What Utilization Management Strategies Do Payers Use to Lower Costs?
Utilization management strategies aim to lower healthcare costs and prevent low-value care but can have unintended consequences for patients.
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- As healthcare spending rises in the United States, stakeholders are constantly working to address the drivers of high costs. The overutilization of healthcare services—including the provision of low- or no-value care—not only impacts patients’ physical and mental health but also contributes to rising costs.
Health plans leverage utilization management strategies to help reduce unnecessary services and ensure patients receive appropriate, quality, and cost-effective care. Payers initiate these strategies on a case-by-case basis to evaluate medical necessity.
However, utilization management strategies may have unintended consequences on hospitals, providers, and patients, leading to polarizing opinions surrounding the tactics.
In the following article, HealthPayerIntelligence explains the different types of utilization management strategies payers use and weighs the benefits and risks of implementing these strategies in healthcare.
Types of Utilization Management
There are three main types of utilization management: prospective, concurrent, and retrospective reviews. Payers use these reviews to assess services before they are administered, during the treatment course, and after the treatment is completed.
Prior authorization
Perhaps the most common utilization management strategy is prior authorization. Also called preauthorization or precertification, prior authorization requires patients to receive approval for a service or medication from their health plan before receiving care. During the prior authorization process, payers decide if they will cover a given service or treatment, which could result in full or partial coverage.
Prior authorization standards vary by health plan and are based on medical guidelines, utilization, and cost. The process of obtaining prior authorization also varies but generally consists of physicians submitting administrative and clinical information to payers.
Step therapy
Step therapy is a type of prior authorization used for prescription medications. In this process, payers require patients to try alternative, lower-cost medications before taking the one their provider prescribed. Health plans will not cover the more expensive, prescribed drug until they determine how effective the lower-tiered treatment is at resolving the patient’s issue.
Provider networks
Payers can use provider networks to manage care utilization. Establishing high-performing provider networks ensures patients receive care from providers who deliver high-quality care at lower costs. In addition, preferred provider organization (PPO) health plans incentivize patients to seek care from certain providers by offering lower prices for in-network providers. Positive, established relationships between payers and providers can result in lower instances of unnecessary healthcare services.
Concurrent reviews
As its name suggests, concurrent reviews are conducted while an individual is receiving treatment. Health plans initiate concurrent reviews to assess previously approved ongoing care, track patient progress, and reduce coverage denials after the treatment is complete.
Care coordination and management programs can be established based on the results of a concurrent review. These programs can help minimize duplicate services, especially for patients with complex conditions.
For example, health plans can connect high-cost members with complex conditions to quality primary care providers in hopes that preventive care will lead to better health outcomes, lower utilization, and lower healthcare costs.
Concurrent reviews may also cause in-process treatment to be halted if plans find that an expensive service is not improving a patient’s health.
Retrospective reviews
A retrospective review seeks to determine coverage for a service after completion. It assesses whether the treatment was appropriate, effective, and delivered on time in the right setting. A retrospective review also determines if the Current Procedural Terminology (CPT) codes included in the submitted bill were correct. While results from the review may be used to deny coverage, they can also help payers understand which treatments would work best for future cases.
Pushback against utilization management
While health plans see utilization management strategies as critical to curbing high healthcare costs and reducing unnecessary services, these methods can also create a substantial burden for providers and cause care delays for patients.
According to a 2022 American Medical Association (AMA) survey, 94 percent of patients reported care delays due to prior authorization, while 80 percent said the process can lead them to abandon their treatment. The survey also indicated that 89 percent of physicians find prior authorization to have a negative impact on clinical outcomes and 33 percent said it has led to serious adverse events.
The utilization management process is time-consuming for physicians, with practices completing 45 prior authorizations per physician per week and spending an average of two business days per week on the process. In addition, 88 percent of physicians described the burden associated with prior authorization as high or extremely high.
Provider groups, including the American Academy of Family Physicians (AAFP), have decried step therapy. AAFP has said that step therapy protocols delay access to treatment and hinder medication adherence.
Payers defend utilization management as an overarching strategy, but many have also acknowledged the flaws and pursued solutions. For example, in response to pushback against utilization management strategies and calls for prior authorization reform, some payers have started reducing their prior authorization requirements or streamlining the process with technology.
