Modern UR Stressors Demand Innovation

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Hospitals and health systems are increasingly turning to innovative methodology to cope with staffing and budget constraints.

Utilization review (UR) has been in place for more than 60 years in American healthcare. In that time there have also been some major developments that have revolutionized how UR is completed and processed. UR is the process by which medical necessity is established, using a systematic approach based on a set of criteria, standards of care, guidelines, and/or other methodologies through which a patient’s care is approved for reimbursement.

The basis for UR is to ensure that care delivered to patients is appropriate for the time and setting – and to control costs that will, in the end, provide sufficient funds to allow for care to be provided to all constituents. UR can be conducted by various entities, including but not limited to governmental agencies, contracted agencies and companies, Quality Improvement Organizations (QIOs), private payors, hospital committees, and hospital staff. Most states also have a review process for Medicaid beneficiaries that can be leveraged by QIOs, contracted parties, and insurance departments of the state under public health or insurance laws.

“A UR program must have personnel and processes in place to ensure compliance. At the core, a hospital’s UR program is meant to optimize the quality and cost efficiency of healthcare services, while helping insured patients understand the benefits and limitations of their healthcare coverage,” the Healthcare Financial Management Association (HFMA) reported in 2019. “Hospitals must ensure that both medical necessity and insurer compliance points are met when submitting a claim. Any missteps – from missing a deadline to failing to get authorization prior to rendering services, to a host of other technicalities – can lead to reduced or denied payment and impact the payment the hospital receives.”

The laborious process is a daily grind that takes hours and encompasses many steps to complete and document, taking staff away from direct patient care. Many UR staff are also dedicated to care management (CM) and discharge planning, further dividing their workload and putting more pressure on them to complete multiple tasks daily. If the model includes dedicated UR staff, costs go up due to the need to hire staff to do both UR and CM work.

In most health systems, 50 percent of the operating cost is on personnel. Hiring, training, retention, and ongoing issues related to personnel can drive budgetary margins to an ever-escalating expansion year over year, with dwindling return on investment.

Turnover of personnel can be expected, thus the need to engage in continuous hiring, which is another cost that needs to be accounted for (as well as a drop in productivity while the new staff is trained). Meanwhile, UR suffers, which can lead to denials and a loss of revenue.

It is estimated that through the end of 2022, more than 50 percent of all U.S. hospitals will have a negative net margin and will remain depressed, relative to pre-pandemic levels, at a rate of 37 percent. With that in mind, hospitals need to try to leverage all revenue streams where they are available, and UR is one such stream.

Revenue in terms of denial management can be determined by looking at the net revenue per adjusted discharge and comparing it to the concurrent denial rate per adjusted discharge. Thus, a hospital with 30,000 discharges per year and a 3-percent denial rate with a $25,000 net revenue per adjusted discharge is losing $22,500,000 per year in denials. A 1-percent reduction would net $7,500,000.

A strong UR program with seasoned professionals who are certified to use any criteria that the payors use and are well-versed in their guidelines can quickly turn around concurrent denial issues and maintain a low denial rate. A best practice in the U.S. is to have a concurrent denial rate at or below 1 percent.

UR programs tied with second-level reviews with physician advisors who can also conduct peer-to-peer reviews with payor medical directors can overturn concurrent denials, preventing significant effort required for formal appeals if such cases are denied without such intervention.

Shoring up the denials in any healthcare system by enforcing medical necessity and documentation of need is the job of the UR team. Nurses trained in clinical criteria, along with a physician advisor, can counsel admitting physicians on the correct status to place patients so that billing is not a guess, but a true clinical judgment – making it less prone to be rejected by the payors, thus increasing turnaround time for payment, decreasing AR days, and improving net revenue.

One method to save on personnel costs is to use remote UR programs that can that take the place of hiring, training, retaining, and maintaining staff in today’s challenging workforce environment. With the high turnover of registered nurses, finding qualified, the quality staff is getting harder every day. Using trained experts who can remote into work and document in your systems and communicate directly with your physicians and staff is a productive method to decrease denials, but also a method to ensure communication with payors for authorizations.

Flexible workflows are another hallmark of remote UR staff models, in that they can also provide insight through their documentation as to when patients are nearing discharge so that length-of-stay milestones can be realized and discharge delays minimized.

For Medicare patients, complying with the two-midnight rule and conversion from observation to inpatient, and ensuring regulatory compliance, is essential to stay clear of post-discharge audits. Remote UR experts are well-trained in this area and conduct thousands of reviews annually to meet the needs of hospitals and health systems to comply with the requirements of the two-midnight rule, converting outpatients to inpatients in a timely manner, as well as ensuring that those who are receiving observation services are meeting the standard. They also conduct reviews for the inpatient-only list for surgical cases to maximize appropriate reimbursement.

Case managers today have many duties in hospitals and health systems; UR is but one of them. With so many competing priorities and the ongoing shortage of staff in all aspects of hospital care, something must give. It is a foregone conclusion that commercial and Medicare Advantage (MA) payors are not going to let hospitals forego the use of commercial criteria to determine which patients require hospital care and under what status, leaving the decision to the clinical sense of the attending physician. And although the two-midnight rule does not require the use of commercial criteria, their use is invaluable, not only as the first step in determining the proper admission status but also in reviewing patients throughout their hospital stay to determine if ongoing hospital care is warranted.  

At the same time, care coordination, complex case management, arranging post-acute care, reducing avoidable readmissions, and addressing the many social determinants of health (SDoH) cannot be ignored. With the ability to use electronic tools designed to enhance remote UR workflows, hospitals and health systems should seriously consider an alternative approach that will allow their highly trained expert CM staff to spend their valuable time at the patient’s bedside, working with the patient and local providers, optimizing the patient’s course through the continuum of care.

The new reality of hybrid services, with remote UR reviews and on-site case managers, appears to be gaining steam, allowing for more effective use of hospital personnel as everyone reaches for the quadruple aim of an improved patient experience with better outcomes at a lower cost, all while improving the well-being of the care team.

About the author: Paul Arias received an ASN from Miami Dade Community College in 1994, and obtained his BSN at the University of Miami and graduated in 1996 with Sigma Theta Tau Honors. He obtained a master’s degree in information systems in 2007 from the University of Phoenix. Arias has a law degree from Concord Law School, with emphasis in healthcare law. He has spent most of his 25 years as a nurse in leadership positions. He has also authored a book, titled “Prevent Denials and Win Appeals: The Hospital Case Manager’s Guide to Revenue Integrity.”

Arias is currently the Vice President for Utilization Review for R1 RCM, a Revenue Cycle Corporation, in their Physician Advisory service line.

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