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Utilization management and prior authorization: a sustainable strategy for healthcare costs?


By Bipin Mistry, MD, Chief Medical Officer, Alight Solutions
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The costs for healthcare in America can vary drastically, and sometimes incomprehensibly. How then do you deliver a range of valuable healthcare services to your employees that are consistent in quality and cost effective?

It’s a question many organizations grapple with, and one where utilization management (UM) commonly surfaces as an answer.   

Prior authorization (PA), a technique within the utilization management process, requires providers to obtain pre-approval before administering a medical procedure or drug. This element of the UM strategy is designed to protect patients from unnecessary or ineffective medical treatment, and thereby lower overall healthcare costs. 

Why then are the majority of physicians reporting that PA can lead to increased resource utilization and have a negative impact on patients’ work productivity and health? Is PA really a bargain

In Part 1 of this two-part series, I’ll discuss some of the benefits and flaws of UM as a strategy that we recently shared in Alight’s webinar.

Utilization management as a care model

A distinguishing feature of UM is that nonclinical personnel make the initial decisions on patient care, with clinicians following as a secondary layer of review for escalations and appeals.

Who uses this model? Often healthcare benefit purchasers, by way of pharmacy benefit managers (PBMs), some healthcare navigators, healthcare plans and third-party administrators.

This model of care uses a system of rules based on clinical evidence to determine approval for certain medications and procedures. 
 
For patients navigating this care model, the journey can be painstakingly long. And as more organizations use UM, it increases the amount of work for physicians to obtain treatment for patients. 

Key findings: AMA prior authorization survey

33%
of physicians report that PA has led to a serious adverse event for a patient in their care
58%
of physicians with patients in the workforce report that PA has impacted patient job performance
62%
of physicians report that PA has led to additional office visits
42%
of the time, patients whose treatment requires PA often experience delayed access to care

Utilization management from an HR benefits perspective

HR and benefits leaders no doubt have it tough. Rising healthcare costs and employee demand for better benefits create a challenging balancing act. Established as a vital tool in modern healthcare to lower costs, support access to clinically appropriate care and reduce waste, UM can present as a solution to this challenge. And depending on the size of the organization, UM can make sense. But for larger organizations that lean into UM year after year under the guidance of benefits consultants who are tasked with examining claims data, it can be harder to understand these decisions. 

Opaque prior authorization rules create patient-care hurdles

It's no secret that PA poses various burdens for patients, physicians and managed care organizations alike. A manually intense process, rife with unclear rules and varying submission requirements, the approach can add to costs, drive burnout and increase employee absenteeism. In Alight’s recent webinar, Dr. Jonah Essers, Pediatric Gastroenterologist at Swedish Health Services, addresses examples of ways PA denials can lead to delayed care, poor outcomes and additional expense:

Example$26,000 preventable pediatric hospitalization

  • Arbitrary plan limit on medication dosage ignored the need of one pediatric patient who required more medication than other patients with similar diagnosis. 
  • The critical medication is sold in two-pack injectables (i.e., syringes) and the child required three. 
  • To obtain three syringes of medication for the patient, an additional pack of medication required PBM plan approval (four syringes total).
  • Physician was faced with the choice by PBM to either “underdose” the patient under the plan’s coverage or order the second two-pack of syringes, which would cost the patient’s family $5,000 out-of-pocket for the extra syringe of medication. 
  • Lengthy adjudication process led to progression of the child’s illness, resulting in two-night hospitalization at $26,000. 
  • The same medication the physician was requesting was then used in the hospital to treat the patient, at a 150% premium on pricing. 
  • PBM CEO eventually reversed denial after extended time spent by the physician trying to seek resolution. 
$5,000

The unaffordable out-of-pocket (OOP) medication cost a family was faced with while trying to appeal.

This is one of many examples of how rules within the UM process miss the big picture and pose a risk to the patient. 

Clinical aspects of decision-making are too often missed in the current PA system, where approvals and denials are administered ambiguously, and physicians are left without a clear avenue for questioning.

To truly transform care, conversations around the medical necessity of treatment and drugs must start and end with the physician.

Building a better experience with value-driven strategies

While the American Medical Association made tremendous progress in getting the Centers for Medicare & Medicaid Services (CMS) to remove some of the roadblocks in the prior authorization process, full reform is still needed. In the interim, HR and benefits leaders can take steps to better contain costs and improve outcomes with strategies that drive more value out of the organization’s existing healthcare and benefits.  

Look for my Part 2 to this series coming soon, where I’ll discuss value-driven strategies for cost containment in greater detail, as well as the importance of value-based care. 

As always, if you would like to share your experiences with me or have further questions, please email me at: bipin.mistry@alight.com.

Bipin Mistry, MD
Bipin Mistry, MD
By Bipin Mistry, MD

Bipin Mistry, MD is Chief Medical Officer at Alight Solutions. He is board-certified in Internal Medicine and obtained his medical degree at Kings College School of Medicine and Dentistry, University of London and an MBA from Babson College. He is passionate about value-based care and issues connected to the advancement of health equity.

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