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© P.R. Kongstvedt
Chapter 5: Utilization Management, Quality Management, and Accreditation
Learning Objectives
Understand the different approaches to managing wellness and prevention;
Understand the basic metrics and measures used for cost and utilization in health plans;
Understand the basic components of utilization management for medical and ancillary services, including prospective, concurrent and retrospective review;
Understand the basic concepts for disease and case management;
Understand the basic components of quality management, including structure, process and outcome;
Understand the purpose and scope of external review and accreditation of managed care plans
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Common Utilization and/or Cost Metrics
Per Member Per Month (PMPM)
Average cost or use spread across all members, every month
For example: $30.00 PMPM means that for each and every member, the plan pays $30.00 each and every month (on average)
Per Member Per Year (PMPY)
Average cost or use spread across all members for a full year
For example, commercial health plan members fill an average of 10 prescriptions PMPY
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Common Inpatient & Ambulatory Utilization Metrics
Unique metrics for tracking and managing inpatient and ambulatory procedure utilization:
Bed Days per Thousand, sometimes referred to as BD/K
Procedures or Admissions per Thousand
Average Length of Stay (just what it sounds like)
Bed Days per Thousand
Metric means for every 1,000 members, how many bed days will be used over the course of a full year
Refers to occupied beds, not total number of admissions; e.g.,
1 member in the hospital for 4 days = 4 bed days
1 member in the hospital for 4 days and a 1 member in the hospital for 3 days = 7 bed days
Is actually used for any period of time
Example of formula on next page…
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Calculation of Facility Utilization: Bed Days per Thousand
Bed days per 1,000 members per year
Uses a 365-day year, not 52 weeks or 12 months, in order to be consistent
Formula:
[A ÷ (B ÷ 365)] ÷ (C ÷ 1,000), where A is gross bed days per time unit, B is days per time unit, and C is average plan membership for the time period
B can be any defined time period, e.g.:
Single day
Month to date
Month
Year to date
Year
Since B already takes time into account, C is average plan membership, not total member months, even when measuring for time period greater than one month
Formula is the same for measuring ambulatory procedures
Examples of calculation on next slide…
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Examples of BD/K Calculations
Example Calculation of Bed Days for a Single Day
Assume: Current hospital census = 300
Plan membership = 500,000
Step 1: Gross days
= 300 ÷ (1 ÷ 365)
= 300 ÷ 0.00274
= 109,500
Step 2: Days per 1,000
= 109,500 ÷ (500,000 ÷ 1,000)
= 109,500 ÷ 500
= 219
The days per thousand for that single day is 219
Example Calculation of Bed Days for the Month to Date (MTD), Three Weeks into the Month
Assume: Total gross hospital bed days MTD = 6,382
Plan membership = 500,000
Days in MTD = 21
Step 1: Gross days MTD
= 6,382 ÷ (21 ÷ 365)
= 6,382 ÷ 0.0575
= 110,925.24
Step 2: Days per 1,000 in MTD
= 110,925.24 ÷ (500,000 ÷ 1,000)
= 110,925.24 ÷ 500
= 222 (rounded)
The MTD days per thousand is 222
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Medically Necessary and Evidence-Based Medical Guidelines in Benefits Determinations
Medical necessity in benefits determinations does not mean whatever a member or a doctor thinks is – or should be – necessary
Medical necessity typically defined as items or services that may be justified as reasonable, necessary, and/or appropriate, based on evidence-based medical guidelines
Evidence-based means medical guidelines supported by peer-reviewed and published research by appropriate medical researchers, focused on randomized trials
Evidence-based guidelines available through vendors and/or the AHRQ, and access is typically fully automated
Examples of typical coverage exclusions based on medical necessity:
Services that are primarily for the convenience of the patient or physician
Services that are more costly than an alternative service or sequence of services at least as likely to produce equivalent results
Custodial care or care that is essentially assistance with acts of daily living
Experimental or investigational care, except in defined circumstances (e.g. as in the ACA)
Care not considered medically appropriate by generally accepted standards of medical practice
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Basic Utilization Management
[Put Figure 5 – 1 here]
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Note: Most routine services (for example, an office visit to a
network PCP or a routine lab test) do not require authorization
Categories of Benefits Coverage Authorizations
Prospective
Issued before any service is rendered
Applies to elective services
Concurrent
Generated at the time a service is rendered
Applies to urgent admissions or services while those services are being provided
Retrospective
Takes place after review of claims for non-authorized services after the event
Review of individual cases
Review of patterns of utilization
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Categories of Benefits Coverage Authorizations
Pended (For Review)
Authorization yet to be either approved or denied
Review required because of a question as to coverage for a service
Denial – certainty that there will be no payment forthcoming
Sub-authorization –one authorization allows creation of another; e.g., authorization of an admission automatically authorizes payment of anesthesiologist
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Three Basic Categories of UM
Prospective
Precertification review of elective cases prior to admission
Precertification review prior to high cost or selected outpatient procedures
Concurrent – also called “Continued Stay Review”
Review of inpatient cases if length of stay will exceed amount authorized for coverage
May apply to periodic review of outpatient therapies such as PT or OT
Retrospective
Takes place after the fact
Individual high cost cases
Pattern analysis
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Disease Management and Case Management
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Disease Management and Case Management (cont’d)
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Managing Ancillary Services Costs
[Put Figure 5 – 3 here]
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Components of Pharmacy Benefits Management
Benefits Design
Cost sharing separate from other benefits
Differential cost sharing based on formulary
Use of internal or external pharmacy benefits manager (PBM)
Use of formularies – lists of covered drugs
Closed vs. open
Tiered
Increasing the use of generic drugs
Contracted pharmacy network
Mail order fulfillment
Managing utilization
Drug utilization review – DUR
Step therapy
Prior authorization requirement for certain drugs
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Approaches to Quality Management
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Donabedian’s classic model of Quality Management1
Structure
Process
Outcome
1 Avedis Donabedian, Exploration in Quality Assessment and Monitoring: The Definition of Quality and Approaches
to Its Assessment, Vol. 1 (Ann Arbor, Mich.: Health Administration Press, 1980).
Approaches to Quality Management
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Incorporation of IOM’s six goals as appropriate2
Safe
Effective
Patient-centered
Timely
Efficient
Equitable
Peer review and appropriateness evaluation
Continuous quality improvement
2 Institute of Medicine, Crossing the Quality Chasm (Washington, D.C.: National Academy Press, 2001) 5-6.
Accreditation
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Majority of the nation's health maintenance organizations (HMOs) and point-of-service (POS) health plans are accredited, and PPO accreditation has been growing
Accreditation is driven by:
Employer mandates
State and federal government requirements
Consumers use of data and information
Desire by health plans to demonstrate quality objectively as market distinction
ACA requires that plans participating in the health insurance exchanges be accredited
In addition to accreditation, submission of routine HEDIS® and CAHPS ® performance data is required
Managed Health Care Accreditation Organizations
Three primary managed care accreditation organizations are:
National Committee for Quality Assurance (NCQA, which is also responsible for the HEDIS data set and co-responsible for CAHPS)
URAC (formerly known as the Utilization Review Accreditation Commission)
Accreditation Association for Ambulatory Health Care (also known as the Accreditation Association or AAAHC)
Accreditation by any of these three organizations is
Usually sufficient to demonstrate compliance with most state and federal laws and regulations around clinical activities and provider credentialing
Also recognized by Centers for Medicare & Medicaid (CMS) as meeting clinical requirements to offer Medicare Advantage plans for seniors
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