For health insurers and at-risk physician groups, utilization management (UM) can be an effective tool for minimizing waste (low value care), complying with state or federal regulations, and ensuring all patients consistently benefit from evidence-based care decisions. Unfortunately, today’s UM (as implemented by most legacy vendors) hasn’t evolved much since contemporary UM’s origin in 1989, when Congress passed legislation shifting the obligation of performing utilization and quality control review from physicians to third party “Peer Review Organizations” (PROs) for Medicare Fee-For-Service patients.  This legislation and the ensuing rulemaking and committee recommendations resulted in a UM system specifically tailored to, what was at the time, a predominately fee-for-service payment system.

UM hasn’t changed much since the early 1990s, but health care certainly has. There’s now an intensified movement for payers to deploy innovative risk-based payment models (vs. fee-for-service) which align financial incentives with high-value physician decision-making at the point of care. UM is stuck in the past; a product of it’s 1989 origins, today’s approaches to UM are not equipped for this new world of value-based care. The impacts of a dated UM approach are many, but we’ve identified three important pain points where UM may be impeding the delivery of effective, high-value patient care:

1. Fragmentation of care: As payers outsource their UM to third-party entities, managing medical expense remains a priority, but at the lowest administrative cost possible. As a result of systemic incentives dating back to the early 90’s, vendor selection tends to reward the one or more bidders pledging the lowest cost. The result? Multiple UM vendors each responsible for a discrete aspect of the payers’ covered services (e.g., one vendor for diagnostic imaging, another for surgery, another for physical therapy, and so on). The more vendors involved, the greater the chance friction is introduced at some point in a patient’s care journey. For instance, a patient in need of a knee replacement may require up to eight prior authorizations for the entire episode of care, each requiring the physician to work with a different UM vendor. The result? The patient’s physician may often receive approval for the surgical procedure itself, but not for the valuable pre-operative physical therapy necessary to ensure optimal post-op outcomes. These fragmented UM silos can delay crucial treatment and outright denials can disrupt the care plan entirely.

To further complicate things, review standards can differ among UM vendors and the payers they’re contracted to serve. Eligibility requirements may vary in a way that leads to authorizations being unexpectedly blocked or revoked. For example, an orthopedic surgeon may be under the impression that a plan benefit covers a needed foraminotomy only to find out that the UM vendor has implemented complex, opaque requirements for determining medical necessity of the procedure. This serves to create even more confusion as providers navigate a review process that is already taxing on their time and resources.

2. Misaligned incentives often conflict with achieving optimal clinical outcomes: Initially, UM was devised to be, first and foremost, a cost containment exercise focused on the short-term (reviewing a procedure) versus long-term expense (driving decisions to reduce the overall cost of the care episode). While ensuring high-value economics is a necessary reality of an effective healthcare system, the dated origins underpinning UM’s incentive structure can, today, come at the expense of the patient by delaying, denying, or facilitating low-value care decisions. Today’s health plans and their network partners want more–overwhelmingly, at-risk payers and physician organizations want UM to facilitate better clinical outcomes in addition to, not in lieu of, cost containment.

In a survey of 1,000 physicians conducted by the American Medical Association regarding prior authorizations, 91% of physicians reported care delays. Over 70% said that recommended treatment had to be abandoned sometimes during the authorization process.  Any gaps in care also have the potential to exacerbate the patient’s condition. In the same survey, 24% of respondents reported experiencing serious adverse patient events during a wait. Complications can lead to protracted care journeys with inferior outcomes. Prioritizing short term savings without fully considering the course of care necessary to achieve long-term cost savings and optimal outcomes results in a system prone to do more harm than good for all stakeholders involved.

3. Misalignment with physicians attempting to deliver optimal care for their patients: The UM process can hinder physicians as they try to determine the most effective treatment plans for their patients in today’s value-based, integrated care models. Under the siloed UM model, vendors have a limited view into the patient’s individual needs (e.g. comorbidities or responses to past treatments) that can have a significant impact on the overall care plan outlined by a physician. When any denials are challenged, physicians lodging appeals find themselves talking to someone who is not acquainted with the patient in question, and typically lacking a longitudinal view of the patient’s care. It’s no wonder then that the relationship between UM vendors and physicians can often turn adversarial.

Unfortunately, the current process also requires excessive time and resources. The 2019 AMA study also reports that a majority of doctors have had their prior authorization burden increase in the past five years. These clerical tasks take up an average of two business days per practice for physicians and their staff. This takes away from time actually spent practicing and contributes to broader dissatisfaction among doctors.

Where does that leave us?
From here, all signs point to the need for disruption and reconfiguration of legacy UM approaches, replacing this dated view of cost containment with an orientation aligned with today’s value-based, integrated care models. Payers, ACOs, similar at-risk physician groups must move to reimagine their UM strategy and consider moving to UM 2.0 – a UM approach rooted in contemporary payment and incentive structures. Rather than organizing around the needs of insurance billing, UM 2.0 should be organized around the needs of the patient.  This means that UM 2.0 should be focused on activating adherence to a care path that depends on every involved party getting access to the information they need to properly contextualize and having the ability to promptly communicate with one another in the event of conflicting decisions. This allows for the sensibility of typical utilization management with the consideration of clinical precedent.