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.

Outlines

00:00

🏥 Utilization Management in Healthcare

Dr. Eric Bricker introduces the concept of Utilization Management (UM), a critical process in healthcare and insurance that involves managing bed days in hospitals. He explains that hospitals must seek approval from insurance companies for patient stays, which are granted based on clinical criteria. The process can be complicated by unforeseen complications that extend a patient's stay beyond the approved days, leading to potential patient liabilities. The 'No Surprises Act' does not prevent these issues, which can occur due to the hospital's inefficiencies in notifying insurance companies, especially during off-hours and holidays.

05:01

📊 The Impact of Utilization Management on Hospital Stays

This paragraph delves into the specifics of how utilization management affects hospital stays, particularly for elective surgeries where prior authorization is required for a set number of days. It highlights the challenges when complications arise, as insurance companies may not approve additional days, potentially leading to patient financial burdens. The speaker also discusses the origins of the standard days for various conditions, mentioning two major companies, InterQual and MCG Care Guidelines, that provide these standards but do not disclose specific evidence or studies used to establish them.

10:03

🛂 Traditional Medicare vs. Commercial Insurance in Utilization Management

Dr. Bricker contrasts the utilization management process with traditional Medicare, which uses a diagnosis-related group (DRG) system that pays a fixed amount for a diagnosis regardless of the length of stay. This differs from commercial insurance, which applies utilization management to control costs. The speaker emphasizes the significant financial impact of these processes, with approximately $400 billion spent annually on inpatient care influenced by utilization management, controlled by a relatively small group of individuals at InterQual and MCG Care Guidelines.

15:05

📝 The Importance of Understanding Utilization Management in Healthcare Finance

In the concluding paragraph, Dr. Bricker stresses the importance for those working in healthcare and healthcare finance to understand utilization management. He points out the lack of competition in the field, dominated by InterQual and MCG Care Guidelines, and questions why there isn't more competition to provide alternative standards. The speaker encourages viewers to reflect on the significance of these processes in shaping healthcare costs and patient experiences.

Keywords

💡Utilization Management (UM)

Utilization Management (UM) is a critical concept in healthcare that involves managing the use of healthcare services to ensure they are necessary and appropriate. In the video, UM is described as the process of managing bed days at a hospital, where the hospital must seek approval from insurance companies for payment for a certain number of hospital days based on clinical criteria. This process is fundamental to understanding how money works in healthcare.

💡Case Management Nurses

Case Management Nurses are healthcare professionals who play a crucial role in the utilization management process. They are responsible for communicating with insurance companies to report a patient's condition and justify the need for hospital days. In the script, they are depicted as the liaisons who call insurance companies, read doctors' notes, and negotiate the duration of a patient's hospital stay.

💡Insurance Payer

An insurance payer is an entity that provides health insurance coverage and is responsible for paying for healthcare services. In the context of the video, the insurance payer is involved in the utilization management process by approving the number of hospital days a patient is entitled to based on their medical condition. Examples of insurance payers mentioned include BlueCross, United, Signet, Aetna, and Medicare Advantage plans.

💡Clinical Criteria

Clinical criteria are the standards or guidelines used to determine the necessity and appropriateness of healthcare services. In the video, these criteria are used by insurance companies to decide the number of hospital days they will approve for a patient's stay. The script illustrates this with examples such as pneumonia being approved for three days or cellulitis for two days.

💡No Surprises Act

The No Surprises Act is a U.S. federal law aimed at protecting patients from unexpected medical bills. However, as mentioned in the video, the act does not prevent surprise bills resulting from utilization management denials of bed days by insurance companies. The script emphasizes that patients can still receive unexpected bills due to the discrepancy between the approved hospital days and the actual days the patient needs to stay.

💡ER Admits

ER Admits refer to patients who are admitted to the hospital through the emergency room. In the script, it is mentioned that for ER admits, the hospital must go through an insurance notification process, which can sometimes lead to issues, especially during weekends and holidays when case management nurses may not be working, resulting in a backlog of notifications.

💡Elective Inpatient Surgeries

Elective inpatient surgeries are procedures that are scheduled in advance and are not emergencies, although they may still be medically necessary. The script explains that even for elective surgeries, prior authorization is required from the insurance company, which will approve a certain number of hospital days for the procedure, not an open-ended stay.

💡Interqual

Interqual is one of the major companies in America that provides utilization management guidelines. The script mentions that Interqual is owned by Change Healthcare, which was recently acquired by Optum, a subsidiary of United Health Group. Interqual's guidelines are used by insurance companies to determine the number of hospital days approved for various medical conditions.

💡MCG Care Guidelines

MCG Care Guidelines is another company that provides utilization management standards, competing with Interqual. The script explains that it was previously owned by Milliman but was sold to Hearst Health, which is part of the larger Hearst Corporation, a media company. MCG Care Guidelines are an alternative to Interqual used by health insurance companies.

💡Diagnosis Related Group (DRG)

Diagnosis Related Group (DRG) is a system used by traditional Medicare to categorize patients into groups with similar clinical conditions for the purpose of payment. Unlike utilization management, DRG does not involve approval of specific hospital days but rather pays a fixed amount for a particular diagnosis, as explained in the script. This system removes the need for arguing over bed days and allows hospitals to keep patients as long as necessary.

💡Employer-Sponsored Health Insurance

Employer-sponsored health insurance refers to health coverage provided by an employer to their employees. In the context of the video, this type of insurance is subject to utilization management, which means that the process of managing bed days and approvals by insurance companies applies to a significant portion of the American population who receive their health insurance through their jobs.

Highlights

Utilization management (UM) is a fundamental aspect of how money works in healthcare.

UM involves managing bed days in hospitals and requires approval from insurance payers for payment.

Hospitals must justify the number of days a patient stays, which can be unpredictable and lead to complications in billing.

Utilization management nurses often communicate with insurance companies to negotiate bed days based on clinical criteria.

Unforeseen complications can extend a patient's stay beyond the approved bed days, leading to additional approval requests.

Insurance companies may deny payment for days beyond the initially approved bed days, resulting in patient balance.

The No Surprises Act does not prevent surprise bills due to denial of bed days in utilization management.

ER admits and notification challenges can create backlogs in the utilization management process, especially over weekends and holidays.

Elective inpatient surgeries also require prior authorization with a predetermined number of hospital days.

Interqual and MCG Care Guidelines are the two major companies providing utilization management standards in the U.S.

Interqual is owned by Change Healthcare, recently acquired by Optum, which is owned by United Health Group.

MCG Care Guidelines, previously Milliman Care Guidelines, is owned by Hearst Health, a media company.

The evidence base for Interqual's guidelines is not transparent, and the company uses a mix of doctors and non-physicians for reviews.

Utilization management affects a significant portion of the healthcare spending, with $400 billion annually running through this process.

Traditional Medicare does not implement utilization management and instead uses Diagnosis Related Groups (DRGs) for payment.

The lack of competition between Interqual and MCG Care Guidelines raises questions about the influence these organizations have on healthcare spending.

Hospitals agree to utilization management as part of their contracts with insurance companies, despite its challenges.

Understanding utilization management is crucial for those working in healthcare and healthcare finance.

Transcripts

hello this is Dr Eric Bricker and thank

you for watching a healthcare Z today's

topic is utilization management

oftentimes abbreviated

um if you work in healthcare and health

insurance then you have to know what

utilization management is it's

essentially a fundamental in how the

money Works in healthcare so what is

utilization management it is what is

called managing bed days at a hospital

what in the world does that mean so

believe it or not a hospital actually

has to go to the commercial insurance

payer for the individual BlueCross

United Signet Aetna Medicare Advantage

plan what have you and say hey so and so

is here and they have to get approval

for payment for a certain number of days

at the hospital the insurance company

just doesn't just say okay the person's

in the hospital will just pay for it

they say okay so and so is in the

hospital we'll pay for it for a day or

two days or five days so it's based upon

clinical criteria so literally there are

utilization management sometimes they're

called case management nurses at the

hospital that literally phone call and

give report they like pull the chart you

know on the computer they like literally

pull the paper chart and they read the

doctor's notes and they tell the

insurance company what's going on with

the patient and they say okay the

person's not got pneumonia and the

insurance company says okay well we'll

approve you for three days or they've

got a cellulitis which is a skin

infection we'll approve you for two days

or you a scoliosis surgery which is more

significant we'll approve you for five

days now let's say the person has to

stay for more than three days for your

pneumonia I mean nobody can predict the

future the insurance company can't

predict the future the doctor can't

predict the future I mean if I can only

tell you how many times I admitted a

patient with pneumonia and then all of a

sudden their stay took a turn for the

worse like sometimes that happens their

heart might go into atrial fibrillation

um with rapid ventricular response which

then causes pulmonary edema which

worsenses their oxygenation status and

all of that could happen on Hospital day

three when we're about to send them home

oh you're looking great Mr or Mrs Smith

Oh no you're an afib with rvr and you've

got new pulmonary edema guess what

there's no way you're going to be able

to be discharged at home so I write that

in my note I put in the orders for you

know deltaism drip or whatever and then

the nurse from the hospital has to call

then the insurance company again say oh

you know so and so Mr so-and-so Mrs

so-and-so they're not doing so good yada

yada yada and then the insurance has to

approve them for like more days oh A-fib

with rvr with pulmonary edema okay now

we'll give you an extra two days on top

of the original Three Days okay so you

literally have to go through this whole

rigmarole now to make things even worse

it doesn't always happen the hospital

doesn't always have their act together

so sometimes the person stays for five

days they only got approved for three

days so when the hospital bills the

insurance company the insurance company

pays for three days denies the last two

so there's a remaining patient balance

guess what the hospital does with those

remaining two days they automatically

build a patient and So the patient's

like oh look at this a bill for twenty

thousand dollars that I was not

expecting by the way the no surprises

act doesn't stop this from happening at

all so believe me people will still get

surprise bills after this approach no

surprises act because of the denial of

bed days because of utilization

management from the insurance company

okay so there's a couple of ways that

people generally get into the hospital

one is through ER admits right they

would either admit them to Medicine

typically or sometimes they would admit

them to surgery now there the hospital

has to go through approximate it's

called Insurance notification right

because you're not you don't know in

advance that Mr Smith's going to be in

the hospital they just come into the ER

and this causes a problem because people

are admitted to the hospital seven days

a week 24 hours a day these case

management nurses do not work typically

on weekends and holidays and they don't

work overnight so you end up getting

this backlog over the nights and

weekends and holidays so this whole

process of notification doesn't happen

smoothly so sometimes the patient gets

admitted and they turn around real quick

and they get discharged and the hospital

like never even notified the insurance

company that the patient was even there

but then they go ahead and they build

the insurance company anyway and then

the insurance company automatically

denies it for lack of notification so it

is it is not a smooth process okay next

up then there's there's also elective

inpatient surgeries now elected doesn't

necessarily mean optional like you could

have colon cancer and need a

hemicolectomy which is half of of your

colon taken out to remove the colon

cancer okay that's elective surgery okay

it's not optional but it's not emergency

surgery so it's still considered

elective okay well there or even for

like that scoliosis surgery example you

got to get prior authorization and when

they prior authorize you again they're

giving you authorization for a certain

number of days they're not saying oh you

can just have as long of a stay in the

hospital as you want it's like okay

you're approved for the scoliosis

surgery but you're only getting five

days for that and again if the person's

scoliosis surgery has a complication or

whatever you can call back and ask for

more days beyond the five oh by the way

the insurance company doesn't have to

give you more days they could be like

like no like the patient doesn't fulfill

uh requirements for hospitalization

anymore so yeah they're in for five days

you're asking for more but guess what

we're not going to prove that like we

don't have to approve that if we don't

want to so they'll deny it okay so that

begs the question then where does the

where do these numbers come from who

decides uh pneumonia's three days seven

cellulitis two you know two days

scoliosis fighting like besides that

there are two major companies in America

that provide that they are interco

interqual and MCG care guidelines now

interqual anecdotally from the people

that I talk to on the insurance in the

hospital side interqual seems to be the

one that's used more frequently now

interqual interestingly is owned by

change Healthcare which was recently

bought by Optum which is owned by United

Health Group so there you go the largest

provider of utilization management

standard approval days in America is

United Health Group

intercall used to be a part of McKesson

for decades it was a part of McKesson

McKesson Fortune 10 company in America

Healthcare company and then McKesson

ended up selling it dude it was kind of

complicated but actually not too many

years ago in the somewhat recent past

that it was like five years ago they

sold it to change Healthcare and then

change Healthcare got bought by United

Healthcare so a lot of the interqual

help employees have been there and

they've got a long history with McKesson

and you'll see that they've worked at

change healthcare for like five years

okay so this interqual says that okay

when they did this it's evidence-based

all over the interqual website the

evidence base is everywhere okay they

don't say what the evidence is they have

some sort of circular framework that

describes it in general but they don't

say specifically they talk about

literature reviews but they don't say

specifically you can't say okay for

pneumonia what is the specific criteria

what are the what are the studies what

are the what is the evidence that you

used for pneumonia it's proprietary you

can't find it they say that they use a

thousand doctor reviewers and it's not

just excuse me clinical reviewers and

it's not just doctors they also use

registered non-physicians I'm not sure

what a registered non-physician is maybe

registered nurse but they just blump a

thousand doctors and a thousand

non-registered um physician registered

non-physicians together is it 200

doctors and 800 or the other is it 800

after 200 is it 999 doctors and just one

of the like they don't break it down

it's impossible to know how many of

these people are doctors and how many of

these are registered non-physicians

whatever that is okay so who are these

people interqual is not a nameless

faceless organization it's people

people

it's Laura Coughlin okay Laura Coughlin

is sort of the vice president of uh

strategy there seems to be one of like

the highest level people that I could

find at interqual she's got a BSN okay

there's no evidence of any uh clinical

experience on her end on um LinkedIn

um maybe she does I'm not saying that

she doesn't but there's just she doesn't

list it anywhere in her profile there's

a Woman by the name of uh Dr Monique

johannan who until very recently was the

chief medical officer of

uh interqual she went to Brown for

medical school and then she did an

Internal Medicine Residency in Boston so

it's like I would encourage you to like

look up who these people are like it's

not that hard to find them on LinkedIn

what's interesting is that one there's

not a lot of them so if you look up

people on LinkedIn who work at integral

here is the here's an incredibly large

and Powerful organization within

Healthcare like it's really hard to find

people no you're not required to put

your information on LinkedIn no one's

requiring you to do that I'm just saying

the people who work at interqual are not

on LinkedIn for the most part now next

up MCG care guidelines which is their

sort of the competing firm so typically

a health insurance company they will

either use interqual or the MCG care

guidelines and again it used to be

called the milliman care guidelines but

when because it used to be owned by

milliman but then milliman sold it to

Hearst and now they just call it MCG

care guidelines so in other words it's

like the middleman care guidelines care

guidelines it's kind of like what it's

saying okay but milliman's no longer

used in the title it's just called MCG

care guidelines which is owned by Hearst

Health I've got another video about

Hearst and Hearst Health that's right

the first the media company that owns

the St Louis newspaper and the Houston

Chronicle and they own it's a media

company

that just oh by the way they just happen

to do utilization management

um you know bed day standardization in

America okay

um now

why am I making a big deal out of this

like what why does it matter okay

traditional Medicare doesn't do this

this does not exist for traditional

Medicare if you have traditional

Medicare there is no utilization

management if you have traditional

Medicare the nurse doesn't call Medicare

and ask for bed days from traditional

Medicare no instead traditional Medicare

uses diagnosis Related Group drg

perspective payment this is look you got

pneumonia you stay as long as you want

we're only going to pay you X number of

dollars for that pneumonia five grand

you stay for a day you stay for a

hundred days you're getting five grand

so they just they cut off how much

they're gonna pay you and they say look

we're not going to argue about bed days

you keep them as long as you clinically

think is necessary but we're only going

to pay you x amount independent of how

long they stay but this whole process of

utilization management is applied to

commercial insurance for

employer-sponsored health insurance fans

so Blue Cross United Cigna Aetna through

your job you're a state employee you're

a firefighter you're a police officer

you're a university Professor you're a

school teacher you're a construction

worker you're a software programmer

you're uh you get you name it for your

health insurance company employee

yourself you yourself at your own health

insurance company you got utilization

management for your own health insurance

okay now uh Commercial Insurance spends

about two thousand dollars per member

per year on inpatient services and

that's the most recent year I could find

which was 2016. there in 2016 there are

150 million Americans that were roughly

half of Americans that received their

health insurance coverage through

employer-sponsored insurance so if you

take the two thousand dollars per person

per year times the 150 million people

that gets you 300 billion dollars that

was spent on inpatient care in 2016 the

most recent year I could find now

Medicare spends traditional Medicare

spends about 110 billion dollars per

year on inpatient care

um that was per 2020 so I couldn't find

exact years to match up okay now keep in

mind Medicare Advantage uses utilization

management and let's say the Medicare

and Medicare Advantage has about half

the equal numbers of people on

traditional Medicare and Medicare

Advantage so let's just assume that

Medicare Advantage plans have about the

same amount that they spend on inpatient

care yeah maybe it's a little less

because they're doing better keeping

people healthy yada yada but let's just

assume for round numbers that it's about

a hundred billion dollars if traditional

Medicare is spending 110 billion

Medicare Advantage is spending 100

billion so if you take the 300 billion

from the commercial the employer

sponsored commercial insured plans plus

the 100 billion from the Medicare

Advantage plans that means 400 billion

dollars a year of spending runs through

utilization management

wow

400 billion dollars a year of spending

runs through this process

that is controlled by Laura Coughlin

Monique johannan and their colleagues at

both interqual and MCG care guidelines I

would argue that these thousand doctors

and registered non-physicians these

thousand there's about a million doctors

in America okay these thousand people

are probably the most powerful people in

healthcare in America

they are

hugely responsible for how

400 billion dollars a year is spent on

Hospital Services okay that is a huge

deal very little is known about these

companies very little is known about

these people and they have huge

financial impacts on hospital care now

who's the grand High Arbiter that made

interqual and MCG care guidelines made

them King who made them King nobody made

them King

the hospitals when they negotiate their

contracts with the insurance companies

the insurance company said you've got to

agree to our utilization management

guess what the hospitals agree to it

that

reject this

the hospitals could reject this now

obviously this is very onerous on the

hospitals so I would argue that the

insurance carriers are really sticklers

about utilization management being in

the contract if you're a hospital

negotiator like you would want to

negotiate out having to do this

but they haven't

the hospitals have not walked away from

this utilization management process I'm

not saying go without any utilization

mere management process maybe recruiting

replace it with something else there

could be a third option you could call

it MCG qual or Intercare or whatever but

like the fact that these two are the

only two shows a lack of competition

there should be more competition in

creating these number of days

competition's good right

why in the world do we only have two

organizations creating these number of

days because hospitals in America have

accepted that I don't know why maybe you

know why leave a comment in the show

notes help us out but if we work in

health care and Healthcare Finance we

have to understand utilization

management that's my point for today

thank you for watching a healthcare Z