Best Practices of Utilization Review

Brittany Turman: Everyone, and thank you for joining today's webinar, Best Practices of Utilization Review. My name is Brittany Turman with Optum and I will be your host today. Before we begin, please note the following housekeeping items. At the bottom of your audience console are multiple application widgets that you can use to customize your viewing experience. If you have any questions during the webcast, you can click on the Q&A widget at the bottom of your screen to submit a question. We do capture all questions and we'll be providing follow-up to questions as appropriate. If you experience any technical difficulty, please click on the help widget. It covers common technical issues. You can expand your slide area by clicking on the maximize icon on the top right of the slide window or by dragging the bottom right corner of the slide window. There is a survey widget, which you can use at the end of the webcast to provide us with feedback on today's presentation.

We do have a related resource available for you to access today. That resource is located to the right of your slide deck. Additionally, this presentation does use streaming audio. You may listen to the audio through your computer speakers or headphones. To ensure the best possible system performance, please be sure to shut down any VPN connections and connect directly to the internet. Presenting today will be Dr. Kurt Hopfensperger, Vice President of Medical Solutions with Optum, and Dr. Robert Wasnick, Physician Clinical Relationship Manager with Optum. And with that, I'm now going to hand the presentation over to Dr. Wasnick.

Dr. Robert Wasnick: Okay, well thank you and good afternoon, or good morning, everyone. My name is Dr. Robert Wasnick. I'm an internal medicine physician by training and have been with Optum here for the last, boy, 13 years. And Dr. Hopfensperger, would you like to introduce yourself?

Dr. Kurt Hopfensperger: Yes, thanks, Dr. Wasnick. Kurt Hopfensperger here. I'm a neurologist and an attorney, and I've been with Optum for a little over 10 years, as well in the UR space. And welcome everyone, and as Rob said, good morning or good afternoon.

Dr. Robert Wasnick: Okay, so here is an agenda of what we're going to try to cover over the next 20 or so minutes, and hopefully leave some time for Q&A at the end. Why do we have utilization review? What are some challenges to effective utilization review, and some potential downstream impacts on both hospitals and beneficiaries? We're going to review some of the statutes, regulations and guidance that govern the utilization review process and finally go over some suggested best practices and key takeaways.

To get us started here, we have a survey question. There's no right answer, of course. I'll give you about 30 seconds to just enter your choice here. But what are some of the biggest barriers you find to success for your organization with utilization review? You can see your choices ranging from staffing, or gaps in physician knowledge regarding medical necessity, payer behavior, the changing  regulatory landscape. So if you could just submit your choices now and we can just take a look to get an idea of what you are seeing.

Okay.

All right. Well thank you for your submissions.

As this is getting tabulated, why don't we move on to, oh, there we go. Okay, perfect. So the biggest barrier to success, physician knowledge of medical necessity guidelines. Kurt, does that surprise you in any way?

Dr. Kurt Hopfensperger: It does a little, and it doesn't. So, for commercial plans, for example, medical necessity guidelines can be all over the map, but for now, as of January with the MA plans and traditional Medicare following the same set of medical necessity guidelines, hospitals have been dealing with this for over 10 years. Traditional Medicare has been dealing with this for over 10 years. So I think it really speaks to the fact that the Medicare and Medicare Advantage rules are still incredibly complex, incredibly lengthy. There's so much interpretive guidance, for example, that you have to know that when I think about it, I am actually, I guess I'd say I'm not surprised that that is such a high ranking one there as well, just given the complexity of the subject matter that we're talking about. And which, Rob, you're going to talk about today when I'm done here. But yeah, I guess this really reflects the complexity of the subject matter.

Dr. Robert Wasnick: All right, fair enough. Well, let's dive in here then. Much of what we're going to talk about today concerns Medicare, and there's a few reasons for this. A. It's the largest government insurer with approximately 65 million enrollees. And just for comparison's sake, United Healthcare is the largest commercial insurer with approximately 70 million covered people. But also if you get it right for Medicare, you'll mostly get it right for all plans. Oops, sorry. If you get it right for Medicare, you'll mostly get it right for all plans.

Additionally, the rules for traditional Medicare are both inflexible and complex, right? There's numerous laws, and regulations, and sub-regulatory guidance, open door forms, et cetera, et cetera. There's a lot to be cognizant about. Medicare Advantage plans also must follow, of course, CMS guidance such as what might be found in the Medicare Advantage Manual. And many of the rules for Medicare Advantage plans are largely similar to those that apply to traditional fee-for-service Medicare. Ultimately, the goal of knowing the rules and all their complexity is to assure a compliant process, which results in zero false claims and minimizes potential errors found by auditors and then ultimately upheld by administrative law judges.

As far as commercial insurers go, the rules are mainly determined via contract negotiation between the hospital and the payer. But let's come back to original, traditional Medicare for the next few minutes. A Medicare beneficiary really can have only one of two statuses ever. And one way to think of it is a Medicare beneficiary is always an outpatient, except between the time a valid inpatient order is written straight through until a discharge is effectuated. Remember, of course, that observation itself is not a status, but rather a service provided to hospitalized outpatients. A Medicare patient can only be an outpatient or an inpatient.

As of 2024, as the slide here says, a Medicare beneficiary receiving observation services would derive a reimbursement of approximately $2,600. In order to receive this comprehensive APC payment, the patient must spend a minimum of eight hours in observation, and this payment includes everything from the ER visit, to labs and radiology, to the ongoing assessment and reassessment of that patient. Of course, as I'm sure some of you or all of you may know, the historical basis for observation services was to provide hospitals with an alternative to the previous prolonged ER stays of the past.

So what observation did was provide a mechanism to place a patient in a hospital bed and provide on-going assessment and reassessment with the express purpose of determining whether that patient could be safely discharged home, or would require inpatient admission. One way to kind of think about it is it's the same decision point that you make a lot of times in the ER, where you're deciding does this patient need to be admitted or can be discharged home? It's just that the time that they need to make that decision is a little longer. For those who cannot be safely discharged home, then that patient should be changed to an inpatient, as long as there's ongoing, medically necessary hospital service needed for treatment and stabilization.

Generally speaking, traditional fee-for-service, Medicare reimbursements are going to be higher for inpatients than the APC payment for the same or similar diagnosis. And this reflects the longer expected time to diagnose and treat that patient due to the documented increased risk and complexity of that patient. So, really what it is is exactly the reasons that that patient was an inpatient. The medical necessity that defined the patient as an inpatient is exactly what defines this patient as an inpatient. Another key distinction between inpatient versus outpatient is that the specific reimbursement defines, reflects, the diagnosis. You have your base DRGs of course, but then as well the ability to add CCs or MCCs, which can dramatically increase the DRG weight, which then is directly reflected in the overall payment a hospital can expect.

But there are numerous factors that impact the UR process beyond simply the binary bundling system of patient status and diagnosis. Inappropriate statusing of patients can lead to alterations in hospital metrics, including length of stay data and mortality data, Medicare spending per beneficiary, market share calculations, because all of these are based on the inpatient population. Additionally, of course, there can be impacts on beneficiaries in terms of out-of pocket costs or transfer DRG payments. It's probably salient to many of us here, the skilled nursing facility qualifying stay. In the background of all of this. There is always the risk of promoting audits or denials, which then can lead to increased resource utilization on the part of hospitals to realize expected reimbursement.

And Kurt, I know I've seen hospitals lean into observation, thinking that they're being more conservative, or leaning into inpatient believing that they'll just weed out the improper inpatient orders on the back end, but both of these have their own pitfalls, correct?

Dr. Kurt Hopfensperger: Yeah, I think that's right. So if you talk about inappropriate use of observation, there are some consequences to that. Inappropriate use of observation is going to affect all of these things on this slide here, for example. It's also going to dramatically affect some of the patients. It's going to affect, as you mentioned, the three-day skilled nursing facility. It's going to affect their co-payments as well, because there's no limit to the number of times within a benefit period that a patient might have to pay an observation co-payment of 20%, 100% for non-covered services, for example. So there's a lot of, I think, tail or spillover effects as well for observation.

The other comment I'd just like to make, if you don't mind, Rob, is you mentioned case mix index, and I'll talk to hospitals a lot and they'll have initiatives about increasing their CMI, their case mix index, for example. But the entire input, as you've pointed out, to the CDI process and the coding process is an historical artifact. It's inpatients. And so if you have a high observation rate, for example, you might, for example, be influencing your CMI purely through who is actually an inpatient in a hospital bed versus not an inpatient. And similarly, if you've got a very low observation rate, assuming that's legitimate, and those patients that are inpatients are there, you are going to tend to have a lower CMI in your hospital.

And so you might find some of your CMI improvement efforts are kind of not bearing fruit, just because of the input to the UR process. So it's a really complex sort of set of machinery between all of these factors on this slide and UR, but UR, as you mentioned, that is the common input to almost all of these on this slide here, including auditing risks, market share, CMI, readmission risk, et cetera, et cetera. So UR is the cornerstone of it all.

Dr. Robert Wasnick: All right, well, thank you. And, as I mentioned at the outset here, we tend to focus on Medicare because of the litany of rules and regulations, all of which are somewhat inflexible and abundant. But what are some of the key statutes, regulations, and guidance that govern a compliant process of utilization review for traditional Medicare patients? Well, on the left side of the screen, the Social Security Act gets right to the heart of medical necessity. It states, in part, that no Medicare payment shall be made for items or services that are not reasonable and necessary for the diagnosis or treatment of illness or injury. As we discussed earlier, status is a binary bundling system, and precisely what separates an inpatient from an outpatient receiving observation services is the medical necessity of that patient.

And reasonable and necessary, it sounds fairly straightforward, but CMS stated that the decision to admit a beneficiary as an inpatient is actually a complex medical decision made by a physician after considering numerous factors. The age, the comorbidities, disease processes, and the potential impact of discharging that patient home.

Below this Social Security Act, the False Claims Act. It's broad, of course, but it certainly would apply to Medicare claims, saying no one shall knowingly, with deliberate ignorance or reckless disregard for the truth, submit a false claim for payment to the federal government. To me, this speaks to the import of having a compliant process that attempts to properly evaluate in-status patients. But I know the Social Security Act and the False Claims Act, these are old statutes, but there's a contemporary example as well, of course, in the Notice Act. Signed by President Obama in 2015 and born primarily out of concern over high cost sharing for Medicare beneficiaries in observation and a lack of transparency regarding their observation status.

The Notice Act basically directed hospitals, as you know, to provide beneficiaries in outpatient observation a MOON document, a Medicare Outpatient Observation Notice, to all patients receiving observation care in excess of 24 hours. Down the center of the slide, we can see the Conditions of Participation there at the top. And these outline the minimum requirements for the UR process. You need to have a UR committee overseeing a UR plan, which then specifies utilization reviews. And this UR plan must provide for review of Medicare and Medicaid patients respect to the medical necessity of admissions to the institution, durations of stay, and the professional services furnished. Review of admissions can be performed before, at, or even after hospital admission, and may be conducted on a sample basis.

If I can just unpack a few things here that strike me. Because of the language of admissions, this refers specifically to inpatients, and by extension there'd be no requirement to review outpatient observation patients. But let's put a pin in that for the time being, and we'll come back to that on an upcoming slide.

You may note as well, there is no mention of specific guidelines for the review, and there's no requirement to review all cases. But a caveat to that last point is the False Claims Act itself, and I might recommend all inpatient claims being subject to your utilization review process. Of course, for definitions of what an inpatient is, the 2014 IPPS, the original to midnight rule, as well as the 2016 OPPS, allowing short stay and inpatient admissions on a case-by-case basis, certainly gives some color and granularity to the medical necessity and time components of what comprises an inpatient.

Finally, in terms of the hospital payment monitoring program, its goal is to protect the Medicare Trust Fund by analyzing and identifying any payment errors, whether they be inappropriate DRGs, or billing errors, or even unnecessary admissions. The workbook guidance on UR process states that cases that fail criteria, whichever criteria you're using, they should be referred to physicians for review. For your UM program to screen medical necessity appropriately, the decision to admit, retain, or discharge a patient should be made by a physician, either using physician approved criteria or through a physician advisor.

And Kurt, I know we are just scratching the surface on this slide, but I can't pass up the opportunity to engage you here as a lawyer as well as a physician to comment on your views regarding any key statutes, regulations, and guidance that you believe impact utilization review.

Dr. Kurt Hopfensperger: Well, thanks Rob. I'll just mention, I think a lot of times in the healthcare world we're surprised at who one of the largest auditors is. So we are in this world where we have to comply with statutes, regulations, and we should comply with guidance, for example. But there's also, unfortunately, the stick. And I don't want to be too negative about that, but a couple billion dollars or more every single year is taken back, essentially by an auditor we sometimes don't think about, and that is whistleblowers. And so they are the private army of auditors that the government engages to make sure that we're all compliant, and obviously any hospital could have a potential whistleblower. And when you look at the take back amounts that the Department of Justice announces from whistleblowers, just for Health and human Services, it is pretty close to what the RACs were doing in their heyday 12, 13 years ago. So we all feared the RAC auditors 12, 13 years ago.

Yet the amount of aggregate take back nationally is pretty close to that with whistleblowers today, which is an ongoing incentive for compliance as well. And then one other comment I just want to make, just to amplify something you said, is some of the guidance is very, very informative. You look at just the regulations for utilization review, you'll see that you have to have a UR committee and it has to be made of certain individuals, for example, and we could certainly answer those questions if you want in the chat, but how you actually do the review, the regulations are actually pretty silent on that. You just have to review a sample of admissions to the institution, meaning inpatients.

If you look at some of the sub-regulatory guidance, like the HPMP workbook, which it's a little bit old, but it's never been superseded, amended, or contradicted by CMS in the past, they lay out specifically how you do utilization review. They talk about so-called first level review, screening tools or criteria to be used by case managers, and they talk about the role of physician advisors for those cases that specifically don't meet screening criteria, and that physician advisors should essentially use physician developed criteria as well. So you've got a lot of pieces to put together, but once you put that together, you will have a compliant UR plan that also protects you from the Federal False Claims Act.

Dr. Robert Wasnick: Okay, great. Well, thank you.

Okay, moving on. So what would be best practices here? I know we had touched on the conditions of participation earlier and outlined some key points about the UR process. As Kurt just said, no requirement to screen every inpatient case, no requirement to screen any outpatient observation case. And I know the top of the screen here says, "Review all cases occupying a hospital bed." And I used to be similarly dogmatic in terms of that, but I might amend that to some degree. I would suggest this. I would review most patients occupying a hospital bed. And I say most as observation patients expected to be released the same day may not need a review, but certainly any observation patient who has crossed a midnight without clear plans for discharge should probably be reviewed as a best practice.

This helps limit any of those negative beneficiary and hospital metric impacts we discussed earlier, and that Kurt mentioned as well. The length of stay and mortality, market share, SNF benefits, CMI, et cetera. And it's also going to go a long way towards protecting against any potential false Claims Act violations while fully maintaining compliance with the conditions of participation. If the patient is registered as an inpatient, confirm that the claim indeed should be an inpatient, and if the patient is registered as an outpatient observation, confirm that there are medically necessary observation services that are being given and that the patient is not actually inpatient appropriate.

If an order change needs to be made in one way or the other, consider the code 44 process if the patient remains hospitalized and has not been discharged yet, or one-to-one billing, if that's not the case. And also if you find an observation patient that you believe instead through your process should be an inpatient, obtain that inpatient order prior to discharge being effectuated. Use criteria to guide and take advantage of that second chance that a physician advisor can give on cases that fall into the gray zone where the acuity and risk is somewhere between a clear inpatient and a clear observation patient. And while the overall number of those gray zone cases may not be out-sized as a proportion of all your bedded hospitalized patients, appropriately obtaining an inpatient order on some that first-level review screening may have missed can have a significant impact on revenue integrity and other institutional metrics.

Oh, we have one last survey question here. Okay, so this is, what is the most important aspect of a utilization review partner to help you be successful? And same as before, just 30 seconds to enter your choices here. And I believe this is a single selection for you here. So out of all of these, what is the most important aspect when considering a partner for utilization review?

Okay, I see it. It's up now here. So I apologize. Just if you could just enter your selection, pricing, technology, staffing, and I believe staffing is speaking to confidence in your partner having sufficient resources to respond to the workload that you're sending to your partner.

All right.

Okay. Interesting. Market experience and investment in keeping up with the statutes, regulations, and guidance. Well, that is, and not one person responded with pricing, so thank you so much for your responses here. Okay. To finish us off here, a guiding principle we should keep in mind is that a UR process ultimately serves to guide recommendations. The entire statusing of patients ultimately falls to the attending physician, placing that practitioner first and foremost. So what does that mean? If the UR process guides to recommend observation and the attending is adamant that that patient should remain an inpatient, the only recourse a hospital would have is to perform a Part B rebuild.

And in the probably less frequent instance where the attending insists on observation, and yet the UR process guides towards inpatient, there simply is no recourse. Ultimately, it is the attending who has control over the status for their patients.

And Kurt, when you talk to attendings about status, what do you generally find? Are they frequently not understanding the importance of status, or instead maybe they're hyper engaged and disagree with the recommendations provided by the UR process? And maybe as a subtext, what is the best strategy for maximizing the impact of physician advisors?

Dr. Kurt Hopfensperger: Yeah, no, that's a good question, Rob. And so you do definitely have attending physicians who, they understand, they put it in an appropriate place in their mental workflow. They know that I'm seeing this patient in the emergency room, or this patient's come up to the floor, and one of the decisions I have to make is status. And it's an important decision. It's not as important as diagnosing and treating the patient, but it's an important decision. But as you kind of described, you do have the other ends of the spectrum that are still around. You do have physicians who simply, I'm going to be blunt, are not interested in patient status at all. And you do have the occasional physician who is hyper interested in patient status.

The latter one is very easy because what I'll usually ask is, do you as a physician know more about status than the specialists who are actually, in a sense, acting as your status consultants? And by that I mean case managers, directors of case management, maybe a physician advisor, or a physician advisor service. And they may know as much, but generally not. And so I generally advise, maybe, just like you get other consultants on the case, maybe you want to give some deference or listen to the experts in status rather than having a fixed idea.

The other end of the spectrum's a little more difficult, because if you're just diagnosing and treating patients, you may say, why do I care about status? Well, if you just look at the patient out of pocket difference, especially in the Medicare plans, for example, that can really affect your patient's well-being in terms of the out-of-pocket expense that they may or may not be able to afford, or they may not be able to get their budgeted medications, or they may not be able to pay co-pays for therapy they need if the status is wrong. 

And so often I'll say, it not only affects the patients, and maybe you should perhaps pay a little more attention to the patient's status and the recommendations you're getting, but also it directly affects the attendings. For example, I think on one of your slides, Rob, you had Medicare spending per beneficiary. That includes physician parts around a hospitalization, mortality rates, that's tracked by most payers regarding physicians, readmission rates, most payers will track that, and hospitals will track that by physicians as well. And those are all affected by status. So a physician who doesn't really pay attention to status is usually shortchanging themselves as well as the patient. And when you phrase it that way, I've gotten a reasonably good response in terms of desire to know a little bit more about this whole idea.