Group, 1988). Contempo 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 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 grade of affliction and reduce the numbers who volition receive afterward expensive treatments. The question is, will the costs of screening and early treatment offset the savings? Will existent survival rates increase? 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 than successfully treated if they are detected earlier.
The work force and the general population are aging, and the utilize of both astute-intendance 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 Educational activity National Informational 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 accept no routine health insurance coverage is generating various proposals to protect these individuals through, for example, land-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 wellness care costs such that they are much closer to the level of general aggrandizement would appear to demand radical changes in American health policy, either major restructuring of the financing and commitment 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. Lodge 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.

Information technology is an unfortunate reality, still, that most toll-containment strategies somewhen disappoint their supporters and evaluators to some degree. Even when these strategies seem to reduce costs initially, trend projections do not appear to evidence an appreciably lower increment in full costs over the longer term (Prospective Payment Assessment Commission, 1989). Given the effort and optimism information technology mostly takes to commit a corporation or a government to a new program, it is non surprising that excessively high expectations often give way eventually to disillusionment. Unwarranted or excessive negativism can, in turn, be counterproductive and atomic number 82 to premature abandonment of pocket-sized only still helpful strategies.

Cognizant of these hazards, the Committee on Utilization Management past Third Parties has tried to approach its initial evaluation of utilization management with reasonable expectations. To this end, the commission has reviewed the development of tertiary-party financing of health care in the United States and the means in which various strategies to manage costs have evolved. The next chapter summarizes this review.

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1: Public programs have been the subject of several reports in contempo years (for example, General Accounting Office, 1983, 1988a, 1988b; Health Care Financing Administration, 1979; Md Payment Review Commission, 1988, 1989, and Project Hope, 1987).
2: Medical necessity is another term that is used differently by different people in dissimilar contexts. Some use information technology generally to cover assessments of the site and duration of care equally well as the clinical demand for a particular process, whereas others utilize it only in the latter sense. Those who use the term more than restrictively tend to apply the term ceremoniousness to the one-time assessments. For a discussion of legal interpretations of medical necessity, run across the newspaper by William A. Helvestine in Appendix A of this report.
3: The private sector is non lonely in providing meager resources for program evaluation. The utilization and quality review components of Medicare's peer review system (PRO) program take not been very rigorously examined (General Accounting Office, 1988a; Md Payment Review Commission, 1988). The Health Intendance Financing Administration does have operation 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.
iv: Even when the reported results were positive, the commission encountered considerable reluctance by review organizations to accept their analyses published.

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