Compare and Contrast Utilization Review and Quality Management

Prior to having the cholecystectomy recommended past her physician, Greta Harrison calls an 800 telephone number to notify the organization that does utilization direction for her employer. That organisation gets in touch on with the surgeon'due south role to discuss various aspects of the care that is proposed for her. Is hospitalization necessary or can the surgery be done equally an convalescent procedure? How long volition 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 acknowledge the patient two days prior to surgery. Since the patient lives in the same town as the hospital and can hands have preoperative tests performed on an outpatient basis, the surgeon agrees to acknowledge her on the 24-hour interval of the surgery.

After Michael Travers is admitted to the hospital following a myocardial infarction, the hospital—aware of his benefit program's requirements—notifies the appropriate utilization management organization. The length of stay is discussed, merely no explicit target date for belch is set. However, the hospital is then called every 3rd day by the organisation, which evaluates information about the patient'due south need for farther hospitalization. The calls continue until Mr. Travers, who has a difficult recovery, is improved enough to be discharged to his home. The md has non had to accommodate the handling plan but feels irritated at the "ruby-red tape" involved. And Mr. Travers has worried on some occasions that payment for office of his hospital stay might be denied.

With their girl depending on a ventilator to exhale and receiving other hospital care for muscular dystrophy, the parents of Patty Simon are contacted by a instance director for the insurance company that covers the family. The question is whether they and their medico would like to explore arrangements for dwelling intendance, which is possible in this example but considerably more complex than usual. With the parents' and physician's cooperation, the case managing director 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 mean solar day, and purchase of appropriate medical equipment and supplies. This requires some expenditures not normally covered by the benefit plan, merely the employer agrees with the insurer to make an exception in this case considering the arrangements will not only be less costly than hospital care but will also amend the quality of life for the family.

With great rapidity and relatively little public sensation, a significant alter has taken place in the way some decisions are fabricated about a patient'south medical care. Many decisions similar those just described, once the sectional province of the physician and patient, now have to be examined in accelerate by an external reviewer, someone who is accountable to an employer, insurer, wellness maintenance organization (HMO), preferred provider organisation (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 most whether a service is needed, how treatment volition exist 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 touch on 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 fabricated limited use of the technique even earlier. Nevertheless, widespread awarding of this approach to managing health care utilization is a miracle 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 Lodge of the United States, 1983). By 1988, another survey found 95 of 100 large firms had such programs (Corporate Health Strategies, 1988). Mayhap half to three-quarters of employees nationwide are now covered by such programs, upwardly from merely v percentage 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 well-nigh obvious gene is speedily ascension wellness 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 wellness care financing. In 1987, the latest twelvemonth for which statistics are available, total spending on health care reached an estimated $500 billion, upwards from $234 billion just 5 years before (Levit and Freeland, 1988). This spending has been increasing at a charge per unit considerably above the rate of general inflation (Table i-one), and the share of the gross national product attributed to health services went from five.nine percent in 1965 to 11.1 percentage in 1987. Spending for health care by business organisation every bit a percentage of the gross individual domestic production grew from 1.i percent in 1965 to iii.4 percentage in 1987 (Levit et al., 1989).

TABLE 1-1

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

High health care costs for employers take been cited as one gene impairing American competitiveness in world markets and a reason why many minor firms do not provide wellness benefits for workers. In 1987, spending for health care by business organisation equaled about six percent of total labor compensation compared with about ii per centum in 1965 (Effigy one-1) (Levit et al., 1989). A recent survey of nearly 800 employers of all sizes reported average premium increases from 1987 to 1988 of xi 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 pct for employers with insured programs and 25 percent for employers with self-insured programs (Foster Higgins, 1989). Companies that cocky-insure assume all or about of the fiscal risk of paying for covered medical services used by employees and their dependents instead of paying an outside insurance to take that take chances. In the private insurance sector, many commercial insurers, Blue Cantankerous and Blue Shield plans, and HMOs have seen significant underwriting losses—$iii.6 billion for commercial carriers and $1.1 billion for Blueish 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).

Effigy i-i

Expenditures by private manufacture for wellness services and supplies as a percent of full labor bounty, 1965-1987. Source: Levit et al. (1989, p. 9).

To the dismay over rising wellness 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 take also produced some optimism that external review of doctor practice decisions could discover unnecessary care, influence doc behavior, and reduce costs without jeopardizing access to needed services (Eisenberg, 1986; Schwartz, 1984; Wennberg, 1984; Wennberg et al., 1977). In addition, feel has suggested that review of some intendance 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 direction, a hypothesis of interest to patients, practitioners, purchasers, and policymakers.

The IOM Committee on Utilization Direction by Third Parties has examined the utilization management hypothesis past asking several questions.

How effective is utilization direction in limiting utilization and containing costs?
Are in that location unintended positive and negative consequences of bringing an outside political party into the process of making decisions about patient intendance?
Are utilization direction organizations and purchasers sufficiently accountable for their actions, or are new forms of oversight, possibly authorities regulation, needed?
What are the responsibilities of wellness intendance providers and patients for the appropriate utilise of health services?

The committee'southward investigatory approach has been described in the preface. Capacity 2 through 5 discuss the committee's findings most why utilization direction has go so widespread, how utilization management actually operates and appears to exist evolving, and what is known about its furnishings. In Chapter 6, the commission assesses the current status of utilization management, including its strengths and shortcomings, and recommends near-term and longer-range actions that could help utilization direction realize its objectives of decision-making costs and reducing inappropriate services without undermining patient admission to needed care.

What Is Utilization Management?

In its study of utilization management, the committee constitute that the term has no single, well-accustomed definition. Equally with the labels toll containment and managed care, different people may mean different things past 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.

3 points nigh the committee'southward focus are worth underscoring. First, the commission examines methods that rely on case-past-instance 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 outset characteristic distinguishes utilization management from methods that clarify aggregate utilization patterns to identify potential problems or that rely on all-embracing limits on health care benefits that accept no account of individual patient characteristics. The 2nd characteristic differentiates utilization management from the retrospective review of claims or medical records submitted later care has been provided. The third characteristic directs attending to purchaser-sponsored—rather than provider-sponsored—utilization management efforts, except when providers explicitly share the financial adventure with purchasers of care, equally 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-cost case management (run into Table 1-2).

Prior Review

Prior review provides advance evaluation of whether medical services proposed for a specific person conform to provisions of health plans that limit coverage to medically necessary care.² Virtually prior review programs include an integrated set up of review steps, not all of which volition apply to any single patient. The focus may be on the site of care, the timing or duration of intendance, 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 access. This is what Greta Harrison and her md experienced in one of the vignettes that opened this chapter. In this example, the review did non challenge the need for the process itself or the need for hospital care, only information technology 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, access review may be required within 24 to 72 hours afterwards hospitalization to check the appropriateness of the access as early as possible. The vignette describing Mr. Travers involved this technique as well every bit connected-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 intendance.

In add-on, a patient may exist required to get a 2d stance on the demand 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 2d opinions are focused on patients for whom the clinical indications for a service are dubious.

To encourage patients covered by a wellness plan to cooperate in the prior review process, a fiscal penalty, such as higher cost-sharing, may apply when individuals neglect to obtain necessary certifications. Affiliate 3 provides more details virtually 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 exist contingent rather than last. 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 business firm does not have access to the details of the benefit plan for a grouping, information technology might qualify services non covered past the contract. A review of claims prior to payment might then result in denial of benefits. Since this latter practice commonly makes patients unhappy, many utilization management firms attempt to consider restrictions in a client's wellness program in their determinations. Retrospective denials of claims following prior certification announced to be rare, equally are refusals to preauthorize services.

Loftier-Toll Case Management

High-toll case direction—also chosen large example management, medical case management, catastrophic case management, or private benefits management—focuses on the relatively few beneficiaries in whatever grouping who have generated or are likely to generate very loftier expenditures. This modest percentage of individuals—perhaps one to 7 pct of a group—may account for 30 to 60 per centum of the group's full costs. For the U.s. every bit a whole in 1980, one percent of the population accounted for 29 percent of total wellness intendance spending (Berk et al., 1988).

Case management for individuals with high-toll illnesses is similar to other forms of social and wellness case management, in that it involves assessing a person's needs and personal circumstances then planning, arranging, and coordinating the recommended services. It differs in its targets, those very expensive cases for which specialized attending may encourage appropriate simply less plush 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 get involved in the process or comply with its recommendations. (In the third vignette, Patty Simon's parents could have refused the alternative class of intendance suggested for her.) In addition, more endeavour is generally devoted to reviewing the patient's particular condition and circumstances and exploring, fifty-fifty arranging, alternative modes of treatment. Finally, exceptions to limitations in benefit contracts may exist authorized in advance if this volition permit appropriate but less expensive care. For case, additional home nursing benefits may exist arranged so that an individual tin avoid further hospitalization. In unusual cases, benefits may exist provided for other than health care services, such equally construction of a wheelchair ramp or rewiring a patient'due south home, if these expenditures will let dwelling intendance 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 accept been covered in this fashion.)

Retrospective Utilization Review

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

monitoring the accuracy of information provided during prior review and identifying trouble areas,
examining claims that are unsuitable for predetermination (generally those with high volume and low unit of measurement costs), and
analyzing patterns of practitioner or institutional care for use in provider pedagogy programs and selective contracting arrangements.

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

Other Cost-Containment Methods

The techniques of prior review and high-cost case direction are merely a subset of the price-containment methods that can influence decisions well-nigh patient care. Other methods, some of which are discussed in Chapter 2 and Appendix B, include the following:

benefit blueprint (including patient cost-sharing and coverage exclusions), consumer educational activity, and other approaches that shape patient demand for intendance;
financial incentives (for example, capitation or bonuses) that are designed to advantage physicians or institutions for providing less plush care;
contracts with health care practitioners and institutions that plant limits on payment for care provided to health program enrollees;
use of gatekeeping, triaging, and other devices to manage patient menses to specialists and expensive services; and
physician education and feedback on standards of care and patterns of exercise.

Utilization management shares with the last four strategies a recognition of the physician'due south cardinal part as the thespian-manager of the health care squad who is responsible for organizing and directing the product process and providing some of the productive input (Eisenberg, 1986). The unlike strategies for influencing decisions virtually patient care, withal, vary in their emphasis or reliance on unlike models of control (such as professional person self-regulation, informed consumerism, or prudent purchasing), their techniques of influence (such equally education, financial incentives, peer pressure, or external oversight), and the parties involved (that is, patients, primary care practitioners, or specialists).

Equally will be described in Chapter two, different strategies for cost containment have been tried, abandoned, and revived as third-party financing of health intendance has expanded. This history reflects both the difficulties of the job and an appreciation that there is no unmarried solution to problems of health care costs, quality, or admission. Many strategies have a place, each of which has different strengths and weaknesses and each of which needs monitoring and adjustment as circumstances alter and people adapt to various attempts to shape their beliefs.

Two Notes of Caution

Obstacles To Evaluation

This report laments the limited evidence on utilization direction and calls repeatedly for more and meliorate assessments. Notwithstanding, the commission is well aware that sound evaluation of utilization management programs faces several obstacles. Some are intrinsic to the research problem, some reflect mutual organizational behaviors, and some involve detail pressures faced by market-driven organizations. Rigorous evaluation also tends to exist quite expensive. In Appendix B of this report, the commissioned paper by Joan B. Trauner notes that evidence almost the impact of medico financial incentives on patient intendance decisions and quality of care is also quite express.

Intrinsic Conceptual and Methodological Problems

A number of problems in evaluating utilization management and other price-containment programs are anticipated difficulties faced, to one caste or another, in much social and evaluation research (Eddy and Billings, 1988; Wennberg, 1987). One such trouble is that there are no uniformly accustomed and applied rules for measuring wellness care utilization or adjusting data for differences in the characteristics of groups being compared. Other methodological difficulties involve (1) information quality and availability; (two) definitions and measurements of program characteristics, group characteristics, outcomes, and other variables; (three) 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-turn a profit, big or small-scale (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 instance, using data on inputs and procedures that are simpler to collect rather than data on outputs or outcomes);
compelling anecdotes, consensus, or tradition over conscientious and complex analyses; and
positive rather than negative results.

In add-on, faced with limited resources, managers are often reluctant to classify funds for evaluation instead of wages and benefits, shareholder dividends, or other activities. The committee has no information almost what utilization management firms spend on evaluation (for internal use or for clients) or how much unlike employers invest in systematically assessing the affect of prior review or other price-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, competition tin can exist a powerful stimulus for internal evaluation of how well a production is working and what makes it piece of work ameliorate. Also, clients of utilization management organizations have a potent involvement in obtaining reports on results and in shifting their business concern to other firms if they cannot get such reports.

Balanced against these forces are several threats posed by evaluation. Nearly manifestly, an evaluation may be negative and thereby reduce a firm's chances for retaining clients or winning new clients.^four Moreover, when an evaluation is publicly bachelor, 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 direction programs may provide competitors with statistical norms or even provider-specific data that would not exist readily available to them otherwise. Likewise, if firms that invest in relatively sophisticated research and evolution 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 tin seem a significant upshot for more experienced organizations.

Forces Behind Rising Health Care Costs

The Committee on Utilization Management by 3rd Parties also recognizes that the forces behind rising health intendance costs are exceptionally potent and hard to constrain through moderate means. Many believe that, for the foreseeable future, wellness care costs will proceed to increase faster than costs in the balance of the economy.

Clinical judgments about the value of treatment for diverse categories of patients are changing as new treatments or new prove of treatment impact emerges. For case, women who underwent mastectomy for chest 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 handling 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 non add together any information that aids in treatment decision-making (Kassirer, 1989). Advances in screening techniques may grab individuals much earlier in the course of disease and reduce the numbers who will receive later expensive treatments. The question is, volition the costs of screening and early treatment start the savings? Will real survival rates increment? Researchers involved with cancer betoken to methods under evolution 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 crumbling, and the use of both acute-intendance and long-term-care services is higher for people in the older age groups.
Betwixt 1980 and 2000, the number of physicians has been projected to increase from 171 to 260 per 100,000 population (Graduate Medical Education National Advisory Commission, 1981; U.S. Department of Health and Human being Services, 1985). Whether this will bring a surplus of physicians is a thing for fence (Ginsburg, 1989; Schwartz et al., 1989). Nonetheless, 1 estimate, now many years out of engagement, is that every additional md results in $400,000 in additional yearly expenditures for medical services.
The concern about the millions of Americans who have no routine wellness insurance coverage is generating various proposals to protect these individuals through, for example, state-sponsored insurance pools, mandated employer-based insurance, expansions of Medicaid, and universal federal wellness insurance (Congressional Research Service, 1988). What are the short-term costs (and for whom) of increasing access? What long-term costs and benefits can be expected?

Reducing increases in wellness intendance costs such that they are much closer to the level of full 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. Club may not be willing to make such changes, particularly in the curt run (Curran, 1987). It may continue the search, described in the adjacent chapter, for more moderate strategies to command health care expenditures. Utilization management is one such strategy.

Information technology is an unfortunate reality, however, that most price-containment strategies eventually disappoint their supporters and evaluators to some caste. Even when these strategies seem to reduce costs initially, tendency projections exercise not appear to show an appreciably lower increase in total costs over the longer term (Prospective Payment Assessment Committee, 1989). Given the effort and optimism it generally takes to commit a corporation or a regime to a new program, it is not surprising that excessively high expectations often give manner eventually to disillusionment. Unwarranted or excessive negativism can, in turn, exist 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 arroyo 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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1: Public programs have been the subject of several reports in recent years (for example, Full general Accounting Office, 1983, 1988a, 1988b; Health Care Financing Administration, 1979; Physician Payment Review Committee, 1988, 1989, and Project HOPE, 1987).
2: 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 intendance too as the clinical demand for a particular procedure, whereas others utilise it only in the latter sense. Those who use the term more than restrictively tend to apply the term ceremoniousness to the onetime assessments. For a discussion of legal interpretations of medical necessity, see the paper past William A. Helvestine in Appendix A of this written report.
3: The private sector is non solitary in providing meager resources for program evaluation. The utilization and quality review components of Medicare's peer review system (PRO) plan have not been very rigorously examined (Full general Accounting Role, 1988a; Medico Payment Review Commission, 1988). The Health Intendance Financing Administration does take performance standards for PROs, but they tend to emphasize process rather than effect 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 committee encountered considerable reluctance by review organizations to have their analyses published.

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