Utilization Management Explained

Summary

Dr. Eric Bricker's video discusses utilization management (UM) in healthcare, a critical process where hospitals must secure approval from insurance companies for patient stay durations based on clinical criteria. He explains the challenges of UM, including the unpredictability of patient conditions and the resulting financial implications for both hospitals and patients. The video also highlights the influence of companies like Interqual and MCG Care Guidelines, which set the standards for hospital stay durations, impacting a staggering $400 billion in annual healthcare spending.

Takeaways

• 🏥 Utilization Management (UM) is a critical process in healthcare that involves managing bed days at hospitals and obtaining approval from insurance companies for payment for a certain number of days.
• 📞 Hospitals must contact insurance companies to get approval for the number of days a patient can stay, which is based on clinical criteria, often involving utilization management or case management nurses.
• 📈 The unpredictability of patient conditions can lead to situations where the initial approval for hospital stay days may not be sufficient, requiring additional approvals from insurance companies.
• 💸 If a patient stays longer than the approved days, insurance companies may only pay for the approved days, leaving the hospital to bill the patient for the remaining days, potentially leading to surprise medical bills.
• ⏰ Utilization management can be complicated by the fact that case management nurses may not work on weekends or holidays, leading to backlogs in the notification process.
• 🛑 The No Surprises Act does not prevent surprise bills due to denial of bed days resulting from utilization management decisions by insurance companies.
• 🔍 There are two major companies in America that provide utilization management standards: InterQual and MCG Care Guidelines, which are used by insurance companies to determine the number of approved hospital days.
• 🤔 The evidence base for these utilization management standards is not transparent, with InterQual and MCG Care Guidelines not disclosing specific studies or criteria used to establish their guidelines.
• 👥 Key individuals at InterQual and MCG Care Guidelines, such as Laura Coughlin and Dr. Monique Johansen, play a significant role in shaping these guidelines, influencing how billions of dollars are spent on hospital services.
• 💼 Traditional Medicare does not use utilization management; instead, it uses Diagnosis Related Groups (DRGs) for payment, which is a fixed amount regardless of the length of hospital stay.
• 💰 The process of utilization management affects a significant portion of the healthcare spending in the U.S., with approximately $400 billion spent annually on inpatient care through employer-sponsored insurance and Medicare Advantage plans.

Q & A

What is Utilization Management (UM) in healthcare?

Utilization Management (UM) is the process of managing bed days at a hospital, where the hospital must seek approval from commercial insurance payers for payment for a certain number of days of patient stay based on clinical criteria.

Why is Utilization Management important in healthcare finance?

Utilization Management is important because it is a fundamental part of how money works in healthcare, affecting how hospitals are reimbursed for patient stays and impacting the financial flow in the healthcare system.

What happens if a patient's condition changes and they need to stay in the hospital longer than initially approved?

If a patient's condition changes and they need to stay longer, the hospital's utilization management or case management nurses must call the insurance company again to request approval for additional days, which may or may not be granted.

How does Utilization Management affect surprise medical billing?

Utilization Management can lead to surprise medical billing if the insurance company denies payment for days beyond the initially approved bed days, leaving the patient with an unexpected balance.

What are some challenges faced by hospitals in the Utilization Management process?

Challenges include the need for constant communication with insurance companies, potential denials for additional days even when medically necessary, and the administrative burden of managing these requests, especially during off-hours and holidays when case management staff may not be available.

How does Utilization Management differ from the payment system used by traditional Medicare?

Traditional Medicare uses a diagnosis-related group (DRG) system, which pays a fixed amount for a diagnosis regardless of the length of stay, unlike Utilization Management which involves approval for specific bed days.

What are the two major companies in America that provide Utilization Management guidelines?

The two major companies are InterQual and MCG Care Guidelines, which provide the standards and guidelines for the number of bed days approved for various conditions.

Who owns InterQual and what is its relationship with the healthcare industry?

InterQual is owned by Optum, which in turn is owned by UnitedHealth Group, making it part of one of the largest healthcare companies in America and influencing a significant portion of Utilization Management decisions.

What is the role of case management nurses in the Utilization Management process?

Case management nurses play a crucial role in communicating with insurance companies, providing updates on patients' conditions, and requesting approval for additional bed days when necessary.

How much of the annual healthcare spending is influenced by Utilization Management?

Approximately 400 billion dollars a year of spending on inpatient care is influenced by Utilization Management, including both commercial insurance and Medicare Advantage plans.

Why is there a need for more competition in the Utilization Management guidelines market?

More competition could lead to better standards and guidelines, potentially improving patient care and hospital reimbursement, and reducing the administrative burden on healthcare providers.