With most of the increases in health care costs of the last 10 years shifted to the employee, there has been little incentive for health insurers to pursue the focused, effective management of health care resources. In fact, during this period, there was a general revolt by consumers against prior authorization requirements and denial of care that did not meet evidence-based criteria. Now, however, with a weakened economy sparked by the burdens of higher energy costs and declining housing values, it appears consumers are less willing to continue to accept the shifting of additional costs on top of the continuing rise in the overall cost of health care. This presents an opening for insurers to craft a medical management program that includes a utilization management component that will, at a minimum, reduce the future rate of increase in health care costs and premiums.

Utilization Management
Utilization management and medical management are not synonymous terms; utilization management is but one of medical management’s three components, with the others being network development and management and quality management. The misperception that they are synonymous stems from the fact that utilization management is the component most familiar and visible to health care providers.

Many people see utilization management as an “all or none” phenomenon. The “all” is viewed as an arbitrary and capricious, “scorched earth” approach to managing health care resources, one characterized by a strategy of review and denial. On the contrary, the hallmark of superior utilization management is the influencing of the course of care that the patient receives so as to achieve optimal health care for the insured member. Optimal health care is defined as the care the patient requires provided at the lowest cost and accomplished within the parameters and constraints of the insured’s benefit plan, provider contracts, and statutory regulations.

The guideposts for this journey to provide influence along the health care delivery continuum are evidence-based guidelines. Which care and services are subject to review and the variation in the stringency with which the evidence-based guidelines are applied determine whether the health care resources are loosely, moderately, or tightly managed. The level chosen should be the one likely to achieve the outcome desired. It is important to recognize that the strategic intent of this endeavor is to achieve high-quality, cost-effective health care for the insured member.

Critical to success are experienced clinical personnel who understand the benefit plans, policies, and guidelines and who have both the ability and willingness to debate and discuss the health care being delivered to the insured members.

With well-structured and executed utilization management, coupled with an effective negotiation program (as detailed in the second-quarter 2008 Nolan newsletter), the cost of care can be significantly reduced—even with a loosely managed approach. Increased attention to the management of health care resources improves both the efficiency and quality of the care delivered.

System Support
Using the appropriate software allows for consistency in both clinical review determinations and adjudication of claims. Internet-based guideline applications, such as Milliman, Interqual, and Hayes Technology Assessment, give ready access to routinely updated evidence-based guidelines and clinical information. CodeReview and Red Book are examples of software that support effective claim adjudication. These allow for maximum efficiency in making not only the initial claim and clinical review decisions, but in giving ready access to pertinent clinical information when in direct discussion with a provider or when reviewing an appeal of a previous denial.

Legal Support
One frequently overlooked but critical component of an effective medical management program is legal support. For maximum effectiveness, the legal department should provide at least one experienced health care attorney to be involved as an ad hoc member of the medical management department. Activities would include participation in developing and implementing contracts, reviewing guidelines, and defending against any legal challenges of medical management decisions. An attorney who understands the goals and objectives of the medical management program and participates in the development of a strategy that avoids legal pitfalls is far preferable to one who regularly vetoes any endeavor that includes even a scintilla of legal risk.

Network Contract
Whether you have a directly contracted network or rely on a rental network, there are certain important goals to be achieved. One is fixed costs that have some relativity to the reasonable price benchmarks cited above. Payment for access to a rental network is on a per-member, per-month (pmpm) basis, not a percent of savings. Also, reimbursement for covered services delivered by network providers is payment in full, and the insured is held harmless for balance billing.

Equally important is agreement that the insurer can employ standard medical management techniques, such as pre-certification, concurrent review, retrospective review, and industry coding and evidence-based guideline software. The insurer may also engage specialty companies to supply services and goods, such as utilization management, pharmacy benefit management, chiropractic care, home health care, and DME supplies.

Medical Management
Since the largest portion of the premium dollar funds health care services provided to the insured members, the effective management of these resources always allows a unique opportunity to create a sustainable competitive advantage for the insurer. In order to capitalize on this opportunity, the insurer must employ knowledgeable, experienced medical professionals to oversee the delivery of clinical services to members, with the focus resting equally on quality and the cost-effectiveness of care.

Crucial to the success of the medical management program is the medical director. The medical director must provide leadership, training, and mentoring to nursing personnel; take the lead in both development and acquisition of the guidelines and policies used in making medical necessity determinations; and provide input and support across the organization. All medical management personnel (and the medical director in particular) must be capable of articulating certification decisions to physicians, institutional providers, and internal constituencies.

To remain relevant and provide the outcome desired, an effective medical management program requires commitment, consistent decisions, and effective oversight. We at Nolan have experience with both “all” and “none” and would be pleased to discuss the issue or help you find appropriate positioning for your organization in between.