Managing utilization successfully in 12 not-so-easy steps - Managed Care

Healthcare Financial Management, Oct, 1998 by Thomas Mayer

Managing utilization involves managing the processes of care, which requires a systems approach that coordinates services, eliminates redundancy in care delivery, and makes use of alternatives to traditional methods of meeting healthcare needs. On the caregiving level, internally developed benchmarks illuminate efficient or unneeded practice patterns, hospitalist programs help contain inpatient costs, and standard protocols and disease state management help to maintain expected measurable outcomes. Wisely managing patient access to care, relying upon case managers to oversee catastrophic care, assessing high-risk senior citizens and promoting their and other patients' relationships with social service agencies, and implementing patient education and prevention programs all can be coordinated within the managed care system.

Utilization management is considered to be the cornerstone of managed care. As an abstract concept, the provision of only those healthcare services that are both necessary and appropriate to maximize efficiency and effectiveness is impeccable in its logic. Unfortunately, the implementation of this concept at the point of care has been imperfect; thus, managing care sometimes is regarded as withholding, delaying, or denying care.

Managing care, however, does not refer to managing patients but rather to managing the processes of care in an increasingly complex, at-risk healthcare system. Accepting risk requires a systems approach to managing utilization that coordinates services, eliminates redundancy in the delivery of care, and provides alternatives to traditional methods of meeting healthcare needs.

Twelve not-so-easy steps are required to efficiently manage care through this comprehensive systems approach. These steps require substantial resources and effort to implement and integrate to achieve their full effect.

The 12-Step Process

Step 1. A complete, contracted network. Critical to managing care is a comprehensively assembled and thoroughly contracted network. This network should include all medical specialties and types of facilities, including skilled nursing homes, rehabilitation centers, and the emergency departments the network's members may require. Ancillary services, such as physical therapy, ambulance service, and durable medical equipment, plus any other major vendors of equipment and services, also should be contracted to the network. If prescription drug management is part of the network's risk responsibility, then contracts should be negotiated with the pharmaceutical companies supplying the drugs and with the pharmacies and pharmacists dispensing them.

Because managed care payment tends to limit the ability of an organization to increase revenue from any one patient, it is imperative to limit contractually the costs of the most frequently used healthcare services. The premise of a contracted network is to limit risk, not by blocking a patient's access to service but by controlling the cost of providing that service.

Step 2. Effective contract management. The ability to contract creatively far exceeds the administrative capacity of most managed care organizations to accurately pay claims by the terms of those contracts. The typical managed care organization may have literally thousands of subcontracts, each with slightly different terms, conditions, and required payments. It is not atypical for the provider's staff to be unaware of the specific terms of a particular contract, for claims staff to be unfamiliar with that contract's rates, and for contracting staff to ignore its conditions for renewal or termination.

Unless contract administration is accomplished effectively, the managed care organization's contracting effort is wasted. A system of contract administration requires a routine auditing process to ensure that claims payments are in accordance with contractual terms. The claims payer should provide performance guarantees of accuracy and timeliness as part of the basic contract, and the payer should be responsible for resolving problems in the payment process.

Step 3. Benchmarking resource utilization. Managed care organizations can use resource utilization benchmarks reported by such organizations as Milliman & Robertson or CHIPS, but they also can develop benchmarks internally from the practice patterns of network physicians. Internal benchmarks tend to be more reasonable organizational measures to use than national standards, which may not accurately reflect local experience. These internal benchmarks also tend to be more acceptable to participating physicians because they rely on data from their network colleagues.

Step 4. A hospitalist program. By using hospitalists, or intensivist physicians, full-time in the network's hospitals, a managed care organization can decrease variation in patient care and increase the efficiency of resource utilization. Primary care physicians can focus on ambulatory care while inpatients are cared for in a consistent, coordinated manner by hospitalists aware of the idiosyncrasies of a particular hospital and familiar with diagnosis-based treatment protocols.(a)