In any type of health insurance, the determining factor regarding pricing, plan development, forecasting and eventually, controlling costs, is utilization, i.e. how much and how often the system is used. The more health insurance is “utilized”, the more expensive it becomes, as benefits must be provided by health providers who must be compensated for their services. The first real Managed Care program developed solely for the purpose of containing medical care costs, was utilization review, i.e. reviewing how often and how much the system was used. This system attempted to determined whether hospitalization was proper for the particular health situation, whether the medical care was proper. It proposed alternate medical services on occasion, and also helped to determine the length of hospital stays.
The first major use of a utilization panel was in 1972, when the federal government crated panels in an attempt to provide quality medical service to Medicare beneficiaries on a cost-effective basis.
In 1973, the Health Maintenance Organization Act inserted the federal government into the insurance business which was considered the domain of States’ Departments of Insurance. In effect, it “legitimized” the HMO concept by requiring any employee groups of 25 or more employees that is provided health insurance by the employer, must include an HMO as an alternate provider of health services. This stimulated the growth of HMO’s but were not popular with employees because of the limited number of health care providers available.
Coincidentally, medical care costs were rising rapidly due to continuing inflation, so health insurers watched the growth of the HMO concept with increasing interest. However, with the eventual of the HMOs due to limitation of health providers, the insurers introduced the Preferred Provider Organization (PPO) which help to contain medical costs.
The cost savings concept of the PPO was simply that there would be savings in medical care because of the discounted fees of the network providers. However, it did not take long for many of the hospitals and health providers to realize that if their fees were cut, then an increase in utilization would put the money back in their pocket. As an example, doctors may charge 80% of their usual fees to PPO patients, but if it would normally take 4 visits to conclude medical treatment, it would be extended into 5 visits. Hospitals would keep people in the hospital longer to make up for any discounted fees, with the result that savings would be generated by discounted fees to providers that would join the network. However, overutilization more than offset any such savings through discounts. Example: A hospital might give a 25% discount to PPO patients, but may keep them in the hospital longer to make up for the discount. Therefore, medical costs continued to rise, although not as sharply as before.
As a result, some insurance companies would combine the cost savings and discounts of a PPO, with the utilization review procedure. This was accomplished by the insurers maintaining close scrutiny of all health claims, particularly in the area of hospital costs. Again, some hospitals would then treat patients on an outpatient basis, so while inpatient care costs decreased, they more than made up for it by increasing the outpatient cost. Again, the total overall medical costs did not reduce or level out as anticipated.
Realizing that more action must be taken, insurers decided to review the procedures of more than just inpatient and outpatient care, but also to include In an effort to contain these overall medical costs, utilization review procedures were expanded to include a much broader range of services, such as inpatient and outpatient hospital care, drugs, mental health, substance abuse, physical therapy, and chiropractic care. This in turn led to the technique of “Utilization Management” (UM),
In addition to increasing the reviewing of more procedures, Utilization Management provides for utilization reviews at three points: prior to treatment, during treatment, and after treatment.
In order to control medical care costs, it is necessary to manage both the fees charged by providers and also how appropriate is the treatment. It is often quoted that if a surgeon agrees to a charge of $2,000 for an operation for which he usually charges $3,000, the savings might be considered as $1,000. However, if the operation was unnecessary, there was still $2,000 spent and the patient was at risk of complications from the procedure.
Utilization Management uses reviewers who monitor the patient’s care as to appropriateness by basing the procedures and results upon criteria obtained from a variety of sources.
If review is done on a prospective basis (i.e. before the fact), coverage for a recommended course of treatment or hospitalization can be denied if the proposed treatment is not considered appropriate according to standard medical guidelines.
If review is done on a concurrent basis (during the procedure), the need for continued treatment is evaluated.
If review is done on a retrospective basis (after the procedure), payment for inappropriate treatment may be denied. The severity of denial is not taken lightly and the decision is internally reviewed and approved after very strict criteria. The purpose of utilization management is not punitive, but is for control purposes.
Utilization management provides certain discipline that makes providers more careful in the treatments they recommend and the services that they render. To some, this may seem like drastic measures and be similar to having someone “looking over your shoulder”, but the results have been that these procedures have reduced cost and improved treatment guidelines.
In actual practice, Utilization Management has provided an educational function as by reviewing the treatments and establishing treatment “norms”; they have discovered wide variations in the treatments provided by various providers. By comparing procedures, particularly when outcomes are known, the best course of treatment can be more accurately determined.
Using Utilization Management techniques widely has proven that only a minority of providers contribute to inappropriate or substandard treatment. Conversely this data also helps to identify the high-quality providers and their practices can be used as a model. The low-quality providers can then be brought up to standard or weeded out of medical care networks.
Employers can use utilization management techniques in a self-insured system, by third-party administrators, and by insurers. Medicare uses utilization management by using a system whereby nurses trained in utilization techniques use a set of treatment protocols to make an initial screening of proposed treatment by physicians. Panels of local physicians modify the protocols to reflect community practices. If a particular treatment does not meet the protocol standards, the situation is referred to a consulting physician for further review. This is commonly called “peer review” and needs a large number of physicians and specialists to participate.
Like Utilization Management, a third party, other than the healthcare provider and the patient, becomes involved in the treatment process and is necessary for Medical Case Management. While Utilization Management involves only the provider of medical care services, whether hospital, doctor or specialist, Medical Case Management intervenes with both the provider and the patient, taking a much more active role in the treatment process. Utilization Management is generally a remote activity achieved by paperwork, computers and telephone, with occasional on-site review of medical records and bills. In Medical Case Management, a lot can also be done by telephone: gathering information, arrangement for treatment, etc. It is necessary, in most cases, for a medical care manager to personally communicate with all interested parties in the treatment process; the providers, the patient, and the patient’s family.
Medical Case Management should not be used for routine cases as it is not considered cost effective for commonly used procedures and treatments. Statistics indicate that 40% of medical care costs are attributed to 3% of the patients - those very seriously ill or injured. 40% of medical costs are attributed to 17% of patients with chronic illnesses. Applying Medical Case Management to just 20% of the patients allows over 80% of medical care costs to be controlled. (NOTE: These statistics illustrate the “Pareto” rule, that states that roughly 80 percent of most events can be attributed to approximately 20% of their causes).
Determining just how cost-effective Medical Case Management is, or can be, is difficult to determine because catastrophic and chronic medical problems involve longer periods of time, called “long-tail claims” in insurance parlance, than other medical care which is usually of a short duration. Therefore, in catastrophic and chronic cases, the cost savings can only be projected. People rarely take such projections into serious consideration, as there can be too many events that can completely destroy the estimation. Therefore, there is really no way to “prove” that the medical case managers can actually effect such savings. However as a larger data base is created with experience, it appears that such savings are actually realized.
The Case Management Society of America has created the following definition of Medical Case Management:
Case management is a collaborative process which assesses, plans, implements, coordinates, monitors, and evaluates options and services to meet an individual’s health needs through communication and available resources to promote quality cost-effective outcomes.
A collaborative process means that medical case managers work as a team member with providers, care payers, the patients, and the patient’s family.
The general procedure for a medical case manager is as follows:
A life-care plan is developed and individualized for the patient. This plan must meet the medical and psychosocial needs and designed to allow the patient the highest quality of lifestyle befitting the medical care needed. Then the costs of the plan is determined, and sources of payment are determined. The plan is presented for approval by all parties.
After approval, the medical case manager initiates the plan and continually audits the effect of the plan for efficiency and completeness. Communication is important in the analyzing process and the manager is responsible to maintaining continuing communications with the participants in the plan. As with any business plan, it is continually reviewed, modified when necessary, and evaluated as to the efficient operation and effect of the plan, keeping in mind that the goal is to derive the maximum benefits in relationship to the cost of the program, and the satisfaction of the patient, the patient’s family, physician and all other interested parties.
Medical case managers must have the background to properly evaluate the program and all of its components and ramifications. They must know the providers of service in every instance where appropriate, and they must judge which services and actions are appropriate. They must have a grasp of the availability of private and government services, and how they all interact to provide the best plan for the patient.
The principal objective of the medical case manager is to communicate with all participants, and to build a consensus among all of those involved as to the procedures involved, and to accomplish these objectives with the available resources. Frequently the medical case manager will represent the patient in negotiations, in many cases without the knowledge of the patient. They can attempt to change or modify the benefits with negotiating with the providers, and frequently, transmitting the desires of the patient to the providers in respects to where or how the services are to be rendered.
The medical case managers have a number of different results that they strive for, such as arranging for medical care that a physician will approve, with savings to payers, and still meet the patient’s needs and desires. For the patient, the management assures that patients receive the right amount and type of care. Providing the appropriate amount and type of care is the most cost-effective way to treat patients. For the medical community, which is made up of a wide variety of providers, each provider is focused on delivering a certain type of care. The medical case manager brings objectivity into the situation, making providers more aware of the range of options available to service their patients.
Treatment review can be either Prospective, Concurrent, or Retrospectively, as explained earlier. Review can be at any or all of these points in treatment.
Prospective Review. Pre-certification or pre-admission certification is probably the most recognized Managed Care technique as it is required by almost all plans, whether Managed Care or fee-for-service. It has proven that it prevents unnecessary inpatient hospital stays.
When a physician makes a recommendation for hospital treatment, the utilization reviewer is contacted, usually by the physicians. This contact is usually within 24-48 hours, except in case of emergency. The utilization reviewer is provided with the name of patient, name of doctor and hospital, diagnosis and proposed treatment and any other pertinent information. This information is matched against protocols developed for similar diagnosis and which indicates whether the treatment is proper for the diagnosis, whether it needs to be performed in a hospital or on an out-patient basis, and whether the proposed length of stay is in line with standards. If the treatment agrees with the protocols, the reviewer proves the plan and the patient are admitted to the hospital.
However, if the protocol doesn’t meet the proposed treatment, it is referred to a consulting physician who then contacts the patient’s doctor to discuss the situation and to see if they can agree on the treatment. Usually, they compromise on the treatment, or if not, the treatment could be disapproved and coverage denied.
Second Surgical Opinion. Second surgical opinion is also a very popular provision that requires that elective surgery be reviewed by another specialist prior to surgery. This requirement may be satisfied by simply getting the required second opinion, but some plans require that the second opinion agree with the first opinion. The costs of the second opinion are borne by the plan. Not all elective surgery requires a second opinion, as it is not cost effective them in many situations. Some surgeries are mandatory with all plans, such as hysterectomies or laminectomies.
Pre-admission Testing. Patients are tested prior to surgery by facilities outside of the hospital. This eliminates patients being admitted to the hospital a day or two early just for the tests. This is a popular requirement and is present on most plans.
Concurrent Review and Discharge Planning. As soon as the attending physician determines that a hospitalized patient is medically ready for discharge, discharge planning asses whether the patient needs continuing care could be performed at a lower cost with acceptable results, in another facility, such as a skilled nursing facility, nursing home, home health care, or rehabilitation services.
Retrospective Review. After the treatment has been rendered, it can be compared with established standards and guidelines. If the treatment doesn’t match the standards, payment can be denied. However, it is very rare that the payment is denied, but in most cases the information gathered in the review is used to educate the physicians and for date purposes in order to improve the review process.
Review of the Hospital Bill. The overpayment of hospital bills has received considerable publicity recently and a hospital bill review system more than pays for itself. Most overpayments are administrative errors, however some significant savings have been realized over deliberate overbilling. The hospital bill review determines, among other items, whether:
The bill review procedure can also determine whether the “codes” have been used correctly (called “code gaming”).
Upcoding - erroneously coding simple procedures as more complex and expensive procedures.
Explosive - breaking down a group of laboratory tests performed on the same specimen into a number of separate tests, and billing separately for each charge.
Unbundling or “Fragmentation” - breaking down a complex procedure into separate and individual procedures and billing for each. Surgery, in particular, lends itself to fragmentation, as charges can be made for cutting, for suturing, etc.
Visit churning - refers to the physician billing for more visits than were performed.
Outpatient care, often referred to as “Ambulatory” is defined as medical treatment rendered in doctor’s offices, clinics, surgery centers, mobile laboratory facilities, emergency medical facilities, hospital emergency rooms and other outpatient departments.
The Outpatient Review is a direct result of the increase in the volume of care provided on an outpatient basis. Since most of the outpatient services are for small amounts, it is not cost-effective to review many outpatient bills. To add to the difficulty, there are many different types of providers including all disciplines of medical professionals, some of who are not familiar with utilization management.
Therefore, only the more expensive items are reviewed, e.g. pre-authorization may be required for CAT scans and MRI procedures.
Concurrent review is cost effective only to extended treatment plans, which include a number of visits to the provider.
Most outpatient review is performed on a retrospective basis and the larger amounts can be reviewed in conjunction with the hospital bills. Review of treatment of catastrophic or chronic cases; can be accomplished on an individual basis, with emphasis on monitoring so as to compare with established standards.
Specialized care can be reviewed on a basis that is separate from the general health plan that is being reviewed. There are professional reviewers who specialize in the specific areas under management. They can be more effective in dealing with those specialists to control costs.
Early identification of the 20% of cases that account for 80% of the medical care costs, is a key issue in Medical Case Management. The earlier a catastrophic or chronic case can be identified and referred to a medical case manager, the better the care that can be provided to the patient. Medical Case Management is generally integrated into a Managed Care system, which is already involved in utilization management. Cases are designated for case management consideration by diagnosis or nature of the treatment recommended. The list usually includes potentially high-cost indications as head or spinal cord injuries, respirator dependency, extensive burns, loss of limbs or eyes, chronic pain, psychiatric or emotional illness, prolonged hospitalization, high risk pregnancy, premature birth or birth with complications, diabetes with complications, transplants, etc.
Additional patterns of abuse may be flagged for intervention by a medical case manager, such as persons who have multiple prescriptions for mood-altering drugs filled at a high frequency, drug addition, alcoholism, etc.
The potential high cost does not automatically mean that case management is appropriate for a case. There must be potential to improve the case and to obtain substantial cost savings. For cases involving in-hospital treatment, there is little for a care manager to do, and in many other cases the hospital discharge department can do an adequate job of arranging for timely release and alternative settings for care.
CASE STUDY: The Effect of PCP Bedside Manners
Ellen's parents were patients for many years of a large, staff model IB40. Her father, Joe, was admitted to the hospital for diagnosis and treatment of increasing severe chest pains. After the tests were completed, Joe's, internist for many years and the cardiologist he had called to consult, asked Ellen and her mother to come in for a family conference at her father's bedside.
At the conference, the doctors told the family that Joe had severe coronary artery disease and the best option was open‑heart coronary artery bypass surgery. The doctors discussed other options, such as balloon angioplasty ‑ where a balloon is inflated in the artery to open up the blockages ‑ and further medical therapy with cardiac medications, but they did not recommend either of those options.
Recognizing that the treatment for Joe was going to be severe, the situation had been referred to a Case Manager. After reviewing the information from the doctor and cardiologist, the Case Manager concurred with their suggested course of treatment.
However, Joe, known to be a stubborn man who generally disliked doctors, rejected the surgery and said he would take his chances with more medication. It was Joe's decision at this point. Ellen felt that they seemed more concerned in telling her of their options and covering their rear ends, than in helping her father make the right decision.
In discussing this with her father, it was discovered that he felt that the doctors didn't seem to feel it was necessary, as they raised no objection to his refusal of surgery. Ellen felt that the doctors were more concerned in saving $30,000 that the heart surgery would cost. Ellen returned to the HMO doctor and demanded more information as to what could happen to her father if he did not have surgery. As it turned out, the HMO physician was depending upon the expertise of the cardiologist who, by nature, was really not a forceful individual. The situation was referred back to the Case Manager of the HMO, and he agreed to refer Joe to another cardiologist for a second opinion.
The new cardiologist was closer to Joe's age, and after studying the medical records, told Joe that there were several alternatives, but only one that would allow him to five much longer. Joe seemed very impressed, and then agreed to the surgery.
The Case Manager checked with Joe to make sure that it was his decision for surgery, and he also contacted Ellen and explained the alternatives to her. Of course, she wanted the surgery all along, so the Case Manager felt comfortable with the decision.
The surgery was performed within a week at a large HN40 hospital. The Case Manager was kept abreast of the surgery and the recovery on a continual basis. Immediately after the surgery was completed, the Case Manger contacted Ellen again and assured her that her father would be properly cared for in the hospital, and upon his discharge, a home health care nurse would take care of Joe as long as was necessary, and the physical therapy that might be needed afterward.
After Joe had been home for a week, the Case Manager again contacted Joe and Ellen as a follow‑up to the procedure. They were impressed with the fact that there was very little paperwork, and the HMO took care of Joe so well.
STUDY QUESTIONS
1. The determining factor regarding pricing, plan development, forecasting and
controlling costs is
A Utilization.
B the profit margin.
C. the number of HMOs.
D. the cost of hospital rooms.
2. Utilization Techniques
A. proves that only a minority of providers contribute to inappropriate or
substandard treatments.
B. cannot be used by insurers.
C. is not used by Medicare.
D. have nothing to do with local doctors.
3. When someone other than the doctor and patient becomes involved in treatment,
it is called:
A. an HMO.
B. Medical Care Management.
C. long-term care.
D. a Physician’s Association (PA).
4. Second surgical opinions
A. are normally paid by the plan.
B. are never used for elective surgery.
C. are only used by Blue Cross.
D. are illegal in most states.
5. Pre-admission testing
A. is used for college entrance exams.
B. is a popular requirement and is present in most plans.
C. is performed in the hospital only.
D. admits the patient to the hospital 3 days early for tests.
6. Prior to 1973, insurance regulation was primarily in the hands of the States. How did the Federal Government get into the insurance business at that time?
A. It passed a law stating that the federal government now controlled insurance laws and regulations.
B. It expanded Medicare to include all citizens of the U.S.
C. It passed legislation requiring all groups of 25 or more employees that provided health insurance to its employees, to make available an HMO as an alternative provider of health insurance.
D. Legislation was passed requiring all health insurance for groups of 25 or more employees, to be approved by the Federal Department of Health and Human Resources.
7. Utilization Management requires there be Utilization Reviews at 3 points. Which is not one of these points.
A. at autopsy
B. prior to treatment
C. during treatment
D. after treatment
8. The purpose of Utilization Management is
A. for punitive purposes.
B. to makes doctors and hospitals more money.
C. to eliminate as much as possible, federal intervention.
D. for control purposes.
9. A collaborative process which assesses, plans, implements, coordinates, monitors, and evaluates options and services to meet an individual’s health needs through communication and available resources to promote quality cost-effective outcomes, is
A. Utilization Management.
B. Care Management.
C. Case Management.
D. Cost Management.
10. In question (9) above, “collaborative process” means
A. an administrative procedure endorsed by the doctors and the hospital.
B. that Medical Case Managers work as a team with providers, care payers, the patients and the patient’s family.
C. the ability of the doctors and hospitals to collect their medical charges from the insured’s insurer.
D. the cross-ownership of the medical and surgical facilities.
1A 2A 3B 4A 5B 6C 7A 8D 9C 10B