Utilization Management – a Multifaceted Labyrinth
All of the stakeholders have a responsibility and thus will share in the clinical and financial benefits as utilization is optimally managed
By Jay I. Pomerantz, MD – Executive Medical Director for Health Integrated
Newsflash – healthcare costs keep rising.
No surprise there. It is also no surprise that payors will have to take the lead in bending the cost curve if we are to both continue to improve the quality of care and reduce the associated costs. It makes sense since they are the one link between all of the stakeholders in healthcare’s macro environment. In the past, the burden of increased healthcare costs could be pushed to the employer. 2009 figures show that on average, corporations will spend $9,552 per employee for health benefits, up 6% from 2008[1]. But the current economic situation has exacerbated a more aggressive stance taken by the employer in their relationship with payors. The system is being forced to change as the service components and associated costs are increasingly unsustainable. Over the last 10 years, average annual health insurance premiums have increased about 130% of which the employer and the employee have shared a similar percentage increase although the employer had significantly larger out of pocket cost since they have shouldered greater than 77% of the annual premium cost[2]. Employees are increasingly choosing the higher deductable programs to minimize their portion of this health premium. Employers though are likely to increase the amount of employee contribution in the form of premium, deductable and co-pay amounts.
This reiterates some of the same points we heard during the recent healthcare debates. Something has to change. The public will not accept any decrease in healthcare outcomes, and rightfully so, but costs still have to come down. To this end, there has been a push long before any of the recent healthcare debates to re-invigorate some of the more traditional medical management approaches, including pharmacy, case, disease and utilization management. With the ultimate goal of reducing cost drivers, one tactic targets the fine-tuning of physician specialist involvement and increasing consumer participation. I referenced John Wennberg, MD, founding editor of the Dartmouth Atlas of Health Care, where he estimates that over 30 percent of Medicare expenditures go toward unnecessary or wasteful care.
That said, studies show that the act of increasing the focus and implementing utilization management in a serious way, will in and of itself add to cost[3]. The outcomes though appear to be greatly improved with utilization management though. The same can be said for additional case management and disease management.
In this same McKinsey study of a few years ago, their recommended approach was quite simple. They suggested a 3-part course of action:
- Build the specialty network around the most efficient physicians
- Offer financial incentives to physicians based on improved outcomes
- Provide performance metrics
So, if you focus on the best physicians, incent them accordingly, and provide constant feedback on performance measures, it would seem that the system would see dramatic improvement.
This is all good, but how does the patient fit in? By dialing the patient into the equation, the savings can be further improved. To some degree, payors already do this. The within- and out-of-network practice and ‘approved’ healthcare facility approach allows the payors to actively seek out and recommend the best healthcare providers and physicians – or at least those that are preferred. There is also a direct correlation between patient co-pay and utilization. This is all good, but will not resolve all healthcare cost issues alone. The patient is more and more involved in their own healthcare. I talked about this in my 5/19/10 post. More than ever, there are resources available for their decision support. When combined with the financial options, patient-driven utilization management can assist in cost reduction.
Patients are taking advantage of the advancement in technology – diagnostic, procedural and preventive, all of which are driving changes that help both outcomes and cost. The trending of outpatient (vs. inpatient) treatment continues to increase. This is both good news and bad news though. The good news is that overall, outpatient procedures are less costly and tend to have quicker recovery times. When a patient is treated on an inpatient basis, there tends to be very efficient use of resources albeit costlier due to the care coverage and the highly-qualified clinical resource availability. The bad news is that this trend has created an opportunity to provide even more care. The fee-for-service model feeds this incentive with convenience, outcome and home-based convalescence. Additionally, the variety and availability of services is very attractive to patients.
To rein in cost then, the patient may be one of the most critical stakeholders. As we continue to see, the patient’s portion of the overall healthcare bill has not kept pace with actual cost increases although the future trend will be to push more of this from the employer to the employee, but maybe only to a point. With pressure from employers and patients, health plans get caught in the middle trying to strike a balance. There is no question that a cost shift will affect utilization. In fact, some employers have voiced concerns that if the costs are shifted too much, there might be underutilization which in the case of some chronic illnesses like diabetes, might actually end up increasing costs if a disease goes unchecked in some patients.
So we come full circle. A renewed effort of revisiting some traditional clinical practices like utilization management can drive cost reductions and clinical efficiency. Through better informational collection and access, for the physician and the patient, not only better care, but the right care can be provided at the right time while we drive down the associated costs. Optimizing the physician network, providing evidenced-based information for all aspects of healthcare, including high-cost pharmaceutical data, will allow healthcare providers to optimize their portfolio thus balancing outcomes and costs.
What do you think? I would love to hear from you.
Thanks for reading. I would also welcome your thoughts on topics that would interest you. Please contact me directly at healthexecforum@healthintegrated.com, or you can comment directly in the blog.
Best Regards,
Jay I. Pomerantz, MD
[1] 2009 Health care Cost Survey…, Towers Watson – 1/2009
[2] 2009 Kaiser Family Foundation Survey (http://ehbs.kff.org/pdf/2009/7937.pdf)
[3] Creating the Next Generation of Medical Management, McKinsey – 2004
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