Controlling Costs and Changing Patient Care? The Role of Utilization Management (1989) / Chapter Skim
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Origins of Utilization Management
Origins of Utilization Management
Pages 27-57
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From page 27... ...
Without understanding how or why utilization Management and other cost-containment strategies have developed, poliymakers may oversimplify both the difficulties and opportunities they face ~ managing health care benefits. This chapter reviews the development of third-party financing of health services the United States; summarizes early efforts to control costs for health benefits; · describes the growth of government and private employer involve~ent in cost containment; and · identifies some factors behind the change in societal attitudes about Medical care and the acceptance of external assessments of the appropriteness of health care use.
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From page 28... ...
Before the 1930s, few Americans had anything resembling modern health benefit plans (Anderson, 1968, 1972; Somers and Somers, 1961~. Concerns about medical costs were defined largely in personal rather than governmental or corporate terms.
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From page 29... ...
Department of Health and Human Services) established 940 Predecessor of Group Health Association of America founded 940s Federal wage freeze increases union interest in fringe benefits 945 Kaiser Foundation Health Plan opens to non-Kaiser groups 946 Hill-Burton hospital construction program established 946 Blue Shield Commission and Health Insurance Council organized 949 Supreme Court decisions allow employee benefits to be part of collective ~ .
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From page 30... ...
By the end of World War II, more than 30 million people had private hospital insurance, and employment-based insurance was becoming the norm in major companies.2 Also, as early as 1940, the movement for prepaid group practices (PGPs) had helped organize enough PGPs, such as Group Health Association of Washington, D.C., to warrant establishment of 2 although some predecessors of Blue Shield plans, the physician service bureaus in the Northwest, predate the Depression, insurance for physicians services grew more slowly than did coverage for hospital services.
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From page 31... ...
Insurance coverage continued to expand during the next quarter century, reaching a peak of over 188 million people in 1982 (Health Insurance Association of America, 1987, 1988~. Recently, after 50 years of growth, the reach of private health insurance has begun to decline.
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From page 32... ...
Although a variety of economic and social conditions lie behind the decline in insurance coverage, high costs for health care certainly contribute to it. In fact, the continuing escalation of health care costs is once again prompting questions about the insurability of medical care and the viability of private health benefit plans (Abramowitz, 1989; Freudenheim, 1989; National Health Policy Forum, 1988~.
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From page 33... ...
· management of the risk ~pool, · design of the benefit plan, · controls on payments to health care providers, · constraints on the supply of health care resources, and · review of the appropriateness of utilization. Management of the Risk Pool The founders of health insurance plans in the 1920s and 193~)
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From page 34... ...
The long-term impact of this new fragmentation of the risk pool on benefit costs and on the stability of health plans is the subject of spirited controversy (Schemer and Rossiter, 19854. Efforts to create sound risk pools for small groups, the self-employed, the fragmented employer group, and others remain an elusive goal for those trying to extend health benefits to the nonpoor uninsured.
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From page 35... ...
(Egdahl, 19731.4 Constraints on Supply Another approach to cost containment was developed under the rubric of health planning. Health planning had received much of its initial nationwide impetus as a tool for guiding the expansion in community hospital resources under the Hill-Burton program established after World War II.
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From page 36... ...
, and much of the federal and state legal framework for health planning was dismantled. Utilization Review Historically, payers have concentrated their cost-containment energies on the unit price of medical services and have directed less attention to the volume of those services provided by institutions and practitioners.
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From page 37... ...
Utilization review also spread in other settings (Werlin, 1973~. In the early 1960s, more than 60 Blue Cross plans reported programs to review hospital claims for the appropriateness of admissions, and more than 50 looked at the length of stay.6 Some required physicians to certify at admission that hospital care was necessary for cases such as diagnostic and dental admissions, and more than two dozen required physicians to certitr the need for continued hospital care after a specified length of stay (Fitzpatrick, 1965; Young, 1965~.
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From page 38... ...
Federal Government Initiatives The federal government's interest in health care cost containment was prompted primarily by its creation in the 1960s of two major health benefit programs: the federal Medicare program for the elderly and the federal and state Medicaid program for some of the poor. (The latter program also gave states an increased stake in containing health care costs.)
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From page 39... ...
Although researchers disavowed this kind of projection, the figures got a lot of attention and helped persuade Congress to authorize demonstration projects to test second-opinion programs for Medicare and Medicaid beneficiaries. Despite some positive accomplishments, the PSROs like hospitalbased utilization review- disappointed policymakers (Berman and Gertman, 1981; Chassin, 1978; Congressional Budget Office, HCFA, 1979, 1981; Institute of Medicine, 1976; Nelson, 1984~.
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From page 40... ...
for hospital services provided to Medicare beneficiaries. PPS itself was another response by government polic~makers to the frustration with earlier cost-containment efforts, for example, the Economic Stabilization Program with its wage and price controls and the health planning program, which tried to limit major capital investments.
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From page 41... ...
The group consists of the American Hospital Association, American Medical Association, Health Insurance Association of America, Blue Cross and Blue Shield Association, Business Roundtable, and the AFL-CIO (Cronin, 1988~. Another early manifestation of greater business interest in health benefit costs was the move to self-insurance by employers large enough to bear the risk.
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From page 42... ...
· The Greater Phoenix Affordable Health Care Foundation developed a software package for local physician offices (with monthly updates) that lists features of hundreds of employer-based benefit plans (Lockhart, 1988~.
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From page 43... ...
In addition, at least three other factors have played a role in the transition from the provider-based utilization review of the 1960s and 1970s to utilization management by third parties in the 1980s. These factors include · a growing body of research suggesting that many medical services are unnecessary or inappropriate and could safely be eliminated; · an increasing emphasis by purchasers on linking cost containment and quality assurance; and · a proliferation of information resources, assessment tools, and organizations that make case-by-case review of proposed services feasible on a large scale.
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From page 44... ...
Support for these views comes from two directions: studies that document substantial variations in the use of medical services across different settings and studies that assess medical services by using explicit criteria of appropriateness. Vanai'ons in Ui'luai'on Some of the most influential research on medical care utilization has examined how the variations in the volume of medical services relate to variations in ways of organizing and financing medical care.
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From page 45... ...
Certainly, some variation in use is thought to be due to different population needs for care (Blumberg, 1987; Wennberg, 1987~. For example, a small-area study sponsored by Blue Cross and Blue Shield of Minnesota found one rural county with unusually high rates of hospitalization for acute myocardial infarction (80 percent higher than the statewide average)
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From page 46... ...
It can create suspicion, antagonism, and resistance rather than cooperation among payers, practitioners, and patients. By tying utilization management to quality of care as well as cost, purchasers do two things: · they underscore the responsibilities of health care institutions and physicians for providing patients with safe, effective care, and · they emphasize to policymakers and health plan beneficiaries that payment for poor-quality care and unneeded services is a bad use of limited resources.
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From page 47... ...
The paper on utilization management in HMOs in Appendix B of this report discusses these concerns at greater length. Improving the Tools and Structures for Utilization Management Changing perceptions about the extent of unnecessary medical care and the impact of such care on both cost and quality have been intertwined with changes in information resources, analytical tools, and organizational structures.
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From page 48... ...
Assessment and Education Strategies Assessment and analytic tools that have helped the move toward utilization management include (1) explicit criteria for assessing the appropriateness of medical services, (2)
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From page 49... ...
New Organizations The demand on the part of large public and private purchasers of care for ways to manage, rather than only review, health care utilization has been matched by the emergence of many "suppliers" wanting to take on this role (de Lissovoy et al., 1987; Freund, 1987; Gardner and Schemer, 1988; InterStudy, 1989; Mayo Clinic, 1988~. These suppliers fall into two broad categories: first, organizations that integrate utilization and cost control with service delivery and, second, organizations that offer specialized utilization management services to both health care providers
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From page 50... ...
By 1986, all six of the largest multihospital systems, nine of the largest ten group insurance carriers plus the Blue Cross and Blue Shield system, and six of the eight largest HMO systems had developed some kind of integrated product or products (Patricelli, 1986)
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From page 51... ...
A second market response to purchaser demands for cost containment has involved lower entry costs and lower risks than the product integration and triple-option strategies (McGraw-Hill, 1987~. Many organizations have been established to offer freestanding utilization management services to providers, insurers, and employers.
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From page 52... ...
Utilization management builds on the gradual accumulation of experience and data that suggest that externally applied assessments of the appropriateness of proposed medical services can constructively influence how care is provided and, as one consequence, help constrain health care costs. The next three chapters describe what we lmow about the varied ways in which utilization management works.
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From page 53... ...
683-704. Fitzpatrick, Thomas B., "Utilization Review and Control Mechanisms: From the Blue Cross Perspective," Inquiry, September 1965, pp.
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From page 54... ...
1727-1732. Independence Blue Cross and Pennsylvania Blue Shield, Independence and Leadership in Heakh Care: Community Health Care Report 1988, Philadelphia, 1988.
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From page 55... ...
1505-1510. Mayo Clinic, "The 'Cost' of Effective Utilization Review Programs," Statement prepared for the Institute of Medicine Committee on Utilization Management by Third Parties, May 20, 1988.
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From page 56... ...
Mosey Co., 1989. Sandrick, Karen M., "Blue Cross and Blue Shield of Michigan's Efforts to Change Practice Patterns," Quality Review Bulletin, November 1984, pp.
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From page 57... ...
32-38. Young, Lee A, "Utilization Review and Control Mechanisms: From the Blue Shield Perspective," Inquiry, September 1965, pp.
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