Effective claims denials management, a key element in medical billing and coding outsourcing services, is crucial to ensure a healthy cash flow. According to a Revenue Cycle Intelligence report, utilization management, the process used by health insurers to control resource use in healthcare facilities, can be used by hospitals to help prevent claim denials and improve cash flow.

Claim DenialsWhat does utilization management in healthcare involve? According to the Healthcare Financial Management Association (HFMA), healthcare utilization management is the “integration of utilization review, risk management, and quality assurance into management in order to ensure the judicious use of the facility’s resources and high-quality care.”

Utilization management is a process used by health insurers and pharmaceutical companies to assess the relevance, medical necessity and efficiency of healthcare services provided to a patient. The goal of utilization review is to improve the quality of services and ensure efficient use of resources.

Increasing Scrutiny by State Regulatory Agencies and Private Health Insurers

Employers, payers and state regulatory agencies (RACs) have increased scrutiny to detect the possible overuse and disruption to delivery of medical care services.  The report draws attention to the following facts:

  • Medicare and Medicaid use Recovery Audit Contractors (RACs) to review claims and identify improper reimbursement for errors in reporting services or use of the wrong medical codes, non-covered services, and duplicate services.
  • RACs review medical records and can deny claims and recover improper reimbursement if it is determined that healthcare utilization was inappropriate.
  • A survey by the American Hospital Association found that the average number of medical record requests and denials from Medicare RACs is on the rise.
  • According to the AHA, hospitals received an average of 1504 medical records requests by the end of 2016, up from 1424 in the first quarter of 2014.

The SSI Group recently reported on a poll conducted by the Doctor Patient Rights Project (DPRP) which found that more than 50 million Americans with health insurance were denied chronic disease treatment that was considered essential. Overly burdensome prior authorization requirements are one example of how utilization management techniques could suppress access to essential care or life-saving treatment.

Need to Incorporate Utilization Management in Healthcare Revenue Cycle

Revenue Cycle Intelligence says that healthcare providers should strive to stay ahead of the game by incorporating utilization management programs in their organization’s revenue cycle. Hospital utilization management can prevent unnecessary costs and claim denials. With the rising importance of value-based reimbursement models, hospitals need to implement a robust utilization management program to confirm that patients are getting proper and timely care. This will ensure that claims are not denied and also help appeal denials. Prior authorizations and medical record reviews are crucial for providers who are at risk for overutilization or underutilization.

What Hospital Utilization Management involves

So what does utilization management by hospitals involve? It is necessary to distinguish between utilization management and utilization review, terms which are often used interchangeably. According to the URAC (formerly known as the Utilization Review Accreditation Commission), “Utilization management is the integration of utilization review, risk management, and quality assurance into management in order to ensure the judicious use of the facility’s resources and high-quality care. There are 3 types of utilization review and hospital utilization management should include all of them:

  • Prospective review is conducted at the onset of a service or treatment and is also referred to as precertification or prior authorization. Providers should submit prior authorizations to insurers in order to ensure that services provided are necessary.
  • Concurrent reviews are performed during the course of treatment or episode of care. This generally includes case management activities such as care coordination, discharge planning, and care transitioning.
  • Retrospective review is conducted after the service has been completed and assesses the appropriateness of the procedure, setting, and timing in accordance with specified criteria. A specialized nurse or a medical billing and coding company can be assigned the task of performing retrospective reviews to ensure claim submissions contain complete, correct billing codes for services provided.

According to the Centers for Medicare and Medicaid (CMS), any hospital receiving reimbursement from the federal agency should implement a utilization review plan. The hospital utilization review plan should lay down the responsibilities and authorities of all staff members performing utilization review activities. The plan must also detail the procedures for evaluating the medical necessity of admissions, extended stays, and professional services, as well as reviews of the appropriateness of care settings.

Hospital Management Utilization Best Practices

Let’s look at the components and best practices of hospital management utilization programs:

  • Utilization review committees are responsible for making the final judgment on medical necessity for services under review. According to CMS, the utilization review committee in hospitals should include at least two physicians to carry out utilization review responsibilities. Two of the committee members must also be doctors of medicine or osteopathy. Physician advisors can meet these needs. The utilization management program team should also have case managers and nurses on board.
  • Utilization management should be carried out on a daily basis all through the year.
  • Concurrent utilization reviews and case management should be conducted for all medical cases placed in hospital beds.
  • Cases that do not meet the criteria for appropriate utilization should be referred to the physician advisor. After review and discussion with the admitting physician, the physician advisor can make recommendations based on national-level and hospital-level utilization review standards.
  • If appropriate, the treating physician may change the order based on the recommendation.
  • The concurrent utilization review process should be documented at every step either in the patient’s chart or using a utilization review platform. A consistent process will help hospitals appeal claim denials based on medical necessity.
  • Good clinical documentation is critical to preventing claims denials and medical necessity reviews. Clinical documentation improvement (CDI) specialists can identify if physicians failed to document key activities that caused the service to be flagged by the case manager as medically unnecessary.
  • As inpatient admissions are a major cause for claim denials and RAC audits as they involve high costs, hospital utilization programs should ensure that patient charts clearly demonstrate why the patient needs to be in the hospital.
  • Expert medical coding services can ensure that all treatments provided are reported accurately.

A comprehensive hospitalization utilization management program can help providers deliver high-quality, cost-efficient care, submit accurate claims, and appeal claim denials effectively.