How Implementing a Utilization Management Strategy Impacts Member Care

The rise of healthcare spending in the United States is a concern that affects everyone, from health plans and providers to members receiving care. The healthcare industry is moving away from the fee-for-service (FFS) model to value-based care, and a significant reason behind the shift is due to medical costs reaching new heights.

One approach health plans can take when moving to value-based care is implementing a utilization management strategy. This strategy helps reduce unnecessary services and ensures patients receive quality, cost-effective care.

However, this shift can be a substantial undertaking. In this blog, learn how a cost and utilization management strategy can jumpstart your value-based care initiatives while improving payer-provider collaboration.

What is utilization management?

Utilization management ensures patients receive the appropriate level of care most efficiently and cost-effectively. Payers use this strategy when evaluating the necessity of medical treatments on a case-by-case basis. The primary purpose of utilization management is to improve patient outcomes while controlling costs and minimizing unnecessary interventions.

Types of utilization management

There are three types of utilization management: prospective review, concurrent review, and retrospective review. Each type serves a specific purpose in reducing costs and wasted medical resources.

Prospective review: Also known as prior authorization, this review requires patients to get approval from their health plan for a service or medication before receiving care. This method reduces the risk of unnecessary services as payers and providers must agree on which treatments will be provided.

Concurrent review: As its name suggests, this review method is conducted while a member receives treatment. This ongoing assessment monitors the patient's progress and the resources used during treatment to minimize coverage denials after completed services.

Retrospective review: Evaluation begins once treatment is completed. Reviewers examine the services provided to determine if they were medically necessary and met established guidelines. While results may lead to coverage denials, these reviews can be used to better understand the effectiveness of treatments in the future.

The shift to value-based care

Before the healthcare industry shifted toward a value-based care delivery model a few years ago, it primarily operated on a FFS payment model.

In a FFS model, health plans reimburse providers for each service provided to patients, regardless of the outcome. FFS health plans typically don't have provider networks or require referrals, but members may face higher costs. Barriers to high quality care and care coordination also existed in the FFS model, which led to rising costs.

This is why stakeholders are shifting to value-based care models, which reimburse providers based on the quality of care. By offering financial incentives, value-based care holds providers more accountable for patient health outcomes. The three-part aim for value-based care includes:

• Better care for individuals
• Improved health for populations
• Lower costs

The Centers for Medicare & Medicaid Services' (CMS) goal of enrolling every traditional Medicare beneficiary in a value-based care health plan by 2030¹ has also expedited the shift from FFS. So, the sooner health plans embrace value-based medical care, the better off they'll be when it's the standard.

Why cost and utilization strategies are valuable to member care

While cost and utilization programs emphasize improving payer-provider collaboration, it's essential to remember that these changes serve the most important part of the healthcare ecosystem - patients.

One of the most appreciated benefits of a cost and utilization program for the member is the money saved. Emphasizing preventative care helps address health issues sooner, reducing costly interventions later. For example, members with comorbidities usually have a higher utilization rate. By tracking which services these members require, health plans can deliver better care when other members with similar comorbidities need help. This helps reduce unnecessary tests, procedures, and hospitalizations while providing the appropriate level of care. It empowers plans and providers with better cost utilization and allows members to lower their out-of-pocket expenses.

Another benefit for health plan members is that their health outcomes and quality of care are now financially incentivized. By ensuring that the care provided is necessary, members receive treatments that are more likely to result in positive health outcomes.

Also, by only providing medically necessary services, healthcare providers can better allocate resources to ensure timely access to essential services and prevent treatment delays.

Challenges when implementing a cost and utilization strategy

For providers, developing and implementing a cost and utilization management strategy can be a massive, time-consuming undertaking because it requires significant changes.

One of the biggest challenges is the lack of visibility into cost and utilization performance for value-based care programs. Without a big-picture view, providers struggle to analyze where to allocate resources and treatments properly. Fortunately, there is a solution.

How Inovalon's Converged Provider Enablement Cost & Utilization Dashboard can help

Converged Provider Enablement now includes a new Cost & Utilization Dashboard that empowers users to better understand their provider population related to their medical, pharmacy, and emergency departments. Raw cost and utilization data is transformed into valuable insights in real time for users to identify and address areas of concern that may be driving costs and excessive or poor utilization of resources.

Ready to see if Converged Provider Enablement is right for you? Request a demo.

1. "Innovation Center Strategy Refresh," Page 13, The Centers for Medicare & Medicaid Services, October, 2021, https://www.cms.gov/priorities/innovation/strategic-direction-whitepaper

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