In healthcare payers’ never-ending quest to reduce costs while ensuring that members receive the care they need, the importance of effective utilization management (UM) continues to grow.

Resources that were already in short supply—from doctors, nurses and other clinicians to materials, facilities, finances and time—were stretched even thinner by the pandemic. Effective UM enables health plans to deliver financial health and value, reducing costs for the payer organization as well as the consumer.

The industry’s ongoing shift toward value-based care models has expanded the definition of utilization management beyond the strategy of prior authorizations, putting increased emphasis on partnerships between health plans and providers. Under such arrangements, partners share responsibility for eliminating inefficiencies, maximizing available resources, and improving health outcomes in individuals as well as populations.

In this blog post, we share four key elements of effective UM. As with most consumer-facing healthcare functions, member education is essential to creating a satisfactory experience. Members who understand the reasoning behind UM policies and processes are more likely to be satisfied, which is ultimately good for the financial health of the payer.

1. Automating Processes and Administrative Tasks

Automation, bolstered by artificial intelligence (AI) and machine learning, can create numerous efficiencies. It can streamline manual workflows, ease data ingestion and analysis, simplify administrative transactions and lower their costs, speed response and turnaround times, and reduce human error.

The nonprofit Council for Affordable Quality Healthcare (CAQH) has identified numerous administrative transactions whose costs can be reduced with automation. They include eligibility and benefit verification, prior authorization, claim submission, attachments, coordination of benefits, claim status inquiry, claim payment and remittance advice.

A CAQH report from 2021 estimated that the healthcare industry had saved $122 billion a year by partly automating such transactions and could avoid an additional $16 billion in costs by fully automating them. More recently, Healthcare Dive reported, McKinsey and Harvard researchers concluded that broader adoption of AI could save the industry $200 billion to $360 billion a year—including $80 billion to $100 billion for private payers.

The purpose of prior authorization is to use evidence-based guidelines to determine the medical necessity, appropriateness and safety of a treatment, protecting healthcare consumers and payers from the physical and financial burden of unnecessary tests and procedures. But the requirements have often resulted in care delays and frustration. Automation can expedite prior authorization decisions. (Many plans would also benefit from revisiting their prior authorization protocols and revising the list where appropriate. For example, removing routine procedures that are rarely denied will significantly reduce the number of requests in the pipeline.)

By automating processes that can and should be automated, health plans can focus on activities such as authorizations for high-cost services, medications and procedures for at-risk members.

2. Better Care Coordination and Management of Care Transitions

Another way to drive efficiencies is by improving care coordination and management of transitions in care.

Care coordination involves deliberately organizing patient care activities and sharing information among all of the participants concerned with a patient’s care to achieve safer and more effective care,” says the Agency for Healthcare Research and Quality (AHRQ). “This means that the patient’s needs and preferences are known ahead of time and communicated at the right time to the right people, and that this information is used to provide safe, appropriate, and effective care to the patient.”

From the perspective of the payer, who must balance the potentially conflicting goals of managed cost and high-quality care, this means breaking through the silos that can make healthcare disjointed. Members dealing with comorbidities or requiring specialized care, in particular, should understand the reasons for referrals, how to schedule appointments and what steps to expect at each stage of care or transition. The primary care provider and specialist involved must also share the appropriate information in a timely manner, minimizing surprises for everyone involved: member, provider and payer.

Transitioning from one care setting to another too often results in dropped balls and care gaps. Payers can prevent such stumbling blocks in the member journey by proactively managing care through the transitions, employing doctors and nurses if necessary to ensure a smooth handoff. Data analytics and predictive modeling can inform decision making, improve the continuity of care and help prevent costly, unnecessary hospital readmissions. These tools can be used to target and engage potentially high-risk members before they become high-risk, lowering long-term healthcare costs. They also can help clinicians make better decisions about treatments and allocation of resources.

3. Reducing Unnecessary Hospital Readmissions

Putting an accurate cost on avoidable hospital readmissions is difficult, partly because of the variety of payer types, which include health insurance plans, third-party administrators, Medicare and Medicaid, and employer-sponsored employee health plans. Medicare’s Hospital Readmissions Reduction Program (HRRP) links a hospital’s reimbursement to the quality of care it provides, assessing penalties for hospitals with excessive readmission rates for certain conditions. Other payers are also pursuing ways to prevent such readmissions, which by most estimates total in the tens of billions of dollars a year.

Unnecessary readmissions are costly not only on a financial level, but also from a health perspective. A readmission often is an indication of inadequate care during the initial admission or of insufficient follow-up, both of which can negatively impact member outcomes and satisfaction.

By keeping the lines of communication open and freely sharing information with the member and whatever providers are involved in their care, payers can help ensure a more complete picture of the member’s needs. Communication with the member should include attention to health literacy—making sure, for example, that they understand when to reach out to a doctor versus visit an emergency room.

4. Keeping Members in Network

Out-of-network care is costly for the member as well as for the payer, which bears the administrative cost of processing the claim even if it does not cover the services. Network leakage can disrupt the continuity of care and the timely sharing of information, negatively affecting member outcomes and satisfaction.

While members will sometimes have to go out of network to see certain specialists, payers can be proactive in directing them to in-network providers when possible. Engaging members and being transparent about pricing, quality and access will increase the chances that those members will make informed decisions. Payers can use text or email campaigns to remind members about appropriate use and care settings.

Keeping providers up to date with detailed information about in-network specialists will make it easier for them to refer members to those desired specialists. Streamlined referrals and automated approvals increase the timeliness of care and minimize delays and frustration.

All these efforts demand timely, accurate and relevant data, along with the right technology to gather, store, analyze and share it. Payers should be closely monitoring various categories of data. By keeping close tabs on out-of-network leakage, they can identify available in-network options while addressing any access or availability issues. In addition, they should pursue opportunities to bring high-performing out-of-network providers into the network—a win for consumers, providers and payers.

Medecision’s HITRUST CSF®-certified software-as-a-solution, Aerial™, can help health plans introduce efficiencies that bolster UM performance and prevent revenue loss, as well as align workflows with regulatory requirements to reduce audit and penalty risks.

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