Fixing Utilization Management To Fit With a Value-Based World

Tammie Phillips, RN
Vice President of Business Consulting for McKesson Health Solutions

It was the shot heard ’round the health care world. In January 2015, CMS committed to making alternative payment 30% of Medicare reimbursement by 2016 and 50% by 2018. That was the moment, it could be argued, when the transition from fee-for-service to value-based models changed from a pilot for reimbursement change into a mandate.

Value-based health care has two overriding goals: Improve the quality of care and reduce unnecessary cost. Utilization management is one of the ways payers have tried to do just that. But the current way of doing utilization management is designed for a fee-for-service world. It’s also disliked by providers and patients alike. Utilization management as we know it today positions providers and payers against each other.

Get rid of adversarial relationship

Providers end up resenting care decision approvals, many of which occur after care is already provided, and payers get cast as prioritizing cost containment over quality. There’s no place for such an adversarial relationship in value-based care, which frequently depends on providers and payers sharing risk. Payers need to engage providers in the process of cost savings and high quality care. And trust must be part of the equation, something sorely lacking in the current utilization management system.

Tammie Phillips, RN

Tammie Phillips, RN

Value-based care also requires collaboration, yet during the claims process—the primary engagement between providers and payers—every step is transactional and sequential, not collaborative. We need to invert that. Providers should be ensuring medical appropriateness and considering issues of member benefits while care is being delivered.

It’s no secret the U.S. health care system wastes billions on manual transactions and remediation. A study published in 2013 in the Journal of the American Board of Family Medicine said that the mean annual projected cost for preauthorization activities ranged from $2,161 to $3,430 per physician. Cornell researchers published a study in Health Affairs that found that provider office nursing or administrative staff spent 13.1 hours per physician per week on preauthorization, far more than any other type of administrative interaction. This time is due to the back-and-forth interactions between a payer and the provider office to determine the final outcome of authorization requests.

Is this producing results? The Health Affairs study points out that, “although it is easy to portray administrative costs as ‘waste’, it is important to emphasize that these costs can never be zero and that the interactions that generate these costs may produce benefits as well.”

Prior authorization and formulary requirements may reduce costs and improve the quality of care “to the extent that they reduce inappropriate provision of services and promote the use of appropriate procedures and medications.” Dealing with multiple health plans can generate “the benefits that can flow from competition, including innovation and increased patient choice.”

On the other hand, a Kaiser Family Foundation study reported that the United States spends significantly more on health care than other nations, both on a per-capita basis and relative to its wealth. Moreover, U.S. spending on health care was 42% higher than Norway, the next highest per capita spender.

Despite spending considerably more, U.S. health care system performance ranks last in comparison to other industrialized countries, according to the Commonwealth Fund.

We have a utilization management process. We have guidelines. We have evidence. But we’re not using them effectively. Who wants to be admitted to a hospital if they don’t have to? Who wants spine surgery if it’s not warranted? Certainly providers and payers are conceptually aligned on what matters: Providers want to deliver the right care and payers want to pay for the right care. When researchers run the numbers, however, it becomes clear that traditional utilization management isn’t living up to its full potential.

That’s the bad news. The good news: By employing a new process designed for a value-based world, payers can influence decisions as they’re being made, streamline the administrative burden, and better engage providers in a collaborative relationship that supports value-based care.

How do we get from a broken traditional utilization management system to a new one that will work in value-based care? Payers need a way to apply automation to authorization based on data—the latest medical evidence, provider utilization patterns, and value rankings—and do so in real-time with little to no burden on providers. Likewise, providers need to share information collaboratively with payers and adjust when care patterns reveal insights on efficiency and patient outcome.

Point of decision

This new, real-time model that McKesson has developed and implemented successfully at over 20 customer sites uses data to automate much of today’s onerous authorization processes.

This improved process helps ensure that communication among stakeholders happens at the point of decision through the use of health care technology in the cloud. This kind of utilization management doesn’t require a review of every transaction. Instead, it is exception based, meaning the vast majority of approvals happen automatically and instantly. Only the exceptions—those transactions that can’t be determined automatically based on clinical and business rules—are manually reviewed. This new approach may also reward physicians who practice evidence-based care by giving them more freedom and dramatically reducing the administrative cost and burden.

Instead of the current manual authorization process, providers in the exception-based model can access a payer’s clinical guidelines and payer rules automatically, informing their care decisions. A provider will get an immediate automated approval or denial, or be notified that a claim has been tagged for manual review.

The level of prior authorizations required are based on how well a provider’s practice patterns align with evidence-based practices. Payers can set looser requirements and lower hurdles for those providers who are frequently approved. Meanwhile, tighter requirements can be set for those providers who frequently request care that the evidence indicates is not medically necessary.

Once authorization requests are being submitted consistently to the system, the payer can query the database to see how often care decisions are being approved for any particular provider and identify outliers. Data analytics identify practice patterns and variations. The hope is that underperformers can eventually be brought into alignment with the clinical guidelines and payer rules, further reducing the need for manual interventions.

Compare this new exception-based model to the current system, where payers and providers incur significant administrative costs and burden on prior authorizations that, in the end, are approved, often delaying patient care. Now it can take just a few minutes to get an approval, instead of days or weeks. And once providers are practicing in line with evidence and a payer’s policies, approval may become automatic or may not even be required.

When payers and providers can collaborate on care instead of being trapped in a transactional relationship, that’s a true advancement. Prior auth starts to look like a notification from the provider rather than a request for approval. The provider might spend 20 seconds on an authorization instead of hours, days, or weeks. Better still, the provider is no longer in the long-derided “Mother may I?” role.

For payers, using exception-based utilization management can take an enormous load off the system, freeing staff to focus on those fewer providers causing waste or areas where there is great variation. Payers only touch transactions when they’re slated for further review or when an intervention is required.

Why now for this exception-based utilization management? First, we finally have the technology available to make it happen. Cloud-based technology that combines contemporary connectivity with stakeholders’ existing care management systems, payer portals, and IT infrastructure is now available. This cost-efficient, service-oriented, “embrace-and-extend” approach quickly and easily connects a provider’s and payer’s workflow.

Transformation accelerates

Second, the tide has turned away from fee for service toward value-based care. As the pace of the value-based payment transformation accelerates, the payer–provider relationship must be aligned and collaborative. Technology and information must be shared. Payers can earn the trust of providers who are practicing based on the medical evidence and reward them for it with utilization management that makes review the exception rather than the rule. And providers will be able to deliver quality care faster and for less cost.

Automated, exception-based utilization management is in step with the future of reimbursement and makes optimal use of the robust technical capabilities at our disposal today. It might well be one of the biggest steps we can take to help payers and providers meet CMS’s ambitious value-based payment objectives and the larger goal of a value-based health care system.

Tammie Phillips of McKesson Health Solutions speaks frequently about how to manage value-based care.


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