10 utilization review

7/26/2019 10 Utilization Review

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AHM Medical Management: Utilization Review

Objectives

After completing the lesson Utilization Review, you should be able to:

Discuss some of the key issues health plans must address to develop and maintain

effective utilization review programs

Explain the importance of medical necessity, medical appropriateness, and utilizationguidelines

Describe the role of authorizations and member appeals in the utilization review process

Identify some of the ways that health plans evaluate the results of utilization review

programs

Introduction

Few Americans have unlimited access to healthcare-primarily because of the high cost-yet when

they need it, consumers want the very best care that money can buy. In addition, members andproviders often equate the "best" with the "most" or "the most expensive," even though studieshave shown that such an approach does not always lead to appropriate or even safe care.

One way that health plans seek to offer more affordable coverage is by excluding services and

supplies that are not medically necessary and appropriate. When making coverage decisionsbased on the appropriate use of medical resources, health plans are sometimes confronted by thedemanding and conflicting expectations of members, employers, providers, legislators, regulators,the courts, consumer advocates, and the media. Broadly speaking, health plans make these

decisions by performing utilization review (UR).

In this lesson, we begin with a discussion of the purpose and function of utilization review, theprocess, and the types of services included in UR. Then we take a closer look at the criteria healthplans use to determine medical necessity and appropriateness, as well as the role of authorization

systems in UR. Next, we examine how the appeals process provides members with a means todispute UR decisions. We also address the influence of accreditation requirements andgovernment regulations. We end the lesson with a look at several strategic issues associated with

UR. Although our discussion addresses UR in terms of a health plan's activities, keep in mind thatsome health plans delegate some or all UR activities to external organizations, such as utilizationreview organizations (UROs) or provider organizations.

The Purpose of Utilization Review

Since the 1970s, when Dartmouth Medical School professor John E. Wennberg and hiscolleagues began conducting studies to monitor healthcare delivery costs, researchers have

uncovered significant variations in the practice of medicine. Practice variations have beenobserved between different regions of the country, different locations within a region, and evendifferent physicians practicing in the same area.

For example, in a 1995 Harvard Medical School study of Medicare heart-attack patients, thelikelihood of undergoing coronary angiography was 50 percent higher for hospitalized patients in

Texas than for a comparable group in New York, while the New York patients were more likelyto receive beta-blocker therapy. Over the following two-year period, a greater number of the


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Texas patients suffered from angina or died. The researchers suggested that these outcomes mayhave been related to the combination of invasive, possibly dangerous angiograms and the absence

of life-extending beta-blocker therapy for the Texas patients.1

A primary reason for practice variations is the lack of scientific evidence that would give

healthcare practitioners the information they need to determine optimum treatments. According toWennberg, differences often arise when there is a choice between an aggressive surgicalintervention and a more conservative medical approach. Wennberg goes on to say that

"controversies arise because the natural history of the untreated or conservatively treated case ispoorly understood and well-designed clinical trials are notably absent."

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The utilization review process provides a way for health plans to determine whether carerecommendations made by providers are (1) covered under the benefit plan and (2) medically

necessary and appropriate. It is important to note, however, that UR does not actually recommendprocedures.

A primary goal of utilization review is to address practice variations by applying uniformstandards and guidelines, supported by evidence-based medicine, when available, or bycommunity standards of practice in the absence of evidence-based medicine. Another important

goal of UR is to support cost-effective care, based on the health plan's medical policy, thecontract with the purchaser, and the member's medical needs.

Health plans also maintain UR programs to comply with regulatory requirements. Earlyregulations often directed HMOs to implement procedures for compiling, evaluating, and

reporting utilization of healthcare services. These requirements, which usually subjected a healthplan's UR procedures to review and approval by the state insurance and/or health department,continue to apply today. In addition, with the rise of managed healthcare, UR regulations now

include features intended to protect consumers from UR practices that might inappropriately limitaccess to medical care. Insight 5A-1 provides a brief history of the development of utilizationreview in the United States.


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The Utilization Review process

When determining if benefits are payable, health plans perform two basic types of reviews:administrative and medical. Anadmini strative reviewaddresses nonclinical aspects of coverage

by comparing the applicable contract provision to the proposed medical care. For example, the

service in question might be specifically excluded or might not appear in the contract's list ofcovered services and supplies. This type of review can be conducted by a staff member who is nota medical professional.

Amedical review, on the other hand, is one that requires an evaluation based on medical need.For example, to determine if a therapeutic procedure meets the contract's requirement that

services be medically necessary and appropriate, a healthcare professional must review theproposed course of treatment and determine if it is consistent with the health plan's medicalpolicy and utilization guidelines.


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A health plans decisions regarding coverage and medical appropriateness are typicallyincorporated into utilization guidelines, which indicate standard approaches to care for many

common, uncomplicated healthcare services. Utilization guidelines often take the form of

computer-based screening tools or criteria sets that are structured as a series of questions arrangedin a decision-tree format. A UR nurse proceeds through a set of questions to determine if a

proposed course of care is similar to what a healthcare professional would normally expect under

the given circumstances. Utilization guidelines also indicate when the nurse should refer adecision to a medical director or other physician reviewer due to unique circumstances.

UR can be performed prospectively, concurrently, or retrospectively. A prospective reviewevaluates a proposed plan for medical care before care is delivered, a concurrent review occurs

while the care is in progress, and a retrospective review takes place after the care has beencompleted. When payment for a course of medical care is approved, the care is said to beauthorized or, in the case of prospective review, preauthorized or precertified.

Generally, health plans prefer to perform UR on a prospective basis, when feasible, so that thevarious parties-the member, provider, and health plan-can reach an understanding about the

treatment for a given medical condition before it begins. To illustrate, let's consider a proposedinpatient hospital admission. By requiring advance notice of the admission, the health plan canconsider a full range of healthcare service alternatives for the member, beginning with a

determination as to whether the hospital is the most appropriate setting. Using establishedstandards of care for specific medical conditions, a prospective review might lead to thedetermination that the proposed care could be performed in an ambulatory surgical center or in a

physician's office. If an inpatient admission is appropriate, UR staff can use established standardsof care to determine a maximum length of stay and can begin the process of discharge planning.

In some health plans, UR is also used to identify as early as possible those members who are

likely to benefit from other medical management initiatives, such as case management or diseasemanagement. For instance, as a result of a request for precertification of a total hip replacement, ahealth plan might assign a case manager who would suggest a care plan that includes preoperative

physical therapy and postoperative rehabilitation. We discuss case management in greater detailin the lessonCase Management.

After the hospital admission, the health plan's UR activities switch from prospective to concurrent

review, which entails: (1) gathering information about the member's progress, (2) tracking thelength of stay, and (3) continuing the discharge planning process. A UR nurse performs theseactivities by working with the physician, hospital staff, the member, and the member's family;

visiting the hospital; and/or communicating by telephone or other forms of telecommunication asneeded. At some point during concurrent review, it may be determined that acute inpatient care is

no longer required. In this case, the member might be moved to a skilled nursing unit within thehospital, transferred to a skilled nursing facility, or discharged from the hospital to receiveoutpatient follow-up care.

In most cases, the UR nurse documents the clinical details of the patient's condition and care toprovide a case history, which can be used in consultations with physician reviewers or possibly in

appeals or retrospective utilization review.

Under retrospective review, decisions on the authorization of payment for services are made after

the services have been rendered. This approach limits the number of options available to planmembers because the plan cannot direct the plan member to a more appropriate setting or type of


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care. An even greater problem arises when retrospective review results in the denial of paymentbecause the completed services fail to meet coverage requirements.

One way that health plans reduce the number of retrospective denials of payment is byperforming retrospective reviews on a large number of cases, collecting data on these cases, then

identifying and addressing questionable utilization and outcome patterns. For example, aretrospective review of hospital admissions might reveal that certain surgeons unnecessarilyadmit patients the day before scheduled surgery for preoperative care that, in many cases, could

have been provided on an outpatient basis or in the hospital on the day of the surgery. Byidentifying these surgeons and discussing utilization criteria with them, the health plan can

prevent inappropriate early admissions.

The Focus of Utilization Review

Because it would be an overwhelming task to review every course of care for every member in or

out of the hospital, many health plans concentrate on healthcare services that produce the bestreturn on their UR investment. For example, UR programs often consider services that are

Overutilized Utilized differently by different providers Not well-supported by scientific evidence

Known to produce variable outcomes New or investigational Known to pose potential medical risks for members

Often performed for cosmetic reasons Costly

Figure 5A-1 shows some healthcare services that health plans might identify for review using theabove criteria. Lists like the one in Figure 5A-1 continually evolve as medical procedures,

technologies, and medications are developed or gain popularity.

Ultimately, for UR to be effective, each health plan must carefully assess its own situation and

then determine which types of UR activities would be most effective. For example, a health planwhose providers rarely propose unnecessary hospital admissions might determine that

precertifying every hospital admission is no longer necessary. This health plan might choose to

focus more of its UR resources on drug utilization review or on outpatient services such asdiagnostic tests.


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A health plan might also choose to replace or supplement traditional UR methods with otherinitiatives for managing the appropriateness and costs of medical care. Insight 5A-2 describeshow one health plan reduced its use of precertification. Other health plans have reported that theyalso have greatly reduced the number of services for which they require precertification of

medical necessity.4

Appropriate Treatment and Use of Healthcare Resources

Recognizing that some services are more expensive, are less effective, or pose unnecessary health

risks, health plans use appropriateness standards in utilization guidelines to help determine whatshould be covered. Recall from The Role of Medical Management in a Health Plan that medicallyappropriate services are diagnostic or treatment measures for which the expected health benefits

exceed the expected drawbacks and risks by a margin wide enough to justify the measures.Uti li zation gui deli nestypically indicate standard approaches to care for many common,uncomplicated healthcare services and often take the form of computer-based screening tools or


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criteria sets that are structured as a series of questions arranged in a decision-tree format. A URnurse proceeds through a set of questions to determine if a proposed course of care is similar to

what a healthcare professional would normally expect under the given circumstances. Utilization

guidelines also indicate when the nurse should refer a decision to a medical director or otherphysician reviewer due to unique circumstances.

In addition to evaluating the appropriateness of particular medical treatments, utilization reviewevaluates the appropriateness of resources used in conjunction with those treatments. This aspect

of utilization review focuses on determining the appropriateness of the

Level of care needed to treat the condition Clinical setting in which care is provided Services and supplies used to treat the condition

Although health plans emphasize primary care, some conditions require referral to medical

specialists.

A specialty referr alis a decision to divide a patient's care among one or more medical specialties.

Typically, a specialty referral is made by a primary care provider (PCP) or by another specialistwho determines the need for additional diagnostic or therapeutic services. Later in this lesson, welook at different approaches that health plans use to handle specialty referrals.

When making decisions about the appropriate clinical setting, UR personnel rely upon utilization

guidelines as well as the member's unique medical needs and personal circumstances, such as theability of family and friends to provide support. For example, the most appropriate clinical settingfor a low-birth-weight infant might begin with a neonatal intensive care unit (NICU). As the

infant's condition improves, the setting might switch to a neonatal transitional care unit andeventually home healthcare.

A resource some health plans use to review surgery and certain nonsurgical interventions is a siteappr opriateness li sti ng, which indicates the most appropriate settings for common procedures.After reviewing this listing, a UR nurse might be able to point out to a surgeon that network

physicians have performed a proposed surgical procedure more than 90 percent of the time on anoutpatient basis. The surgeon might respond by providing additional information that justifiesinpatient surgery or may decide that the surgery can, in fact, be performed safely and effectively

in an outpatient setting.5

As we have seen, health plans rely on evidence-based medicine and community standards of

practice to develop utilization guidelines that help determine the healthcare services and suppliesthat are necessary and appropriate. By reviewing medical outcomes data, health plans can

determine if a particular service most often produces the best results. However, because clinicalstudies have not been performed for many conditions and procedures, health plans balanceevidence-based criteria with experience-based criteria. Experience-based criteriarecognizecommunity standards of practice and the overall experience of medical directors, UR nurses,

physician reviewers, and the provider's first-hand experience and knowledge of the patient toidentify the most effective treatment.


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Developing and Maintaining Utilization Guidelines

A health plan's utilization guidelines are developed and maintained by licensed physicians and

other healthcare professionals who are employees of the health plan. Also, UR programs oftenuse "off-the-shelf" guidelines developed by nationally recognized vendors such as InterQual,

Value Health Systems, and Milliman & Robertson, Inc. (M & R Healthcare ManagementGuidelines).

Health plans collect and analyze internal data-such as approvals and denials of payment, andcomplaints related to specific services-which could indicate a need to update utilization

guidelines. In addition, as we saw inThe Role of Medical Management in a Health Plan, healthplans rely on committees to track trends in medical practice. These committees consult a varietyof sources such as peer advisors, network providers, and online services that monitor and review

medical literature. Usually, when the need for evaluation is identified, a health plan medicalmanagement committee reviews and, if necessary, updates the health plan's medical policy. Then

the departments responsible for maintaining the health plan's contract, claims administrationsystems, and utilization guidelines make the applicable adjustments to reflect the company's

position.

Clinical Practice Guidelines and Utilization Guidelines

As we noted in the lessonClinical Practice Management, clinical practice guidelines (CPGs) areintended to aid providers in making decisions about the most appropriate course of care forindividual patients. Many health plans make available CPGs that were developed by the provider

community; other health plans distribute CPGs that they themselves have developed. Although itis important for CPGs to be aligned with conditions for coverage in the contract, CPGs are not

benefit payment standards.

CPGs are used primarily as an educational tool for providers, but they can also help a health plan

meet utilization goals. For example, consider a health plan that has identified a particular electivesurgical procedure prone to overutilization. The health plan could send network providers theCPGs for the medical condition being treated by the overutilized procedure, then reinforce thisinformation through the UR process. Some health plans have found that a combination of

education and UR can lead to more appropriate utilization of services.

Authorization Systems

To see that utilization guidelines are consistently applied, UR programs rely on authorization

systems. An authorization system can be described as a set of policies and procedures that givesspecified individuals the authority to make certain choices or decisions about benefit payments.

When we speak of authorization here, we generally refer to the authority to make a paymentdecision prior to or at the time care is rendered, rather than after the fact. In the case of medicalemergencies, however, the authorization process by necessity occurs within a reasonable timeafter treatment in an emergency department.

For some types of care, authorization of payment is not needed. For example, a member can

initiate a visit to a PCP without contacting the health plan first. Also, some health plans allowPCPs to authorize payment for certain types of care, such as a specialist visit or a hospitaladmission, without the need for health plan approval. In addition, as we saw earlier, some health


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plans have redesigned their authorization systems so that physicians are able to approve mosttypes of care without health plan approval

A health plan's approach to authorization is largely determined by its philosophy concerning theappropriate degree of health plan control of utilization. Several other factors also influence a

health plan's approach to authorizations. For example, if a health plan contracts with a largemedical group on a capitated basis, then the health plan may be comfortable delegating to themedical group most of the responsibility for developing and implementing authorization

protocols.

Health plans develop authorization protocols to clarify responsibilities and effectively monitorand manage utilization of healthcare. Invariably, UR nurses may issue approvals based onmedical necessity criteria, but must refer potential nonauthorization decisions to physician

reviewers; only physicians can make nonauthorization decisions based on medical necessity.Under certain circumstances, the authority to make coverage decisions can reside with an internal

In the past, most health plan authorizations were handled through the mail or over the telephone.Today, however, competitive pressures and consumer demand have prompted many health plansto modify their authorization processes. In order to make access to care more convenient for

members, some health plans have

Streamlined authorization processes Implemented special referral protocols for unique situations Given PCPs the authority to authorize referrals and/or certain healthcare services

Designed products that permit self-referrals by members6

Streamlined Authorization Processes

Besides traditional paper authorizations, health plans now offer many more options, such as

automated telephone voice response systems, fax, computer-based software packages, andInternet-based programs in which the provider visits the health plan's home page and enters anidentification code and password to transmit requests for authorization. Some computer-based

authorization programs contain built-in decision criteria that can be used to authorize commonprocedures without the need for a UR staff person to review the request.

Unique Specialty Referral Protocols

Some health plans have determined that for certain types of medical conditions, a specialist,

rather than a general practitioner, is in a better position to coordinate care for the member. Underthese circumstances, the health plan allows the specialist to act as the PCP. For example, in thecase of a member suffering from a serious heart ailment, a cardiologist, rather than a family

physician, might coordinate care. Similarly, a health plan might determine that a certain type ofspecialist, such as an OB/GYN, can also function effectively in the role of PCP. These plans

allow female members direct access to both a general practitioner and an OB/GYN. Some stateshave mandated unique specialty referral protocols such as those described in this paragraph

PCP Authorization

Generally, when health plans allow PCPs to authorize coverage, they develop strategies toimprove provider communications and education to help manage utilization. A health plan that is


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confident in the ability of its providers to recommend appropriate care is more likely toimplement physician authorizations and reduce or eliminate health plan review.

Self-Referrals

Increasingly, health plans are offering products that allow members to self-refer to a specialist forany medical condition that the specialist is qualified to treat. Adirect accessproduct requires the

member to select a PCP, but the member can visit any provider in the network without a referralfrom the PCP or the health plan. Similarly, an open accessproduct allows the member to visitany network specialist without a referral from a PCP or the health plan; however, unlike direct

access, an open access product does not require the member to select a PCP. Some health planshave designed products that charge a higher copayment for self-referrals than for referralsauthorized by a PCP or the health plan. Several states require health plans to allow direct access

to certain types of providers, such as chiropractors, dermatologists, and podiatrists.

Nonauthorizations

There are many reasons why a health plan might not authorize payment for a particular healthcare

service. In some instances, the determination is straightforward; in others, the decision canbecome quite involved. For example, a request for surgery to straighten nose cartilage might atfirst glance appear to be cosmetic surgery, an excluded service in virtually all contracts. However,

the surgeon may respond to the health plan's nonauthorization decision by providing additionalinformation stating that the primary purpose for the surgery is to correct a condition that makes itdifficult for the member, an asthmatic, to breathe. Typically, the cosmetic surgery exclusion does

not apply when the surgery is to treat a condition that impairs a bodily function. In this situation,the UR staff would carefully examine the proposed procedure to determine if, in fact, the surgeryis medically necessary to treat the member's respiratory condition or if the primary purpose is to

change the person's appearance.

As the preceding example illustrates, a health plan might initially determine not to authorizepayment for a procedure but later revise its decision when the provider communicates additionalinformation. Figure 5A-2 lists several examples of why a health plan might determine not toauthorize payment for a hospital inpatient stay.

Decisions not to authorize payment of benefits are communicated to the patient and provider

along with information about the right to appeal. Such decisions can result in several types ofliability for health plans. For example, a plan member can file a lawsuit claiming that the contractor a marketing piece, such as a member newsletter, requires the health plan to pay benefits for the

services in question. To reduce the risk of this type of lawsuit, called breach of contract, a healthplan must develop language that accurately conveys the plan's provisions for paying benefits.

A member might also file a lawsuit claiming that the health plan exhibited negligence in thedesign of its utilization review program that resulted in a decision that was not in the best interestof the plan member. To reduce the risk of this type of lawsuit, a health plan must maintain and

follow medical policy and UR/appeals processes that are based on recognized outcomes data andcommunity standards of practice. A health plan must also see that all authorization decisions aremade by personnel who have appropriate training and experience. 8

Although health plans must do everything reasonably possible to limit the risk of liability that

might result from authorization decisions, they must also be careful not to allow a fear of lawsuits


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to lead to defensive practice of utilization review. In other words, just as healthcare professionalscan become overly conservative in the practice of medicine to avoid malpractice lawsuits, health

plans can become overly conservative in the design and administration of their UR programs to

avoid lawsuits.

Member Appeals

Regardless of how well designed the UR program is, there are times when certain decisions leadto disputes. To address disagreements that result from utilization review, as well as other types ofcomplaints, health plans develop and administer complaint resolution procedures for their

providers and members. The termcomplaint r esoluti on pr ocedur es (CRPs)refers to the entireprocess available to members and providers for resolving disputes with the health plan andincludes informal complaints as well as formal appeals. In Network Management in Health Plans,

we discuss CRPs available to providers; these procedures address, among other things,complaints about the health plan's UR decisions. In the following paragraphs, we discuss CRPs

available to members.

Health plans maintain complaint resolution procedures for a number of reasons, includingstatutory requirements. In addition, the CRP process

Helps build trust with members

Reduces the likelihood of errors in decision making Reduces the likelihood of costly lawsuits Reduces the likelihood of negative publicity

Provides information to analyze trends and improve processes

Members are encouraged to first attempt to resolve a problem by means of an inf ormalcomplaintthrough a telephone call or letter to the health plan. An informal complaint can pertainto virtually anything concerning the delivery, financing, or administration of healthcare. For

instance, a member might complain about long wait times in a provider's office, the care providedby a network physician, a bill from a provider that the member believes the health plan isobligated to pay, a confusing explanation of benefits, or problems obtaining an identificationcard.

If the informal complaint is not resolved to the member's satisfaction, the member has the right to

file a formal appeal. A formal appealallows a member to have a dispute resolved by someone inthe health plan other than the person who made the decision or performed the service that led tothe complaint. Formal appeals follow an established process that typically allows for at least two

levels of appeal within specified timeframes. The process steps are described in the member'scertificate of coverage or are referenced in the certificate of coverage and described in a separatedocument available to members upon request. As we saw in Healthcare Managment: An

Introduction, many health plans also issue to their members a philosophy of care, code ofconduct, or statement of member rights and responsibilities that often includes a statement aboutthe member's right to file an appeal.

States often enumerate specific appeals standards that apply to health plans. For example, somestates require that appeals of nonauthorizations be reviewed by a specialist in the same or similar

field of medicine as typically treats the condition being reviewed. At a minimum, most statesrequire health plans to


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Obtain state insurance and/or health department approval of appeals processes Disclose to members their right to appeal

Maintain and make available to the state all records regarding the number and nature of

member appeals Adhere to specific timeframes for reviewing and responding to appeals

An appeal of a decision that results from administrative review is sometimes called anadministrative appeal, and an appeal that addresses medical issues is sometimes called a medical

appeal. Some health plans distinguish between administrative and medical appeals, assigningeach type of appeal to a different process flow involving different personnel.

The Formal Appeals Process

The formal appeals process can be viewed as an extension of the authorization process, requiringthe health plan to further review its initial decision not to authorize payment of benefits. It is

important for the health plan to closely monitor the appeals process to see that it is consistentlyadministered and that accurate records are kept. Figure 5A-3 shows a diagram of typicalcomplaint resolution procedures, beginning with the initial UR decision, proceeding throughinternal review (informal complaint and formal appeals), and ending with an independent external

review. It is important to note, however, that most complaints are resolved without proceedingthrough the entire process.


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Formal Appeal: Level One

A Level One appeal often goes to one of the health plan's medical directors, assuming that themedical director was not the person who made the initial decision. Members may write a letter or

request a meeting in person to present their case. Members also have the right to name someoneelse to represent them in their appeal, provided that they document their agreement that another

person will be acting on their behalf. Such documentation is not required if the representative

accompanies the member in person to an appeal meeting.

Health plans have a specified number of working days to respond to appeals, as stated by

company policy or applicable regulatory requirements. This timeframe typically falls between 20and 60 days, but is accelerated for certain types of appeals, called expedited appeals, whichrequire a prompt decision because of the nature of the medical condition. The review period

begins when the appeal arrives at the health plan. Some states give the health plan an additionalnumber of days (e.g., 10) if the appeal arrives without all the information needed to make adecision; in this case, the health plan must send notification of the delay to the member.

Typically, the health plan sends a letter communicating its decision to the member and/or

provider involved. If the Level One appeal overturns the original decision, then the health planinforms the member that it will pay for the service in question. If the Level One appeal upholdsthe original decision, then the health plan sends a letter that states the reason for the


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nonauthorization, quotes the applicable contract provision that supports the nonauthorization, andinforms the member of additional rights to appeal.

It is important for the health plan to prepare clear, accurate, and consistent communications of itsdecisions at all levels of the appeals process. For example, if a decision not to cover a particular

surgical procedure has been upheld on appeal because of the cosmetic surgery exclusion, allletters upholding similar nonauthorizations should cite the same exclusion. Otherwise, a health

plan's decisions could be viewed in court as inconsistent and perhaps faulty.

Formal Appeal: Level Two

If the Level One appeal upholds the original decision not to authorize, then the member has the

right to appeal to the next level, which is often handled by an appeals committee at the local,regional, or corporate level, depending on the health plan's organizational structure.

Typically, an appeals committee consists of representatives from various areas within the healthplan who meet regularly to consider most appeals and who also meet as needed to considerexpedited appeals. An appeals committee that handles medical reviews always includes a

physician. To avoid conflict of interest, if the committee's physician member was involved in adecision that is being appealed, then the physician is replaced by another physician within theorganization. An appeals committee might also include a nurse, an attorney, and representatives

from areas such as customer services and health plan operations. Some appeals committees alsoinclude health plan members.

Prior to the date of the appeals meeting, the committee members receive the files for each appeal.An appeals file contains information such as the applicable contract provisions; correspondence

from the member, customer services, UR staff, and the provider involved; and any internaldocumentation, case history notes, or information such as the health plan's medical policy or theutilization guidelines that pertain to the care under review. During the deliberation process, the

committee might contact the member or provider for clarification or might consult with aspecialist.

Under certain circumstances a health plan may allow for an alternative level of appeal in lieu ofthe Level Two appeal. For instance, a request to precertify treatment for a life-threateningcondition might go directly to the senior medical director rather than the local or regional appeals

committee.

Health plans maintain records of all appeals and track information such as turn-around time for

decisions and the percentage of decisions that overturn the initial determination. An important useof appeals data is to identify opportunities to improve utilization, such as those listed below:

If the appeals process reveals a large number of emergency department visits for routinecare, the health plan might decide to develop or redistribute a member brochure that

explains the authorization process for emergency department visits. If the appeals process reveals that a particular provider consistently performs or

recommends a service excluded from the benefit plan, the health plan can supply this

provider with additional training on plan provisions. If the appeals process reveals that a UR staff member consistently fails to authorize

payment for a particular course of treatment that typically should be covered, the health

plan can give the staff member training.


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Independent External Review

An independent external reviewis a review conducted by a third party that is not affiliated with

the health plan or with a providers' association, is free of conflict of interest, and has no financialstake in the outcome of the authorization decision. Typically, this step in the appeals process is

made available to members after the completion of the internal appeals process. Health plansshould seek to establish an external review system that is easy for members to use, considersappeals quickly, and produces fair decisions based on expert medical evaluation and current

medical evidence.

Accrediting agencies, Medicare, and many states have specific requirements and standardspertaining to independent external reviews, although the standards vary. For instance, in somestates, health plans may be required to offer external reviews for all determinations of medical

necessity, while in other states, health plans may be required to offer external reviews only forexperimental or investigational procedures.

According to a study by the Kaiser Family Foundation, most cases submitted for external reviewinvolve nonauthorizations based on questions of medical necessity and coverage limitations, anda large number involve disputes over mental health coverage, substance abuse, oncology

treatment, and pain management. This study also reports that about half of the decisions made byhealth plans have been upheld by external reviewers.

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External appeals are often handled byin dependent r eview organizati ons (I ROs), companies thatspecialize in reviewing healthcare disputes. These companies typically offer a number of different

services to health plans. For example, they can

Offer advisory opinions or consultation services to health plans on utilization review Mediate disputes between health plans and members and/or physicians Render binding decisions as the final step in the formal appeals process

When considering an appeal, an IRO receives a file similar to the one described earlier in ourdiscussion of the appeals committee and might seek clarification or additional information as

needed from the health plan, the member, and/or the provider involved. IROs often employ multi-disciplinary review teams capable of handling a broad variety of both administrative and medicalissues. The IRO provides the basis for its decision in a communication it sends to all parties

involved in the dispute.

Accrediting Agencies

Utilization review activities are influenced by regulatory authorities and, if applicable, healthcareaccrediting agencies.

Two prominent accrediting agencies in the area of utilization review are the AmericanAccreditation HealthCare Commission/URAC (URAC) and the National Committee for QualityAssurance (NCQA). In general, URAC and NCQA take a similar approach to UR by requiring

health plans to

Use care criteria developed with input from actively practicing providers who areknowledgeable in the field for which the criteria are being developed

Base criteria on sound, nationally recognized clinical evidence


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Evaluate criteria at specified intervals, updating as necessary See that UR personnel have appropriate qualifications for the specific activities they

perform Maintain and follow specific policies and procedures for conducting UR activities

Figure 5A-4 provides examples of the types of specific issues addressed by accrediting agencies.

Regulatory Requirements

Most states that regulate UR require the entity performing UR to establish its standards with inputfrom peer advisors. Some states require UR standards to be objective, clinically valid, and

compatible with established principles of healthcare, yet adaptable enough to permit variationsfrom the normal course of treatment when justified.

A growing number of states have enacted laws requiring health plans and UROs to disclose theirutilization guidelines. In some states, utilization guidelines must be disclosed to participating


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providers on demand. In other states, the information must be provided to state regulators, anddepending on the state, the information may be made public. In still other states, if the health plan

makes a determination not to authorize payment for a particular service, the health plan must

disclose to the provider and patient the specific criteria upon which the decision was based.10

Some states require entities that perform UR to disclose the clinical education of their reviewersand to document training programs. Most states with UR requirements stipulate that the educationof any reviewer who has the authority to decline payment for a course of treatment must have

some correlation to the condition being reviewed. Procedural issues addressed by state URregulations include standards for telephone accessibility, confidentiality of patient and providerinformation, and time limits for authorization and nonauthorization decisions.

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In some states, entities that perform UR must (1) be accredited by a nationally recognized

organization such as URAC or NCQA and (2) comply with all applicable statutory requirements.In other states, the UR statutes specify that national accreditation is deemed to satisfy the state's

UR requirements. In still other states, the UR statutes give regulators the authority to acceptnational accreditation in lieu of compliance with the requirements specified in the statutes. 13

Health plans that operate in more than one jurisdiction must identify all applicable requirements

on a state-by-state basis and implement appropriate compliance procedures. Variations in theserequirements make implementation of UR a challenge. Health plans have also expressed concernthat the variety of regulatory requirements might force them to inconsistently apply utilization

standards that, in the absence of such laws, would be applied uniformly in all states. Thesevariations and inconsistencies are eliminated to the extent that health plans are permitted to usenational accreditation to satisfy state requirements.

Benefit mandates can also impact a health plan's utilization review standards. For example, the

federal government and several states mandate a minimum length of stay (LOS) for maternitycare. If the required LOS exceeds the time that the health plan's UR staff would have consideredappropriate for a particular case, the health plan must cover the additional hospital stay, eventhough the health plan otherwise would have considered the additional stay not medically

necessary.

Does UR Constitute the Practice of Medicine?

A controversial legal issue surrounding utilization review is whether UR decisions constitute thepractice of medicine. This question is critical to health plans because if legislatures, regulators, orthe courts determine that a health plan's UR activities constitute the practice of medicine, then

such activities and the medical directors who perform them would be under the jurisdiction ofstate medical boards. In addition, health plans and medical directors would be subject to medicalmalpractice lawsuits.

Some people maintain that UR decisions are medical judgments, not benefit decisions, sincemany patients cannot afford to proceed with care unless payment is authorized. In other words, no

matter how it is defined, nonauthorization often results in treatment being withheld. Others pointout that state laws typically define the practice of medicine as the direct treatment of patients orthe direct advisement of patients concerning healthcare decisions. These people note that when

health plans perform UR, they evaluate the member's medical records, not the member, and thenmake a benefit payment decision, but do not offer medical care or advice.

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To date, only two states have enacted legislation that considers UR to be the practice of medicine.Although this issue has been the subject of state medical board positions, court decisions, and

attorney general opinions, a clear consensus has yet to emerge. For example, a North Carolina

attorney general opinion states that "denial of third party payment may have a direct impact upona patient's decision of whether to undergo the treatment. However, such denial does not prohibitthe patient from seeking treatment without third party benefits, and it does not prohibit the

attending physician from providing the treatment.15

" On the other hand, a Louisiana attorneygeneral opinion states that "the act of determining medical necessity or appropriateness of

proposed medical care so as to effect the diagnosis or treatment of a patient in Louisiana is the

practice of medicine and must be made by a physician licensed to practice medicine."16

Health plans can take some or all of the following steps to reduce the risks associated with URand the practice of medicine:

Monitoring the legal and regulatory environment in each state where the health plan does

business and revising UR protocols as needed Developing UR training programs and protocols that emphasize the need to avoid giving

the appearance of making medical recommendations Maintaining appropriate liability insurance for both the health plan and its physician

employees

Strategic Issues

In this section, we examine several key strategic issues associated with UR programs: member

and provider perspectives, information management, staffing and training, coordination withother health plan functions, and evaluating UR results.

Members and Providers

When designing and implementing UR programs, health plans must objectively anddiplomatically address the unique perspectives of members and providers. The need to controlhealthcare costs is not uppermost in the minds of members when their own or a loved one's

course of treatment is under review. In addition, members frequently object to the "bureaucraticred tape" of UR procedures, and they complain about referral or authorization delays,complicated rules, and network providers who are not familiar with the UR processes of the plans

they represent.

From the provider's perspective, the administrative demands of UR programs are often considered

time away from the practice of medicine. Further, some healthcare practitioners view UR effortsas a negative judgment on their professional competence. Health plans must consider the impact

UR programs have on the way providers interact with members and on the likelihood thatproviders will want to continue working with the health plan.

In developing a UR strategy, health plans should strive for a collaborative rather than anadversarial relationship with members and providers. A health plan can foster such a relationshipthrough

Sensible and consistent UR procedures

A timely UR process A convenient UR process (i.e., one that is easy for the patient and the provider to use)


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UR protocols that rely on evidence-based medicine and, when appropriate, arecustomized to local practices

An unbiased process that is based on reliable data and presented in a manner that does not

judge physicians Procedures that foster clear communication among all parties Access to information that supports appropriate use of healthcare resources and sound

decision making Procedures that are developed with input from providers, members, and purchasers

To specifically address the needs of members, health plans must simplify UR procedures anddesign education programs that help members better understand coverage provisions. Health

plans must also focus on clearly communicating all available information about a proposedcourse of treatment, as well as the reasons for decisions not to authorize benefit payments.

To work effectively with network providers, health plans must implement procedures and

education/communication programs that make it easier for providers to adhere to authorizationprotocols. For example, a health plan might measure, by provider, the percentage of

precertification requests that are ultimately approved. If a provider always proposes services thatare approved, the health plan might eliminate the authorization requirement for this provider. Onthe other hand, if a provider consistently proposes courses of care that are not authorized, the

health plan might arrange additional education on the plan's medical policies and/or benefitadministration policies for this provider.

Recognizing the importance of addressing the types of issues discussed above, some health plansare merging UR programs and case management programs, which typically involve increased

communication and involvement with members and providers.

Information Management

Information technology plays an increasingly important role in utilization review. Some healthplans use electronic medical records (EMRs) and health information networks (HINs) to collectand analyze medical outcomes data from the general population as well as their member

populations. In addition, advances in information technology enable providers to access plan

information. Providers are much more likely to comply with a health plan's utilization guidelineswhen they have online access to eligibility and coverage information, authorization systems,formulary lists, and so on.

The increasing use of eCommerce facilitates concurrent review by enabling medical directors,

nurse reviewers, and providers to communicate clinical information between provider sites andthe health plan on a real-time basis. The UR nurse can meet with the hospitalized member and thetreating physician and then enter data directly into the health plan's information system. In this

way the nurse can provide up-to-the-minute clinical information about the member's conditionand obtain immediate access to the applicable UR standards and expertise available in the health

plan's information systems.

Staffing and Training

Utilization review cannot be successful unless a health plan has qualified employees in sufficientnumbers to effectively administer the program. Many health plans have UR staff (such as nurses

and medical directors) available during regular business hours, with procedures in place for after-


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hours or expedited requests. Some plans provide availability of UR staff 24 hours a day, everyday of the year. Health plans must also see that authorizations and appeals decisions are

conducted by healthcare practitioners licensed in the same or similar medical specialty as the case

they are reviewing, and that appropriately qualified physician reviewers are available as needed.

Health plans often evaluate staffing levels by looking at the ratio of UR staff to the averagenumber of members or the average number of reviews performed. Staffing ratios also varydepending on factors such as the severity of the medical conditions generally treated and whether

UR is conducted on site or off site.

Health plans maintain training programs so that UR personnel can properly perform their duties.Training addresses issues such as application of clinical protocols, procedures for appeals,regulatory requirements, and protection of patients' rights, including confidentiality.

Coordination with Other Health Plan Functions

Utilization review is one of two functions that health plans perform to make benefit paymentdecisions; the other is claims administration. As we saw earlier in this lesson, utilization review

focuses on whether a service is a covered benefit and meets the health plan's guidelines formedical necessity and appropriateness. As described in lesson 1, claims administration is the

process of receiving, reviewing, adjudicating, and processing claims for either payment or denial

of payment.

Claims administration examines all of the provisions of the contract to determine whetherbenefits should be paid. For example, does the person meet the definition of an eligible employeeor dependent? Were the services performed while the person was eligible for coverage under the

plan? Were the services properly authorized? Are the services included in the list of coveredservices? If the services are covered, should they be paid as a network or out-of-network benefit?Is there a copayment or coinsurance? Were the services medically necessary and appropriate? Do

other exclusions apply?

A health plan's claims administration and UR departments must maintain a positive working

relationship to function effectively. UR can assist claims administration in a number of ways. Forinstance, the UR department might specify certain types of cases that always require medicalreview prior to claims determination and other types of cases that can be processed by claims

administration personnel according to written guidelines. Also, the UR department might provideinformation on prospective and concurrent reviews so that the claims administration departmentcan prepare for these cases and better manage the claims workload.

In most health plans, the claims administration department maintains a comprehensive database

of information needed for processing claims. The database includes information on benefit planprovisions, coverage standards, compensation arrangements, member information, and providerutilization. Other departments in the health plan, including the UR department, contribute to thisdatabase and rely upon it for certain functions. For example, the UR department uses the claims

administration database to identify utilization patterns through retrospective review.

The UR department must also maintain a positive working relationship with other departmentswithin the health plan such as provider relations, member services, the legal department, sales andmarketing, product development, or any other areas that communicate benefit payment

determinations or provisions to members or providers.


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Evaluating UR Results

One way that health plans evaluate the results of UR is by determining whether UR results in

reduced medical costs and/or greater consistency and quality of care and if so, how these benefitscompare to the costs of maintaining the UR function? In other words, does a financial cost/benefit

analysis justify the activity? Do the improved outcomes and reduced medical expenses outweighimplementation costs and the potential for dissatisfied members and providers who resentnonauthorizations and the inconvenience of the process?

Health plans often monitor utilization rates to determine the effectiveness of their UR programs.

Uti li zation ratestypically measure the number of services provided per 1,000 members per yearto indicate how frequently a particular service is provided. For example, a health plan maymonitor the number of inpatient hospital days or the number of referrals to specialists per 1,000

members per year. These utilization rates are then examined and used to help determine overallplanning, budgeting, quality management, and medical expense management.

17If a health plan

notices an increase in hospital days, it may decide to precertify all or a greater number ofinpatient hospital admissions. If a health plan notices that its specialty referral rate has been

steadily increasing since contracting with a new PCP medical group, it may improve theeducation programs or UR procedures it uses with this group.

In addition to utilization rates, there are a number of other indicators that health plans mayconsider to evaluate the effectiveness of their UR programs, such as

Changes in the total amount of medical expenses or claim dollars paid for particular

procedures Outcomes and other quality measures Number of appeals

Number of complaints overturned by the formal appeals process and/or by externalreview

Member and provider responses to satisfaction survey questions pertaining to the URprocess

Health plans also evaluate UR programs to adjust their medical management strategies and

activities. After studying UR results, a health plan may decide to shift its focus from inpatient tooutpatient reviews or to tighten authorization procedures for one course of treatment and loosen

procedures for another. UR results may also affect other medical management programs. For

example, a UR manager might review a summary report-showing items such as diagnosis andtype of care-and identify an increase in hospital admissions for complications of pregnancy,which in turn might lead the health plan to institute a disease management program related to

prenatal care or a case management program targeted at high-risk pregnancies.18

Conclusion

Although utilization review is a common component of health plan medical managementprograms, individual health plans vary greatly in the extent to which they use UR and the specificUR processes that they implement. In addition, the overall use of UR in the health plan industryhas fluctuated in recent years. Some health plans are beginning to turn UR responsibility over to

provider groups; others are experimenting with more aggressive healthcare resource evaluationtechniques. As the healthcare industry changes to meet new member, provider, purchaser, andenvironmental demands, utilization review is likely to change as well.


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Endnotes

1. Walter A. Zelman and Robert A. Berenson, The Health Plan Blues and How to Cure

Them (Washington, DC: Georgetown University Press, 1998), 41-42.2. John E. Wennberg, "Variations in Medical Practice and Hospital Costs," in Quality in

Healthcare: Theory, Application, and Evolution, ed. Nancy O. Graham (Gaithersburg,MD: Aspen Publishers, Inc., 1995), 52.

3. Scott Falk and Kip Betz, with Martha Kessler, "United HealthCare Replacing Obsolete

Preauthorization with Provider Profiling," BNA's Health Plan Reporter 5, no. 45: 1087.4. Ibid., 10875. Raymond J. Fabius, M.D., A Physician Executive's Guide to Patient Management for the

'90s and Beyond (Tampa: FL: American College of Physician Executives, 1995), 2, 17.6. Faulkner & Gray's Healthcare Information Center, "Policymakers Grapple with

Foundations of Process for Coverage Decision, Appeals," Medicine and Health

Perspectives, ed. Robert Cunningham (3 May 1999): 3.

7. Eleanor Mayfield, "Streamlining Referrals," Healthplan (May/June 1997): 17.8. Academy for Healthcare Management, Health Plans: Governance and Regulation

(Washington, DC: Academy for Healthcare Management, 1999), 12-4-12-5.9. Jill Wechsler, "External Appeals Please Patients at a Low Cost," Managed Healthcare

(January 1999): 8.10. Marguerite A. Massett, "Utilization Review," in Healthcare Corporate Law: Health Plan,

ed. Mark A. Hall and William S. Brewbaker III (Boston: Little, Brown and Company,1996), 3-29-3-30.

11. Marguerite A. Massett, "Utilization Review," in Healthcare Corporate Law: Health Plan,

ed. Mark A. Hall and William S. Brewbaker III (Boston: Little, Brown and Company,1996), 3-22-3-23, 3-30-3-33.

12. Marguerite A. Massett, "Utilization Review," in Healthcare Corporate Law: Health Plan,

ed. Mark A. Hall and William S. Brewbaker III (Boston: Little, Brown and Company,1996), 3-14-3-15.

13. Ibid., 3-14--3-1514. Ibid., 3-17

15. Marguerite A. Massett, "Utilization Review," in Healthcare Corporate Law: Health Plan,ed. Mark A. Hall and William S. Brewbaker III (Boston: Little, Brown & Company,

1996), 3-17.16. LA Att'y Gen. Op. No. 98-491, 1998.17. Marianne F. Fazen, St. Anthony's Health Plan Desk Reference, 1996-97 ed. (Reston, VA:

St. Anthony Publishing, Inc., 1996), 300.

18. Catherine M. Mullahy, The Case Manager's Handbook, (Gaithersburg, MD: AspenPublishers, Inc. 1995), 194.

10 utilization review

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