Controlling Costs and Changing Patient Care? The Role of Utilization Management (1989) / Chapter Skim
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Appendix B - Utilization Management and Quality Assurance in Health Maintenence Organiztions: An Operational Assesment
Appendix B - Utilization Management and Quality Assurance in Health Maintenence Organiztions: An Operational Assesment
Pages 205-245
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From page 205... ...
The medical community, in turn, has expressed concerns about the design of the clinical standards or algorithms governing utilization review decisions by health insurers, Blue Cross and Blue Shield plans, third-party administrators, and health maintenance organizations (HMOs)
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From page 206... ...
In general, the HMO reviews have involved an analysis of financial, actuarial, enrollment, and utilization trends in the context of benefit design, premium pricing, marketing practices, claims processing procedures, contractual arrangements with providers, utilization review, and management reporting procedures. This managed care and HMO consulting experience provides the background for this paper.
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From page 207... ...
The brief case histories for five plans that appear at the end of this paper do not include any plan identifiers, but do contain actual descriptions of the utilization management programs in place at the time that the operational reviews were conducted. We present these studies to show the range of operational problems that can undermine the structural design of utilization management and quality assurance programs.
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From page 208... ...
APPENDIX ~ physicians. ICE originally included only staff model plans and direct contract IPAs in the two-tier classification.
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From page 209... ...
The HMO market is in a state of flux. Not only are many plans reporting financial losses, but they are having to contend with employer demands regarding the provision of data and experience rating and with provider concerns about reimbursement rates and design of utilization review programs.
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From page 210... ...
The use of a two- or three-tier contracting structure by an HMO is dependent upon existing alternatives to individual physician contracting, such as the presence of multispecialty group practices or hospital-sponsored IPAs, and the prior experience of local providers in working with other HMOs or managed care programs. Negotiation of reimbursement rates, capitation payments, and risk-sharing arrangements are dependent upon (1)
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From page 211... ...
. It is the tension between these two perspectives that establishes the setting for the negotiation and implementation of financial incentives.
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From page 212... ...
whether the HMOs believe that the physicians can discipline themselves effectively through the utilization review and peer review process. As shown in Able B-1, which describes operational responsibilities, there are two control models for two-tier organizations and three control models for three-tier organizations.
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From page 213... ...
X X Utilization review X X X X X Claims payment X X X X X Encounter data X X Data analysis X X X X Provider feedback X X X X Peer review X X X Quality assurance X X X X X X NOTE: MD indicates physician; Gyp indicates group practice. On medical services to the HMO itself.
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From page 214... ...
Federally qualified HMOs have historically offered a more comprehensive set of benefits than have nonqualified prepaid plans or exclusive provider arrangements that are indemni~-based. With the recent growth of nonqualified plans and the move away from community rating and defined benefit packages to experience rating and negotiated benefits, there has been increased emphasis on benefit design as a cost-containment mechanism within HMOs.
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From page 215... ...
bill audit; and (8) remedial action for providers suspected of fraud or noncompliance with utilization review or referral procedures.
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From page 216... ...
They can observe their fellow physicians both in office and hospital settings, whereas in most IPAs the informal peer review process is limited to the hospital setting. Physician financial incentives include both the basic method of provider payment (salary, fee-for-service, or capitation)
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From page 217... ...
a multispecialty group that contracts exclusively with one HMO and that receives almost all of its income from prepaid services. As shown in Table B-2, the IPA relies heavily on formal utilization review procedures to
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From page 218... ...
In terms of controlling patient Dow, IPAs do not generally determine the scheduling practices of their participating physicians, other than requiring plan subscribers to sign up with a primary care gatekeeper. Whereas IPAs rely on formal utilization review programs primarily to control costs, group practices may control utilization through the patient Dow process.
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From page 219... ...
On the third and narrowest level, it consists of focused problem correction in groups, performance feedback to individuals, and direct surveillance and corrective action. State HMO licensure requires documentation of a utilization review and quality assurance program, as does eligibility for a Medicare risk contract and participation in prepaid Medicaid programs.
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From page 220... ...
often was inappropriate for group and staff model HMOs that used capitated arrangements, and vice versa. Moreover, most of the early software had limited flexibility in terms of report generation, particularly for any analysis of practice patterns on a provider-specific basis.
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From page 221... ...
Because the standard reports from the claims system showed such visits as multiple encounters, any analysis of individual physician practice patterns was unreliable. In fact, in Case Study 3, actuarial projections could not be derived from the claims system; rather, they had to come from the data base of an outside consultant.
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From page 222... ...
Many HMO medical directors are frustrated by their lack of input into HMO operations and their inability to obtain adequate budgets for professional support staff with appropriate statistical, utilization review, and quality assurance experience. In some cases, medical directors cannot reduce or deny payment to providers who are suspected of unusual billing practices or provision of unauthorized services.
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From page 223... ...
HMOs that conduct their own utilization review programs may also obtain feedback on provider performance from their staff. Alternatively, some plans may limit their quality assurance programs to tracking malpractice claims, grievance filings, and disenrollment rates by medical group or by primary care provider if they use individual gatekeepers.
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From page 224... ...
DESIGN AND USE OF PHYSICIAN INCENTIVES In the preceding section, we looked at the operational problems impairing the administration of utilization management and quality assurance programs. As noted, structural and process measures are often an inadequate measure of plan performance.
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From page 225... ...
~ date, much of the published research on physician incentives has focused on documenting the range of arrangements that exist and the frequency with which they are used by plan model, plan age, plan size, and geographic location. With the exception of recent work by Mathematica Policy Research, Inc.24 there has been little research on the effectiveness of quality assurance programs or the impact of financial incentives on utilization of services in HMOs.
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From page 226... ...
While the three studies reported varying use of payment mechanisms and risk incentives by plan type, the single most important difference between the three related to the prevalence of financial incentives based on individual performance factors. The GHAA study found that 140 of 164 responding plans (85.4 percent)
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From page 227... ...
Sometimes risk incentives are short-circuited when an HMO cannot fulfill the terms of its contracts because of operational difficulties. For example, if an HMO has a claims processing backlog and cannot provide requested utilization reports according to a predefined schedule, the HMO may have to return all or part of the withholds, despite the existence of deficits in the physician accounts.
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From page 228... ...
For example, a recent report in the New England Journal of Medicine described one physician's negative experience working in a for-profit, staff model HMo.33 Other studies have reported on the use of referrals or the impact of provider feedback on ordering of diagnostic tests in specific plans.34 Our operational reviews suggest that the structure of utilization management and quality assurance programs and their actual implementation vary widely across plans. On-site evaluations of these programs are currently being conducted by mandatory and voluntary review organizations.
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From page 229... ...
However, the descriptions of the control type, the financial incentives, the design of the MIS, the role of the medical director, and the structure of the utilization management program are reported precisely as they were found in each of the plans.
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From page 230... ...
Control lype Three-tier, with the HMO controlling most services (Model 1~. Financial Incentives Under the original risk model, physicians contracted with an IPA that was fully at risk for all inpatient and outpatient physician services, including outpatient mental health, ancillary, and in-area emergency services; durable medical equipment; prosthetic devices; and prescription drugs.
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From page 231... ...
Utilization Management Primary care physicians theoretically were to act as gatekeepers and to approve all specialty referrals and hospital admissions. In reality, patients
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From page 232... ...
r Medical Director and Utilization Management Support Staff The medical director reported that he had not been an integral member of top plan management but had been hired only part-time to oversee the nurse coordinators and to review pending hospital admissions. The utilization review staff did not have well-defined policies or procedures to guide them, particularly when adjudicating claims.
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From page 233... ...
Control Type Three-tier, with delivery of services controlled by the medical group (Model 3~. Financial Incentives With the exception of the medical director in each of the two sites and one practicing physician per site, the rest of the physicians at the expansion sites had no prior experience working for the group.
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From page 234... ...
Aggregate reports summarizing referral rates and costs, by group physician, were received monthly by the medical directors, as were summaries on the number of patients seen and billed charges from each outside provider. However, none of this information
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From page 235... ...
Medical Director and Utilization Management Support Staff Both of the medical directors devoted approximately 50 percent of their time to their clinical practices and appeared to have taken on the management role with some reluctance. Neither had worked with their medical staffs to develop referral protocols or had undertaken any educational efforts to make them aware of referral costs by specially.
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From page 236... ...
. Primary care physicians retained the right to self-refer for services not covered under the capitation agreement.
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From page 237... ...
Utilization review was handled by three nurses who functioned as patient care coordinators. They received all incoming calls for the authorization of hospital admissions, and depending upon the case and available time, they were responsible for conducting on-site concurrent review.
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From page 238... ...
Moreover, there were no built-in financial incentives for performing the gatekeeper function. For example, the IPA did not allocate any percentage of funds in the withhold to primary care physicians, but distributed the funds on a pro-rata basis across the entire IPA membership.
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From page 239... ...
For example, laboratory and x-ray costs were allocated differently in the two systems, resulting in an underestimation of the cost of outpatient services in the capitation payment. Utilization Management and Support Staff For all hospital admissions, the admitting physician was to call the utilization review department at the HMO for Reauthorization.
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From page 240... ...
The medical director of the IPA, along with the leadership of the IPA, had never supported an active utilization management program. For example, using annual information produced by the HMO on the distribution of office visits by specialty, the medical director had never sought to review the practice patterns of individual physicians identified as being in the top 25 percent by cost per visit.
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From page 241... ...
Financial Incentives The physician shareholders in the plan each originally contributed between $600 and $1,750 to finance the plan's start-up. The HMO has operated on a discounted fee-for-service basis, with reimbursement predicated upon the 85th percentile of the customary and reasonable rates used by carriers operating in the local market.
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From page 242... ...
This problem was further compounded by the fact that there were few or no data with which to document consistent patterns of overutilization of services or unnecessary admissions. The plan had two medical directors; one was largely responsible for utilization review and the other was responsible for physician relations and for recruiting primary care physicians for outlying areas.
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From page 243... ...
12. For a description of an HMO in which individual physician incentives are used within pods, see the statement by Jerome Beloff, Corporate Medical Director, Av-Med Health
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From page 244... ...
27. Hillman, Alan, "Sounding Board: Toward Full Disclosure of Referral Restrictions and Financial Incentives by Prepaid Health Plans," New England Joumal of Medicine, Vol.
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From page 245... ...
30. For a review of early research studies on utilization rates in HMO and fee-for-service settings and across HMOs, see Luft, Harold S., Health Maintenance Organizations: Dimensions of HMO Performance, New York: Wiley, 1981.
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