Utilization
  Management

RELATIONSHIP BETWEEN UTILIZATION MANAGEMENT AND CASE MANAGEMENT

Utilization management is a technique used by case managers to ensure that the patient meets preestablished criteria to support the level of care being delivered. Criteria that guide the process of determining the appropriate level of care and setting have been established for acute, subacute, and home care and virtually all levels of service across the continuum. A match between the patient's clinical picture and needed care interventions and the level of service being provided will greatly increase the likelihood that the provider will be reimbursed for the services rendered. When a match cannot be achieved, the case manager is responsible for working with the interdisciplinary team to transition the patient to the appropriate level. This may mean that the patient will either need a higher level or a lower level of service. For example, the patient may be receiving care in the acute care setting, but after intervention and stabilization, the patient may be appropriate for transition to a subacute setting. Conversely, a patient in a nursing home may become acutely ill and require a transfer to an acute care setting to receive acute care services.
     
Before the introduction of case management in acute care settings, utilization management was a discrete function generally performed by registered nurses (RNs). More commonly known as utilization review (UR), it was introduced as a function in the 1960s for matching patient needs to necessary care interventions with the goal of reducing waste and overutilization of resources. At the time, UR was limited to acute care settings. The UR nurse was responsible for reviewing the patients' medical records and for communicating with physicians when there were delays in care delivery or when a patient did not meet the criteria for the level of service being provided.
     
Although the terms utilization management and utilization review are used somewhat interchangeably, they are not the same. Table 1 summarizes the differences between these two terms. Both UR and utilization management describe activities or programs used by healthcare providers, review agencies, and managed care organizations (MCOs) to ensure medical necessity, appropriateness, efficiency, and cost-effectiveness of the healthcare services being provided. The process also includes a review of services to ensure that they are being provided in the most appropriate setting.
     
Utilization management is the term used to describe programs that focus on planning, organizing, directing, and controlling healthcare resources and services in an effort to ensure the provision of cost-effective, appropriate, and high-quality care. UR, however, describes the process, technique, or method by which a healthcare organization reviews, monitors, and evaluates its use and allocation of resources and services. UR is subsumed under the umbrella of utilization management. It enhances an organization's ability to meet the standards of regulatory and accreditation agencies and the policies and procedures of MCOs.
     
For example, a UR nurse might try to intervene when it is noted in the medical record that the patient had been waiting for an extended period for a computed axial tomography (CAT) scan or other diagnostic tests. In this case, the UR nurse might contact the department responsible for performing the test and facilitate its completion. The UR nurse also might communicate with the discharge planner when there are perceived delays in discharging the patient from the hospital.
     
There were inherent problems with this type of review process, which became more obvious after the inception of the acute care prospective payment system in the mid-1980s. The UR nurse performed chart reviews and seldom actually interviewed, assessed, or met with a patient. In some organizations, the UR nurse was not allowed to speak directly to a patient. It was believed that such interactions would prohibit the UR nurse from being completely objective in her analysis of whether the patient was meeting the criteria for the level of service being provided. The lack of direct patient contact limited the UR nurse's review and analysis to only what was documented in the medical record. If certain assessments, interventions, or outcomes were not documented, the UR nurse would have no way of knowing that they existed or had occurred.
     
After the inception of prospective payment, the need for better management of these UR processes became increasingly evident. Reimbursement was limited to the diagnosis-related group (DRG) payment, and excessive use of resources would mean that the total case rate reimbursement would be chipped away at by the excessive or redundant use of resources. In addition, it was clear that the UR nurse was, by design, disconnected from the patient, the healthcare team, and the other care processes. This was particularly problematic as it related to the discharge planning process. In some instances the UR and discharge planning functions overlapped and the practitioners found themselves "bumping into" each other. In other instances, lack of communication might mean that issues "fell through the cracks" and were either addressed late or not at all. This led to system inefficiencies, higher cost, and poorer quality of care.
     
As the 1980s waned, higher and higher managed care penetration in various parts of the country heightened the need for more efficient utilization management. Most MCOs required "reviews," meaning that communication of clinical and service delivery interventions be given to the company on a regular basis while the patient was in the hospital or under the care of a healthcare provider in another setting. It became evident that the clinician providing this information needed to have a working knowledge of the factors related to that patient's hospital stay. If the UR nurse had to rely on others to continuously obtain that information, the process was delayed and was clearly less efficient. If he or she referred the MCO to another clinician, this made it more challenging for the MCO to navigate the hospital system and added to the inefficiencies.
     
In the early 1990s these "passing of the baton" models of care no longer met the needs of a changing healthcare delivery system. These models required some drastic modifications to be more relevant to the changing marketplace. Many acute care hospitals realized that economies of scale would need to be designed to respond to the changing needs of the environment and to make their organizations more productive and efficient.

The Move Toward Case Management
In an effort to improve efficiency and optimize dwindling resources, many acute care settings began to integrate some functions that previously had been disconnected in hospital settings. Many of the early case management models in acute care settings were designed to integrate the functions of clinical coordination/facilitation, discharge planning, and utilization management. The new care providers to take on these integrated functions were titled case managers.
     
Some argued that integrating the utilization management function with the other case management functions would switch the focus of the role to a solely financial one. However, forward-thinking organizations recognized the benefits to such an approach. By integrating these previously disconnected functions, the case manager would manage all functions indirectly related to patient care. This concept of "one stop shopping" enabled the case manager to coordinate all aspects of care from clinical coordination and facilitation to resource management, to ensuring reimbursement, to transitioning the patient to the next care setting when appropriate. By having this "big picture" focus, the new acute care case manager could successfully assist the hospital in becoming more streamlined, efficient, and consumer-focused. Adding the utilization management function to the case manager's role resulted in added responsibilities. These additional responsibilities are outlined in Case Manager's Tip 2.

THE REVIEW AND CERTIFICATION PROCESS

The majority of today's third-party payers require that the hospital provide information from which a decision to approve reimbursement for the stay, or a portion of the stay, is made. This review includes three processes: precertification, continued stay, and discharge planning.

Precertification (Also Known as Prior Authorization)
Patients whose care is being reimbursed by an MCO are required, as per their contract, to obtain precertification before rendering any nonemergent care. Therefore a patient being admitted for elective surgery (or in the case of a planned medical admission) will require that the MCO be notified and a "precert" number be obtained. For elective surgical patients, this process is generally completed by the physician's office staff. The hospital may need to verify the precertification number with the third-party payer. In some situations the third-party may request additional clinical information. The actual process of precertifying a patient is strictly a clerical function and does not require an RN or other clinician to perform it. When MCOs request additional clinical information, a clinical person should be identified to provide this information. This may be a case manager, the physician, or his or her designee. It is clearly a waste of resources to have an RN case manager obtain all precerts. Generally this function should remain with either the admitting department or the finance department. Under any circumstance, it is important to remember that failure to obtain precertification before the service is rendered can result in partial or full denial/lack of payment (Case Manager's Tip 3).

First-Level Reviews
First-level reviews are conducted while the patient is in the hospital. Care is reviewed for its appropriateness and may include the following:
The Process
The insurance company requesting or receiving information regarding the patient's condition and the delivery of services will do so either by telephone, by fax, or electronically, depending on the specific system in the hospital. The turnaround time for responding to a request for a review will depend on the organization's contracts with the MCO. Generally the information will need to be provided by the end of the business day and usually by a specific predetermined time of day. The case manager must provide the MCO representative (e.g., case manager) with the clinical evidence that supports the level of service being provided. The case manager must provide supportive evidence that the patient's plan of care is reflective of the clinical condition and that the interventions/treatments support the level of service. Preestablished and nationally acceptable criteria are usually used for this purpose. Examples are InterQual and Milliman & Robertson.

CRITERIA USED FOR UTILIZATION REVIEW

One of the more commonly used sets of criteria, particularly for the Medicare and Medicaid populations, are the InterQual criteria (InterQual, 1998). The InterQual criteria were developed in 1978 by a physician and an RN to assist in identifying and supporting the level of care and services provided to patients to ensure reimbursement. Consistent with the healthcare environment of the time, the criteria were strictly hospital-based.
     
The criteria help to support the intensity of service (IS) and severity of illness (SI) of the patient; they also identify discharge criteria. They have been updated over the years and now address the continuum of care and include observation, critical care, telemetry, acute care, subacute care, rehabilitation, and home care. The criteria are used as a tool to facilitate appropriate admissions, transfers, and discharges. The case manager should know which criteria the third-party payer is using (Case Manager's Tip 4) and should apply the criteria by asking the following questions: As discussed in Case Manager's Tip 5, the functions of coordination/facilitation and utilization management are interrelated. Combining them is efficient and effective.

CRITERIA USED FOR UTILIZATION REVIEW—INTERQUAL
Severity of Illness
Determining the patient's SI is completed through the use of objective indicators reflective of the patient's illness. The SI criteria include clinical, imaging, electrocardiogram (ECG), and laboratory findings. Time definitions are also included as part of the criteria for each category of findings. For example, acute onset would be within the past 24 hours, recent onset would be within the past week, and newly discovered would be at the present episode of illness.
     
Clinical findings are composed of chief complaints, vital signs, and working diagnoses as identified by the physical examination and patient interview.
     
Findings related to imaging include the results of diagnostic radiology procedures such as x-ray, ultrasound, magnetic resonance imaging (MRI) or positron emission tomography (PET) scanning, echocardiography, and nuclear medicine studies.
     
Laboratory findings include blood gases, pulse oximetry, and arterial blood gas measurements; hematology, which are tests related to blood and blood-forming organs; chemistry, which includes chemical analysis of blood, tissue, secretions, and excretions; microbiology, which includes analysis of blood, tissue, secretions, and excretions for identification of microorganisms; and cerebrospinal fluid analysis.
     
The criteria include clinical parameters for each of the findings. The parameters are based on abnormal states/values indicating the need for care. For example:
Blood Gases
Arterial PO2 ≤ 59 mmHg (7.9 kPa)
Arterial Pco2 ≥ 51 mmHg (6.8 kPa)
Arterial pH ≥ 7.50
Intensity of Service
IS criteria are diagnostic and therapeutic services generally provided at a specific level of care (i.e., intensive care, telemetry, and so on). The IS component contains one element, treatments/medications, which includes those modalities of medical and other professional care provided at a designated level. Within the treatment/medications category, there are two types of IS criteria:
  1. Nonasterisked (IS)
  2. Asterisked (*IS)
 Nonasterisked criteria (IS) signify those treatments/ medications that generally cannot be provided at a less intensive level of care. For example, intravenous (IV) nitroglycerin can only be provided at the critical level of care.
     
Asterisked criteria (*IS) reflect treatments/medications that could be safely rendered at a less intensive (and usually less costly) level of care. These criteria are important case management flags and allow the case manager to consider the need for an alternate level of care for the patient, such as rehabilitation, subacute, or home care. The general time requirement for IS assessment is "at least daily"; for example, once in 24 hours. Some IS criteria specify a frequency such as "IV antiinfectives ≥3×/24h." This refers to the services being rendered greater than or equal to 3 times over a 24-hour period and overrides the "at least daily" requirement.
     
The acute-body system criteria subsets include an IS criterion for postsurgery/procedure care. This criterion has a time limit assigned depending on the body system. For example, in the cardiovascular section, the time limit for postsurgery/procedure care is ≤24h, whereas the time limit in musculoskeletal/spine is ≤3 days. Day 1 begins the day the surgery/procedure is performed.

Discharge Screens
The InterQual criteria also include discharge screens (DS) that identify the parameters of patient stability indicating discharge readiness from a specified level of care. The DS component contains one element only, discharge indicators. These indicators are the parameters of a patient's clinical stability and relative safety the case manager uses to assess the patients' readiness for discharge or transfer to another level of care.
     
For example, the discharge indicators for the acutecardiovascular criteria subset include the following: The case manager must refer to the "rules" as outlined in the InterQual criteria for each level of service. For example, the rule for SI critical-noncardiac stipulates that this level of care would be appropriate if the patient required intensive care after surgery and/or a procedure (e.g., after a craniotomy, or if one SI criterion contained in that subset was met).
     
The IS rule indicates which criteria must be met for each clinical system. The rules differ for critical, acute-body system, and acute-other. Case managers must become familiar with the rules for the clinical areas most covered by them.
     
The rule driving the application of the DS address two critical elements in the evaluation of discharge readiness from a level of care: clinical stability and necessity for continuing care. The first element to consider is clinical stability. This refers directly to the causative factors (SI) for this episode of illness. However, individuals with comorbidities or chronic illnesses may never reach optimal stability. Therefore the degree of clinical stability required is that which allows safe transfer to the next level of care.

Applying the Criteria
Selection of the patient's level of care and the criteria subset is based on the patient's clinical findings and actual treatments/medications. For example, available clinical information indicates that the patient is scheduled for cardiac surgery and requires cardiac monitoring postoperatively. The case manager would select and apply the critical-cardiac subset.
     
SI, IS/*IS, and DS must all be selected from the same criteria subset. For example, a case manager must not apply criteria related to the musculoskeletal system when working with a cardiology patient. A new criteria subset may be selected during the hospital stay to reflect clinical findings associated with either a change in the SI or a new episode of illness.
     
An admission review is conducted when there is a change in the SI and a subsequent transfer to a critical care (cardiac, noncardiac, or telemetry) level from any other level is necessary, or when a patient moves to or from a specialized acute care (other) level.

Types of Reviews
The types of reviews are as follows: Preadmission review takes place for any elective inpatient (scheduled) surgery/invasive procedure. The procedure must be scheduled to be performed on the same day as the planned admission and must appear on the designated inpatient hospital list. InterQual's Guidelines for Surgery and Procedures in the Inpatient Setting can be found in the Intensity of service/Severity of illness/Discharge (ISD) Master Appendix.
     
The admission review is a review done within 4 hours of the decision to admit the patient to the critical care or acute level. An SI criterion and all corresponding elements of the IS criteria subset must be met on admission to the critical or acute care level.
     
Subsequent reviews are performed daily to ensure that the patient requires continued care in the particular setting. An IS criterion also must be met daily. If one IS criterion cannot be met, then three *IS criteria are required to justify the level of care. If only *IS criteria is met, the case manager should review the discharge criteria and explore other level of care options. If at least three *IS criteria are met and the DS are not met, the case manager should approve the level of care.
     
Once the case manager knows the reason for admission, it is logical to expect to find documented SI criteria in the medical record. If the patient is sick enough to require services, then the physician's orders for treatment should validate the need for providing care at the level to which the patient is admitted.

EXAMPLE
A 55-year-old male with a history of angina has been treated with nitroglycerin for approximately 3 months. He arrives at the emergency department (ED) via ambulance after a 2-day history of shortness of breath. On physical examination, he has rales one-third up bilaterally, his chest film reveals pulmonary edema, and his ECG shows uncontrolled atrial fibrillation. Based on this information, the case manager should set an expectation of care and search the record for such therapies as IV inotropics, continuous cardiac monitoring, continuous oxygen therapy, serial ECGs, pulse oximetry, and intravenous/sublingual (IV/SL) nitroglycerin.

As seen in this example, the clinical indicators for hospitalization (SI) are demonstrated by the patient's signs, symptoms, and clinical findings. The expected treatment plan (IS) is found in the patient's medical record. The information gathered during the admission review is used by the case manager to validate that the criteria of the level of care are met. This is accomplished by approaching the medical record both systematically and expectantly: The record of emergency services documents the patient's vital signs, clinical findings, chief complaint, and laboratory and x-ray findings; the physician's admitting note provides the reason for admission, the pertinent history, the physical findings, and the plan of treatment.

THE CONTINUUM OF CARE

The case manager must always be cognizant of the continuum of care and be sure to apply the appropriate criteria to the patient's current setting or review the criteria to determine the appropriateness of transitioning the patient to another setting (Case Manager's Tip 6).

Subacute Care
To qualify for subacute level of service, there must be an expectation for continued recovery. The patient must be cleared medically for less than acute care. Finally, there must be a need for more IS than a skilled nursing facility or home care would provide. Examples would include concomitant conditions, post-major acute conditions, and medical complications. Patients who are end stage and who need complex care, comfort, and dignity would also qualify for this level of service.

Rehabilitation Care
Rehabilitation care is defined as coordinated, goaloriented, multidisciplinary programs for individuals who have had an illness/injury or exacerbation of known disease with resulting functional deficits and whose expectation for improvement is reasonable. Rehabilitation programs are designed to meet the patient's physical, social, psychological, and environmental needs. They require that the patient actively participate in rehabilitation activities/exercises and that there is an expectation of functional improvement. Patients are often medically frail and on-site physician presence is expected. This is in contrast to subacute care, in which treatments are provided for the patient but there is not necessarily an expectation that a level of patient's participation be present. Physician presence may be more sporadic as well.

Home Care
Home care is considered a comprehensive approach to healthcare services for individuals who have experienced an episode of acute illness, injury, or exacerbation of a disease process and where the potential for complications and/or deterioration exists. Both professional and paraprofessional services are provided in this level of care.
     
The case manager should always consider that home care is a cost-effective alternative to inpatient care when the patient's clinical needs can be appropriately met in the home setting.

APPLYING ISD CRITERIA

Case managers should follow these steps when applying the criteria:
  1. Apply body system first, then generic criteria.
  2. Generic criteria are considered part of each category.
  3. SI criteria from one category must be matched by IS criteria in the same category.
  4. DS must be from the same category as the SI and IS.
  5. Review at a maximum of 3-day intervals.
 Admission Review
  1. Either one SI or the specified number of IS must be met on admission.
  2. Both an SI and the specified number of IS criteria from the same category must be met within 24 hours.
 Exceptions
  1. An aggregate of marginal findings may meet the SI requirement.
  2. Elective admissions generally do not meet SI criteria.
  3. ED admissions must meet both SI and the specified number of IS criteria at the time of admission.
 Special Unit Admission
  1. The specific criteria for each unit must be met.
  2. The patient must meet both SI and IS criteria at the time of admission to the unit.

Exception: Patient scheduled for special unit admission postoperatively after an elective major surgical procedure generally does not meet SI criteria but must meet IS criteria.

Continued Stay Review

  1. IS criteria must be met every day.
  2. If the IS met under treatments/medications is IS criteria, SI criteria must also be met.
 Discharge Review
  1. In case the IS criteria are no longer met and the clinical/ functional DS are met, the patient should be scheduled for discharge. The only exception to this would be patients with severe, chronic abnormalities who may never meet clinical/functional DS because they do not have the potential to return to physiological normalcy.
  2. When IS criteria are met and SI criteria are not met but clinical/functional DS are met, an alternate level of care should be explored.

As case managers complete the reviews, they identify deficient areas and opportunities for improvement. They also address/correct the issues as they arise. Examples are documentation reflective of SI and IS, necessity for continued care provision in the same level of care, appropriateness of transfer to another level of care, avoidable days or services in case of patients not meeting predetermined criteria, complete plan of care and transitional plan. Success of the case manager in this role relies on certain conditions such as those presented in Box 1.

MILLIMAN & ROBERTSON

In addition to the InterQual criteria, another set of commonly used criteria are the Milliman & Robertson Health Care Management Guidelines (Schibanoff, 1999). These guidelines, commonly known as the M & R Guidelines, are most typically used by managed care companies for UR purposes. The guidelines have been designed based on a commercial population and to the exclusion of the Medicare and Medicaid populations. Therefore it is important for the case manager to remember that the M & R Guidelines may not strictly apply to these populations. They are intended to be applied as the most efficient practices for "ideal" patients supported by an "ideal" infrastructure. Unfortunately, many insurance companies do not adhere to this application but instead follow the guidelines to the letter of the law, even when a guideline clearly is not a good match with either the patient or the healthcare delivery system.
     
The M & R Guidelines are also called Optimal Recovery Guidelines (ORG) and follow a specific format and apply to specific diseases and surgical procedures. The elements of each ORG are as follows:

The M & R Guidelines can be matched to the patient's specific diagnosis, while the InterQual criteria are applied using body system criteria.
     
There are certain assumptions made concerning the application of the guidelines. The case manager must have an understanding of these assumptions to work with the insurance company and to optimize reimbursement for the provider. The first assumption is that the patient has an uncomplicated course of treatment. The patient does as well clinically as the physician hoped he or she would. The second assumption is that all necessary continuum of care infrastructures are in place and available. The third and final assumption pertains to an expectation that there exists the cooperation of the patient, the family, and any other caregivers.
     
M & R research indicates that 80% of commercial health maintenance organization (HMO) members and 50% of Medicare HMO members fit the definition of uncomplicated patients (Schibanoff, 1999).
     
The structural requirements needed to fulfill the M & R requirements are as follows: Because the M & R Guidelines are based on clinical diagnoses and/or surgical procedures, it may become more difficult to apply a single guideline that will singlehandedly manage the length of stay and clinical outcomes. Case managers must use their best clinical judgment when selecting and applying a guideline and must work with the third-party payer to ensure that the patient's other clinical needs are addressed as well. In general, the guideline most closely matching the primary reason for hospitalization should be used as the best guide for that hospital stay.
     
In addition to adequate reasons, inadequate reasons for hospitalization are also outlined in the guidelines. This data can be a powerful tool used by the ED and admitting department's case managers to assist in the identification of other treatment modalities when hospitalization may not be the most appropriate option. Like InterQual, M & R provides the case manager with care interventions for other care delivery sites across the continuum, such as home care, skilled care, and subacute care. As in the case of acute care, the guidelines provide clinical interventions and outcomes appropriate to those settings.

Proper Use of the M & R Guidelines
The guidelines are based on clinical outcomes that are expected to be achieved during a predetermined timeframe; for example, daily in acute care settings. The acute care case manager should be well skilled in the use of these designated timeframes. For example, day 3 of the community acquired pneumonia guideline calls for the patient to have a declining temperature, to be breathing comfortably at rest, to have microbiology culture reports completed, and to be discharged. Although it may indeed be day 3 of the hospital stay, the patient may not have achieved all of these outcomes and therefore discharge would be clinically inappropriate. Perhaps the patient's temperature has not declined significantly. The acute care case manager should discuss this clinical outcome with the case manager at the mco/health plan the patient is enrolled in. Negotiations should be made for an additional day of hospital reimbursement because the patient was not clinically ready to move to the next phase of care. In this case, the acute care case manager should indicate to the insurance-based case manager that day 3 will be repeated until the patient has met the expected clinical outcomes and is then ready for discharge. This extension of the hospital stay is appropriate and should be approved for reimbursement. The acute care case manager should think of the expected outcomes in terms of "phases" of care rather than as true days, as some patients may not achieve these outcomes in perfect 24-hour intervals. If the managed care case manager (i.e., the acute care case manager) you are providing the review to does not understand this, then you should ask to speak to that individual's supervisor or to the medical director (Case Manager's Tip 7).
     
The acute care case manager should also use this logic when reviewing the criteria for discharge. Once again, if the patient cannot meet the clinical outcomes necessary for a safe and appropriate discharge as per the guidelines, the discharge should be held until they are met.
     
As an acute care case manager, be sure that you have access to copies of any criteria you are being asked to use by any third-party payer. You cannot adequately do your job without having access to the same criteria being looked at by the third party. The third-party payer should tell you which criteria they are using so that you are able to make the review as efficient and complete as possible. You have a right to know which standards you are being held to and you should expect to be told which criteria are in use and to have copies of these criteria.

DENIALS AND APPEALS

During the concurrent review process, the third-party payer's case manager will either approve or deny payment for the hospital stay or a portion of the hospital stay. You will most likely be informed of this information during the review, or by an "end of day" report. You may also be informed at a later point in time by a letter. Once a denial of payment has occurred, an appeal should take place. As per the hospital's contracts, as well as the insurance and public health laws (Table 2), there will be time limits to this process. You will generally have between 30 and 60 days to appeal a denial of payment. The insurance company must respond to your appeal within similar parameters. An appeal may result in the entire denial being upheld, a portion of the stay being denied, or a complete reversal of the denial. As an acute care case manager, you may or may not be directly involved in the written formulation of an appeal. This function may be performed by the admitting physician or by designated nurses in the case management department who take responsibility for writing letters of appeal.

Writing Letters of Appeal
Whenever possible, the individual writing the appeal should be the attending physician of record (Case Manager's Tip 8). If this is not possible or realistic in your organization, the case should, at a minimum, be reviewed with the physician of record before the appeal letter is written and submitted. The physician of record is in the best position to argue for why he or she cared for the patient in the manner that he or she did and why the hospital should be reimbursed for the services provided. Regardless of who is writing the appeal, the appeal should use the criteria of the third-party payer as the basis for its argument. Information as to which criteria are used is usually found in the managed care contractual agreement. If the third-party payer follows M & R, the person writing the appeal should refer to the appropriate M & R guideline for the case and match the criteria and outcomes in the guideline against the patient's care interventions and achieved outcomes. This puts the hospital in the best position to reverse the denial and increases the chances of reversal.

Reasons for Denial
Each organization may categorize its denials in various ways (Box 2). Broadly speaking, though, the categories will fall into either clinical or nonclinical groupings. Clinical denials are related to the patient's condition and decided on based on appropriateness and necessity of the clinical care delivered. An example is denying reimbursement for a diagnostic or therapeutic procedure such as endoscopy that is not justified or precertified as an inpatient procedure. The nonclinical reasons for denials refer to those that have nothing to do with the patient's clinical situation or need for care. They usually indicate factors in the organization's contracts that were not met such as delays in submitting claims.

Appealing Nonclinical Denials
Nonclinical denials tend to be much more difficult to appeal. Because the reason for the denial is generally based on the contract with that insurance company, the basis of an appeal may be rather limited. Your own department must decide whether it will or will not take the time to appeal such denials. One must weigh the odds of winning such an appeal against the cost of generating the appeal in the first place. It is very difficult and rare to win nonclinical appeals.

Appealing Clinical Denials
The case manager, or whoever is writing the appeal, should review the case against the established review criteria in use. Whenever possible, the criteria should frame the argument for the appeal. In writing the appeal, it should refer directly to how the patient did meet the criteria if this is indeed true. These criteria will form the greatest likelihood of a reversal of the denial. If the criteria are truly not met, the appeal may be much more difficult to win. Other arguments may need to be introduced, such as the unavailability of subacute care beds or home care services. These sorts of arguments do not generally win an appeal. The case manager in the acute care setting needs to know the "philosophy" of the organization to know whether there is an expectation that such appeals will be written. Once again, the likelihood of winning such an appeal must be weighed against the cost of the labor spent on writing it when those resources might be better spent on writing an appeal with a greater likelihood of being won.
     
See Box 3 for a template of a sample appeal letter that includes all of the information necessary to include when writing an appeal. As mentioned in Case Manager's Tip 9, using a template can streamline and expedite the appeal writing process.

PEER REVIEW ORGANIZATIONS

Your hospital will most likely have contracts with one or more peer review organizations (PROs). These PROs are contracted with to perform a number of functions; among these may be the review of selected medical records for the purpose of UR. This function is most commonly performed for Medicare and Medicaid. As with any denial and appeal process, the case manager needs to know which criteria the PRO is using and to frame the appeal against those criteria. Once your PRO has requested some medical records for review, it will also review the record for quality issues and anything else it deems necessary. Because the hospital's exposure is greatly increased during an appeal process, some consideration should be taken as to whether the organization wants to conduct the appeal. If other issues are obvious in the record, it may be more prudent for the hospital to skip that particular appeal rather than open the organization up to an audit.

Hospital Issued Notice of Noncoverage for Medicare—Fee for Service
Hospital-issued notices of noncoverage (HINNs) are issued when Medicare no longer maintains the financial responsibility for a hospital admission and financial responsibility is being transferred to the patient. Preadmission reviews may reveal that the inpatient setting is not the appropriate setting for the particular level of service that the patient requires, or the hospital may determine that the level of care is custodial. A HINN may also be issued when the patient is at a skilled level of care and the patient or representative has refused the first available bed in a nursing home. The hospital may also issue a HINN when the medical record clearly documents a discharge plan and the patient/representative is not compliant with the hospital's attempts to execute the discharge plan in a timely manner.
     
Before issuing a HINN, the case manager should be sure that the medical record contains the following: HINNs can be issued before or at the time of admission. The attending physician does not have to agree to the issuance. If the HINN is being issued for continued hospital stay, if the admission was appropriate then the attending physician may or may not agree. If the attending physician disagrees, the hospital can issue the HINN once the case has been reviewed by the PRO and it agrees with the issuance.
     
An admission HINN should be issued before 3:00 PM on the day of admission. Continued stay HINNs issued and appealed to the PRO by the patient or representative before noon on the first working day after receipt of the HINN entitles the patient protection from financial liability until noon of the day after notification of the PRO's determination.

WHAT CASE MANAGERS NEED TO KNOW ABOUT MANAGED CARE CONTRACTS

Organizations contracting as providers for a specific MCO usually negotiate contracts that include elements such as rates and types of reimbursement per case and UR activities and functions (may also be referred to as case management). Once the specific contract has been signed by both the provider and payer, the provider becomes responsible for following all of the agreed on elements in the contract. If not followed precisely, the MCO has the right to deny payment for services rendered, even if those services were medically necessary and appropriate. For example, if a patient is admitted for cardiac surgery but the admission was not precertified as per the contract, it is possible that payment will be denied for part or all of the admission (Case Manager's Tip 10).
     
The functions of utilization or case management are fundamental to any contract. Whenever possible, a case management representative from the provider organization should be present during contract negotiations. When this is not possible, the contract, once written, should be reviewed by the UR or case management department. This process will ensure that the agreed-on elements are realistic and achievable. For example, the contract may call for reviews to be performed 7 days a week. The case management department may not be staffed 7 days a week and therefore would not be able to meet the requirements of the contract, thus resulting in denials of payment for services rendered, especially those provided on days when the department is closed.
     
A case manager working in a hospital setting needs to know the reimbursement elements of the contract. For example, the case manager should know whether a particular case type is being reimbursed as discounted billed charges, a per diem rate, a case or DRG rate, or a capitated rate. Some contracts may include certain case types that may be reimbursed under any of these methods. Therefore a single contract may include per diem and case rates within it. The risks assumed by the organization change as the reimbursement changes.
     
A discounted fee-for-service (FFS) structure is least risky to the provider. Because reimbursement may be between 20% and 50% below the nondiscounted rates, the case manager will need to ensure that all provided services are reasonable and necessary so that resources are not overutilized.
     
Per diem rates are daily reimbursement amounts that are agreed to as part of the contract. Once again, the case manager will need to know that a per diem rate is in effect. In a per diem rate methodology, the MCO may deploy continued stay denials when it believes that the patient is no longer meeting acute care criteria and should be downgraded to a lower level of service. This method creates higher financial risk to the provider.
     
Case rates or DRG rates may apply to particular types of patients as identified in the contract. When a case rate is applied, the provider should not receive continued stay denials or denials for delays in service because the financial burden of a length of stay extension becomes that of the provider.
     
Finally, the contract may call for capitated rates. In capitated arrangements the entire financial burden falls on the provider. In these circumstances the provider is incentivized to reduce the inappropriate use of resources and to aggressively manage the length of stay.
     
Other elements of the contract that should be communicated to case management would include clinical review criteria. These criteria should include the frequency and type of reviews, as well as the expected turnaround time. Finally, case management should be aware of all precertification and authorization processes.

WORKING WITH PATIENT ACCOUNTS

The patient accounts or billing department is the department that submits the hospital's bills for reimbursement. The patient accounts department must work closely with case management or the denial/appeals staff if they are separate from the case management staff. Patient accounts receives third-party payments and should be electronically interfaced with the case management department.
     
The case management department should keep a database of all denial and appeal activities. This database should be supported by the actual dollar amounts denied or reimbursed by third-party payers. In this way case management can keep accurate statistics as to days and dollars denied, appealed, won on appeal, or lost on appeal. When it is time for the organization to renegotiate its contracts, the performance of the MCO in terms of its denial rate relative to other payers should be considered. Patterns and types of denials should also be tracked and trended by payer. For example, does one payer routinely deny for precertification at a higher rate than another, and on appeal is it often determined that the precertification number had indeed been obtained? Does another MCO deny for continued stay at a higher rate than the others?
     
The case manager should stay informed and up-to-date on the organization's contract status and the expectations of both organizations as it relates to case management and utilization management functions. When possible, the case managers should have timely access to this information and be kept informed as specific elements change.

REPORTING UTILIZATION MANAGEMENT DATA

Utilization management data can be reported in a variety of ways, depending on the focus and needs of the organization. Regardless of the data reported, it should be tracked and trended over time and used for quality improvement opportunities when the data shows a downward trend. The case management department should be able to show a relationship between the data and the department's interventions to improve the processes that the data represents. For example, if it is noted that continued stay denials have consistently increased for two quarters of a given year, case management will need to show that a process improvement plan was initiated to identify the reasons for the negative trend and the processes put into place to correct it.
     
Figure 1-1 demonstrates one way of reporting aggregated denial and appeal data for discreet periods. The figure shows denial and appeal activity including a pie chart of the data for a 3-year period. In this example, the organization received a total of $11,767,300 in denials of payment between 1998 and 2000. Of those initial denials received, the organization recovered $3,231,665 or 27.5% after appealing the denials. Another 72.5%, or $8,535,635 is pending appeal or has been lost following the appeal process. This number represents monies currently outstanding or not available to the organization.
     
Figure 2 reports a subset of the previously mentioned data for 1 specific year. It also reports the cases recovered (43.2%) and the cases lost on final appeal (56.8%).
     
Another way to reference the data might be by reason for the denial. This data can be reported in days denied or in dollars denied. It can also be reported based on the date the denial is received. Figure 3 represents denials received regardless of when the patient was admitted to the hospital.
     
Denial can also be reported based on when the patient was in the hospital. This data indicates the performance of the organization at a particular point in time. In the case of Medicare or Medicaid denials, the denial may be received months or even years after the patient was in the hospital. This data can be reported as a percentage of patient days because it correlates to all of the patients who were in the hospital at that point in time. Figure 4 demonstrates how an organization might report this type of data. Organizations will want to keep their denials as a percentage of total patient days as low as possible because this statistic directly relates to the organization's financial performance at that point in time.

KEY POINTS
  1. Effective utilization management techniques, as performed by the case manager, can increase the percentage of reimbursed services for a healthcare provider.
  2. Case managers must be very familiar with the criteria used by the third-party payers they interact with.
  3. Commonly used criteria include the InterQual criteria and the Milliman & Robertson Health Care Management Guidelines.
  4. The criteria used should always match the patient's location along the continuum of care.
  5. Denials can be cataloged as either nonclinical (administrative) or clinical.
  6. Case managers should be familiar with the managed care contracts negotiated in their organization.
  7. Utilization management data should be collected, tracked, and trended on a regular basis and reported through the organization's internal structure.
REFERENCES

InterQual, Inc: System administrator's guide, Marlborough, Mass, 1998, InterQual.

Schibanoff JM, editor: Health care management guidelines, New York, 1999, Milliman & Robertson.
Glossary        


Appendix A
Appendix B
Appendix C
Appendix D
Appendix E-1 Appendix E-2 Appendix E-3
Appendix F
Appendix G
Appendix H
Appendix I
Appendix J
Appendix K
Appendix L
Appendix M
Appendix N
Appendix O

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