Medical Management -- Utilization Management

This is the second article in the Medical Management "Signature Series" by Managed Care Resources, Inc. -- articles on topics in managed care written by experts in the field. The authors of this article are Mary Sajdak and Zachary B Gerbarg, MD.

Programs to manage health care utilization have existed for more than twenty years. Early efforts focused on reducing the number of inpatient admissions and eliminating unnecessary hospital days. To achieve this objective health plan administrators reviewed the hospital admission for medical necessity prior to the admission (precertification) and determined the need for ongoing care (concurrent review). For cases that were not part of initial review, they applied the process retrospectively.

Almost every provider or payer sponsored utilization management program includes preadmission and concurrent review. Typical characteristics of these two components are:

  • Collection of data about diagnosis, required services, diagnostic test results, and symptoms
  • Review of criteria that describe the conditions or services to support the care request
  • Comparison of medical information to medical necessity criteria
  • Referral of case to physician review if criteria are not met
  • Physician determination of medical necessity
  • Communication of review outcome
  • Right of physician to appeal decision

The administration of the precertification and concurrent review process resulted in lawsuits that questioned the program's legitimacy, the outcome of which has helped to further define the roles and responsibilities of the attending physician and the party performing utilization review.

Recognizing the impact of precertification and concurrent review on health care delivery, state legislatures and accreditation agencies designed standards. In many states, failure to adhere to these standards meant that the insurer or utilization review organization could not perform precertification or utilization review. Many insurers and utilization review companies rushed to become certified. The standards, still in effect today, required programs to:

  • Limit the information collected to the review being performed
  • Promote timely decision making
  • Notify parties of outcome decisions
  • Use explicit criteria to determine medical necessity
  • Provide a mechanism to appeal review decisions
  • Promote the use of appropriately credentialed staff for review activities

As the national market penetration of managed care has increased, the precertification and concurrent review processes have continued to evolve:

  • Initially, insurance companies or their contracted utilization review companies conducted these activities. More recently, physician organizations and inpatient facilities participating in risk contracts have developed the mechanisms to conduct precertification and concurrent review.
  • The scope of services that precertification and concurrent review apply to has expanded to include outpatient services and freestanding ambulatory surgery centers.
  • Standards for the decision making process have become more explicit with the Utilization Review Accreditation Commission (URAC) and the National Committee on Quality Assurance (NCQA) developing standards that apply to different components of utilization management.

Although precertification and concurrent review are the oldest and most developed processes for containing utilization, their impact on utilization is unclear. Proponents of these processes contend that they have supported the development of outpatient technology, fostered the shift from inpatient to outpatient care, reduced the number of unnecessary inpatient days and provided a mechanism for timely identification of patients who require discharge planning and case management.

Critics of the processes maintain that they contribute to administrative overhead with an uncertain cost benefit, delays care and are physician unfriendly. Critics also believe the potential of precertification and concurrent review to reduce utilization has already been reached., and any further reductions in unnecessary utilization will require development of new techniques.

Managed Care Resources experience suggests both positions contain elements of truth. Well-run programs result in optimal management of utilization, as evidenced by appropriate admissions and length of stay. Timely review decisions occur using criteria approved by local physicians. Developing and administering these two core processes according to rigorous standards is resource intensive. They require nurses, information systems, medical review criteria and administrative support. Efforts to prove they are cost beneficial have been inconclusive.

And failure to conduct the program appropriately may result in a delay of care. In one case, a patient requesting care sent appropriate information to the HMO. After some time had passed without her receiving a decision, she called the HMO and was told that the nurse handling the case was on vacation and would call her when she returned. This example failed to meet the standard and clearly lead to significant dissatisfaction.

The need to manage utilization continues to exist but health plans and providers recognize that alternative and more effective programs need to be developed. Techniques such as clinical pathways and disease management are two of the newer approaches to managing utilization. These two techniques provide information about optimal treatment methods for certain disease conditions, and prescribe treatment methods, medications, visit frequency etc. A future Signature Series article is devoted to this topic.

The difficulty of quantifying the benefits of utilization processes is further illustrated in two studies published in 1995.

Rosenberg, Allen, and Handte described in the New England Journal of Medicine1 what happened when a group of enrollees was divided into two groups. The first group had a traditional precertification process. The second group was given a "sham review", where anything that was requested was approved. The utilization experience of the two groups was not markedly different. One explanation for the results was that the mechanics of the review process were not as important as the fact that review was taking place. In other words, the review process might encourage providers to engage in efficient treatment (because it is the treatment most likely to be approved.)

In the International Journal of Quality2 Ash attempted to evaluate program results for hospital-based utilization review programs. He determined that there was tremendous variance in utilization management procedures; the ability to determine if these processes provide benefit continues to be hampered as a result of procedural variance.

Until the knowledge base is expanded and tools and research are refined, precertification and concurrent review will probably remain as the mainstay of many utilization management programs. For those organizations who are planning to conduct precertification and concurrent review, the following activities are recommended:

  • Focus the precertification and concurrent review processes.

    The processes should focus on those procedures that are problematic, pose significant risk, and/or for which there are not clear indications for use. Limiting the number of procedures or services subjected to precertification enhances the cost benefit of the review process. Physicians who have demonstrated competence in managing inpatient admissions may even be considered for exemption.

  • Keep the process efficient.

    For routine cases, where complete information is provided, the case should be certified on the first telephone call. If the case is unable to be certified, the process for completing review should be timely. The organization conducting the precertification process should minimize the use of voice mail or automated attendants.

  • Develop strategies to provide support for physicians

    Using a physician to determine the need for admission, manage ongoing hospital care and coordinate care among multiple providers is gaining increasing popularity. Hospital intensivists or rounders have a practice that is devoted entirely to inpatient care. Moore described a rounder program implemented by Kaiser Permanente in Colorado which reduced the days per 1000 by 13%3. Typically, the primary care provider refers to the rounder or contacts them for advice on how to manage patients.

    The development and implementation of guidelines and critical pathways will also provide assistance to primary care providers.

  • Link precertification and concurrent review to other medical management programs

    The value of precertification and concurrent review can be enhanced by using the results of these processes to support other activities. For example, precertification activity can also trigger the case management process. Concurrent review can supply data about quality indicators and determine if cases pass quality screens.

  • Focus on questionable practices

    In Baigleman's study of internists4, the initiation or prolongation of IV therapy for IV fluids, antibiotics, diuretics and nutrition was associated with unnecessary days. The practices that delay timely discharge vary from location to location or provider group. A successful program will identify these practices and then work with providers to modify them.

  • Implement an explicit process for managing denials and appeals

    HMOs or physician organizations need to pay particular attention to the appeal and denial process. A proposed procedure or service should only be denied after careful consideration of all the facts, consultation with appropriate specialists and examination of treatment alternatives. In addition, the organization needs to have a process which clearly identifies avenues for appeal to the attending physician and members. The reason for the denial must be clearly communicated in written correspondence shortly after the decision to deny is made.

The discussion above describes the popularity of precertification and concurrent review and the considerations for program implementation. A successful precertification and/or concurrent review process requires careful planning, an understanding of the relationships with the provider community and reasonable program goals.

For more information on precertification and current review please contact us at (708) 482-0123 or by email at .

I hope that you will join us as we explore all of the elements of medical management in the coming months. In addition, we are offering a "Signature Series" on "Managed Care Contracting". We hope that the two series combined will lessen the mystery of managed care and help level the playing field between providers and payers.

Ira H. Rosenberg

Ira H. Rosenberg

President, Managed Care Resources, Inc.


1 Rosenberg, Allen, Handte et. al, New England Journal of Medicine, 333(20): 1326-30.

2 Ash,A, International Journal for Quality in Health Care, 7(3): 245-52, 1995 September

3 Moore, Duncan, Modern Health Care, Volume 27, Number 5, February 3, 1997, pp54-60

4 Baigleman, Walter, American Journal of Quality, Volume 9, Number 3, Fall 1994, pp122-128

The Managed Care Resources, Inc. team has over 150 years of combined experience in the development and implementation of managed care services. Please visit our home page to learn more about how we can assist you with your managed care needs. We also invite you to contact us with questions or comments.

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