Sponsored Post: The Importance of Utilization Management in Healthcare

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In the fast paced, ever-changing healthcare environment hospitals and health systems must be agile to ensure a quality-driven and financially stable operation. Between care complexities, endless reimbursement rules and regulation changes, utilization management in healthcare is paramount.

Regulatory Compliance

Regulatory agencies such as The Centers for Medicare and Medicaid Services (CMS) mandate for Medicare and Medicaid conditions of participation (Title 42 CFR), The Social Security Act (Sect 1861 Regulation), and the Quality Improvement Organization (QIO) require that hospitals and health systems have an effective utilization review plan in place. Foundational elements of the Utilization Management department such as medical necessity, resource utilization, Length of Stay (LOS), denials and outcomes all affect reimbursement. Thus, it is prudent to have the Utilization Management department involved and aligned with the Revenue Cycle.

Payors and health plans set forth many requirements in contracts which also affect reimbursement. Armed with the knowledge of payor and health plan intricacies, the Utilization Management department can bridge the gap between quality care provisions and clinical medical necessity, intensity of services, coverage and reimbursement.

Having utilization management processes tied to financial policies ensures compliance from regulatory, quality and risk perspectives and provides a course for hospital and health system operations. Different hospitals interpret and implement utilization management in different ways. Utilization management could be a plan, process or approach used for claims processing, resource utilization, denial prevention, risk management and quality review.

Cost containment

The Utilization Management department can help with managing the cost and delivery of services.

The integration of the Utilization Management department and its processes within hospital operations can increase care efficiency and decrease revenue loss. For example, reviewing for medical necessity is one of the various utilization management processes. It involves a prospective (review of medical necessity for procedures and services before admission), concurrent (ongoing review of medical necessity for procedures and services during the stay) and retrospective (review after the discharge) reviews. This process alone can significantly decrease the length of stay, help manage the appropriate use of resources and services as well as preventing denials thus protecting revenue.

Some of the various activities that Utilization Management may be responsible for include:

  • Preadmission and admissions certification
  • Prospective review
  • Concurrent review
  • Retrospective review
  • Discharge planning review
  • Case Management referrals for:
    • Nursing services and Social Work services
    • Pharmacy and Respiratory services
    • Physical and Occupational Therapy services

Operational Efficiency

The Utilization Management department typically interacts with all, if not most, hospital operation services. By working with the healthcare team, Utilization Management department can facilitate and coordinate resources and services in a quality-conscious and cost-effective manner.

Quality Department

The Utilization Management department should be involved in quality assessment (QA)/Quality Improvement (QI) activities such as evaluating patient care systems that includes standards, protocols, and documentation for efficiency.

Admissions, Registration and Scheduling

Appropriate communication and documentation of patient status (inpatient, observation, outpatient) and discharge dispositions helps to ensure accurate coding, thus reducing denials and improving reimbursement potential.

Case Management

While Utilization Management departments are typically focused on cost management and Case Management looks after continuum of care transitions, both departments have overlapping responsibilities and must work together. Both Utilization Management and Case Management incorporate patient care navigation through the entire health care continuum from engagement to discharge/post discharge.

Revenue Cycle/Finance

With the impact utilization management has on the financial health of the hospital, it is important that collaboration exists between the Utilization Management department and the Revenue Cycle/Finance department. Today’s Revenue Cycle teams have access to data and information technology that can assist Utilization Management to manage length of stay, appropriately allocate resources, prevent denials and ensure accurate documentation for coding and appeals.

Originally, utilization management in healthcare started with a narrow focus. Now that Utilization Management department activities increasingly influence reimbursement and affect revenue, there is a move towards re-organizing or realigning Utilization Management to the finance function. Whether it be a solid or dotted line to Finance, these teams must work together to ensure the financial health of their institutions.