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Appendix E
Summaries of Committee Site Visits To Utilization Management Organizations*

Members and staff of the Committee on Utilization Management by Third Parties visited 12 organizations during the summer of 1988. The organizations visited included three independent companies, three insurance company subsidiaries, two third-party administrators, two peer review organizations (PROs) engaged in private review, and two health maintenance organizations (HMOs) (one staff model and one independent practice association [IPA]). The sites were selected to convey something of the variety that currently exists in utilization management. The following summaries and Tables E-1 through E-4 at the end of this appendix briefly describe important features of the organizations visited. Appendix F provides an analysis of client contracts that were obtained from seven of the organizations visited.

Organization 1

Organization 1 is a relatively small, independent organization that handles about 3,000 cases a month. It is a privately held, for-profit organization whose leaders come from professional standard review organizations

* The summaries and tables in this appendix were originally drafted by Susan Sherman and edited by Bradford H. Gray. Each organization reviewed its summary for accuracy. Eileen Connor undertook further editing of the summaries and tables. The data provided were not independently verified.



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Page 253 Appendix E Summaries of Committee Site Visits To Utilization Management Organizations* Members and staff of the Committee on Utilization Management by Third Parties visited 12 organizations during the summer of 1988. The organizations visited included three independent companies, three insurance company subsidiaries, two third-party administrators, two peer review organizations (PROs) engaged in private review, and two health maintenance organizations (HMOs) (one staff model and one independent practice association [IPA]). The sites were selected to convey something of the variety that currently exists in utilization management. The following summaries and Tables E-1 through E-4 at the end of this appendix briefly describe important features of the organizations visited. Appendix F provides an analysis of client contracts that were obtained from seven of the organizations visited. Organization 1 Organization 1 is a relatively small, independent organization that handles about 3,000 cases a month. It is a privately held, for-profit organization whose leaders come from professional standard review organizations * The summaries and tables in this appendix were originally drafted by Susan Sherman and edited by Bradford H. Gray. Each organization reviewed its summary for accuracy. Eileen Connor undertook further editing of the summaries and tables. The data provided were not independently verified.

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Page 254 (PSROs) and academic health centers. Clients are third-party administrators and insurers, and the company sees itself as applying not only its own review criteria but also as applying the more general coverage provisions of clients' benefit plans. A ''standard" list of procedures that normally should be done on an outpatient basis is used to guide decisions about the appropriateness of proposed inpatient care. The details of the list, however, may vary by client. Allowances for preoperative days also vary by client. Criteria are modified on an ad hoc basis as issues are raised by reviewers. The organization also performs prior review of the medical need for certain procedures, which are a mix of inpatient and outpatient services. The organization's services are limited to utilization management and include preadmission review, second-opinion screening, high-cost and psychiatric case management, bill audits, claims review, retrospective utilization review, and physician adviser services for in-house review programs operated by insurance companies. Most reviews take place by telephone, and the information is entered into a computer. Some psychiatric case management and most retrospective reviews are conducted at the site of service. Data analysis and program evaluation capabilities are limited because the organization has only its own activity data, not claims data or medical records. Although patients are responsible for seeing that the prior review process occurs, most calls actually come from hospital staff. All required information is obtained on the first call in an estimated 80 percent of cases. The process works best when the reviewer calls the physician's office after receiving notification of an impending admission. Incoming calls are answered by a receptionist who refers them to review nurses, who collect the information and approve the admission if the criteria are met. If the criteria are not met, the nurses are authorized to negotiate changes with attending physicians. Nurse reviewers are expected to use their own clinical judgment. (It is acknowledged that reviewers sometimes "feed" the criteria to attending physicians to facilitate admission of a patient that the reviewer feels should be admitted.) When nurse reviewers find themselves unable to authorize proposed services, cases are referred to physician advisers, who serve part-time but work from the organization's office. Appeals of denied certifications go to a second physician adviser. Some clients request that all reviews be done by physicians. In these situations, referrals come to the organization's physician review unit from the client's nurse reviewers by telephone or facsimile machine. Incoming calls are answered by an intake coordinator who enters the information into the organization's data base and prints the referral form for distribution to the appropriate physician specialist. Faxed referrals are handled in a similar fashion. The physician reviewer will, if necessary or requested, call

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Page 255 the client's nurse reviewer to discuss the case and then call the attending physician to make a certification decision. The physician reviewer will inform the attending physician of the decision. The final decision is also faxed to the client's nurse review office. In the high-cost case management program, the patient calls the insurer or claims administrator, who validates health plan eligibility and then refers the case to the case management unit. For those clients where site-of-service case management is operational, preadmission review is conducted by telephone, while emergency admission and all continued-stay reviews are conducted at the site of the service. The monitoring of aftercare or alternative care is done by the nurse case managers and physician case managers in the office. Obviously, for those clients for which case management is telephone-based, all levels of review are conducted directly out of the organization's office. The case management program uses a team approach, with nurses and physicians working together in the same unit. The organization believes in intensive involvement of physicians in the review process, in the importance of informal communication among physician advisers, and in seeking cooperative relations with providers. The office is small, and much of the monitoring, sharing of information, and revision of procedures or criteria tends to emerge from the informal communication among nurses and physicians. More formal communication occurs through regular, scheduled medical review committee meetings that assess the quality of decisions by physician reviewers and evaluate the need to change review criteria. The committee is made up of senior physicians who are not involved in initial reviews. The staff emphasizes cooperation with attending physicians. Although they are willing to deny certification, they think that to deny cases ''too readily will alienate doctors." Rather, they encourage behavior change through effective negotiating skills by nurse and physician reviewers. And they "will bend over backwards" to certify a case that they deem a necessary admission, regardless of criteria. Overall, they find physicians to be generally accepting of their programs. Most days saved are as a result of persuasion, not denial. Cost savings are measured by hospital days saved; the organization believes that it is helping to reduce inpatient days per 1,000 lives for its clients. Except for the case management program, no data on quality and appropriateness of service or on patients and families are collected. Retrospective reviews are done for several clients. The organization believes that its biggest impact has been in influencing a switch of some inpatient procedures to outpatient procedures, including cataract surgery, myelogram, cardiac catheterization, hemorrhoid surgery, hernias, and bronchoscopies, and in diverting emergency and inappropriate psychiatric and chemical dependency treatment from inpatient to alternate forms of care.

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Page 256 The organization expressed concern about the adequacy of the clinical research base for some review criteria. There was also concern that some criteria developed by medical specialty societies include too broad a range of acceptable services. It was noted that refusing to allow a preoperative day may be self-defeating if the addition of such a day would shorten the overall length of stay. Organization 2 Organization 2 is a wholly owned subsidiary of a third-party payer and was incorporated in 1985. Clients are mainly those of the parent payer, but it is branching out to others. It covers about 1.12 million lives and reviews about 2,000 cases per month. Services include preadmission review; admission review and concurrent review for medical, surgical, and psychiatric cases; case management; second surgical opinion; disability review and workman's compensation review; and hospital bill auditing. The organization has developed a detailed set of administrative policies and procedures and comprehensive clinical screening criteria. Nurse reviewers are guided through the decision-making process by a criteria manual, which lists procedures, gives conditions for certifying an admission, and assigns a rating to conditions denoting the likelihood of an admission for this condition. Nurses must apply the criteria in all cases and consult a physician adviser if the information given does not meet the screening criteria. They must document their reasons for approval or referral to a physician adviser. The organization emphasizes that it requires its nurses to have at least 5 years of clinical experience. Physician advisers are local and work from their own Offices. Advisers may sometimes know the physicians they are reviewing. The cost-effectiveness of services and the cost-benefit of programs are emphasized rather than simple cost savings. The staff believes that cost savings from utilization management will decrease after the initial impact has been achieved, except in the mental health field where there is a greater potential to achieve the desired goals. The staff expressed skepticism about most measures of cost savings used by other companies. In this organization, pricing is based on the client company's inpatient utilization. The organization is becoming more concerned about reviewing appropriateness of care and may call in a physician adviser on cases in which the quality of treatment is questionable. There is an internal quality assurance program, and the organization is now undertaking an outcome-based program to evaluate the appropriateness of decisions made by review coordinators and physician advisers. The review process is initiated by the patient, a family member, or the

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Page 257 provider. The organization expects employers to educate employees about the program. The organization has a full-time account services representative to assist employers with that education. When nurse reviewers are notified that an admission is planned, they call the attending physician to get the reason for admission, other clinical information, the anticipated length of stay, and the treatment plan. About 90 percent of the time, the reviewer speaks to the physician's office staff for medical and surgical admissions. For psychiatric admissions, the attending physician is almost always called. If the admission is authorized, the nurse notifies the attending physician, the patient, and the hospital. At the end of the certified length of stay, the nurse reviewer calls to verify that the patient is being discharged. If the patient needs additional time in the hospital, then the continued-stay review process continues until the time of discharge. If the nurse reviewer cannot approve a case based on the criteria, he or she will refer the case to a physician adviser, who must call the attending physician or document that they have made a reasonable attempt to discuss the case. Most referred cases involve requests for extensions of length of stay. About 2 percent of the total cases are denied. Appeals can be made to a second and then a third physician adviser. Of the denied cases, about eight or nine have been appealed. Organization 2 does not currently review for quality of care but may refer problem cases to a physician adviser for review. The company surveys patient satisfaction by sending out a postcard questionnaire, for which there is a 15 percent return rate. It has observed a sentinel effect on physician requests for admissions and lengths of stay. The organization believes that it has had its biggest impact on cutting preoperative days, shortening lengths of stay, and increasing consumer awareness. The organization expressed the following concerns about its current processes. (1) Attending physicians may bill patients for their time spent on the telephone with reviewers, and these charges are not usually covered by insurance. (2) All of the physician advisers work out of their own offices. In addition, the medical director and physician adviser work at the organization's offices part-time. Physician adviser specialists are reluctant to make calls to physicians who work in the same metropolitan area. The organization's management believes it is necessary to have at least one physician adviser on staff to ensure accessibility and consistency. (3) Patients are often uninformed about their benefit coverage. It is possible for a reviewer to certify a procedure as medically necessary, but to have that procedure not be covered by the patient's benefit package. However, letters sent by the organization to the patient clearly state that the days certified are certified for medical necessity only, and there may be contractual exclusions and/or limitations on coverage of these services in their health plans.

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Page 258 Organization 3 Organization 3 is a third-party claims administrator that began to offer utilization management services about 1 year before the site visit. It covers about 2.3 million lives and has about 700 medium-sized companies (5,000 to 15,000 employees) as clients. Services include preadmission review, continued-stay review, retrospective review, discharge planning, second-opinion surgery (focused on specific procedures using criteria-based waivers), case management, and outpatient surgery review. It also conducts hospital bill audits and offers health information services and referral services to preferred providers. Because this company does claims administration, it has a vast amount of data on its program and its impact on patients and providers. It can track case histories of patients, review benefits packages of patients, check outcomes of care in terms of rehospitalizations, and measure savings in terms of costs. A variety of reports can be generated on every aspect of its utilization management activities, including reports on days approved and used by diagnosis, extensions, averages for days requested and days approved, variances, estimated savings, and readmissions. Audits are done on both hospital services and physician services. The company considers data analysis and reporting one of its four main functions (the others are utilization management itself, claims administration, and preferred provider referencing). This company is very client-oriented. It markets its programs as a service to employers. It believes it offers an added benefit to employees, guiding them through the maze of health care services. Decisions are rendered on the medical necessity of services and the reasonableness of provider charges to clients. To maintain the quality of the review process, Organization 3 monitors almost every activity of the nurse reviewers, and reviewer comparisons are made across time. Reviewers have 5 years of clinical experience and some review experience. They go through a 3-week training program. Physician advisers are local practitioners who spend about 3 hours a week conducting reviews out of their own offices. Their decisions are monitored to see how often they uphold a nurse reviewer's recommendation to deny certification. Nurse reviewers are allowed to negotiate with providers and may use their own clinical judgments. The company uses the Health Data Institute Optimed system, but it believes that the review criteria are too liberal. It plans to switch to a system of its own. Reviewers are allowed to override criteria with a supervisor's permission. All of the review information, including the criteria, is programmed into the organization's computer system. Patients are expected to trigger the preadmission review process.

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Page 259 About half of calls come from patients, and about half come from physicians and hospitals. If the patient or the hospital has made the initial call, the nurse reviewer will call the physician's office to confirm the diagnosis and treatment plan. If the nurse reviewer approves the admission, he or she assigns the case a length of stay (based on the Professional Activity Study Western Region at the 50th percentile minus 1 day). The reviewer calls back on the day before the expected discharge date to verify the discharge. If the case is to involve a surgical procedure, the reviewer determines whether a second surgical opinion is necessary. The opinion may be waived by the reviewer on the basis of criteria indicating that there are solid indications for surgery. If a case does not meet criteria and the reviewer cannot negotiate a change with the attending physician, he or she refers the case to a physician adviser. Most referrals concern inpatient versus outpatient decisions. About 75 percent of the referred cases are denied by the physician advisers. Appeals may be made for consideration by a second physician adviser. Less than 1 percent of cases are appealed. During its 1 year of utilization management experience, the company says that it has brought about an average 12.5 percent reduction in admissions, a 32 percent reduction in days of hospital care per 1,000 employees, and a 26 percent reduction in hospital costs per covered person for its clients. The company monitors quality and appropriateness of care and patient satisfaction by conducting retrospective chart reviews and by having reviewers make follow-up calls to all patients after they return home. This follow-up also allows the organization to confirm information given upon admission about diagnoses and treatment. The biggest area of impact is believed to have been in moving tonsillectomies and cataract surgery to outpatient settings. Staff expressed concerns about how data are used, how impact is measured, and how savings are calculated. They expect to be able to track the appropriateness of their decision-making, outcomes of care, and impact in a much more sophisticated manner as they update and improve their own data base. A more sophisticated data base is necessary to enable the organization to modify its review criteria appropriately. It expects to use more restrictive criteria reviews in the future to further reduce lengths of stay and inpatient admissions, and the staff wants to use data to justify and monitor these changes. More retrospective review of cases is planned. Organization 4 Organization 4 is an independent review organization with origins in a staff model HMO. It was one of the earliest organizations to apply preadmission review in an indemnity context. The company views its

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Page 260 business as a health care cost management business, and it serves a variety of clients—both insurers and employers. The goal is to get the most cost-effective care for the employers. It offers a full range of utilization management services. The company strives to eliminate all inappropriate and unnecessary care. Reviews are concerned not only with inpatient versus outpatient surgery, presurgical days, and length of stay, but also with medical necessity of admissions, necessity of surgery, and necessity of expensive outpatient testing and procedures (for example, nuclear magnetic resonance imaging and lithotripsy). Criteria are developed by panels of outside physicians, who build protocols using existing criteria sets, specialty society guidelines, and their own clinical judgment. Some decisions (for example, those regarding outpatient surgery) are based on clients' benefit plans rather than the company's own criteria. Information used for medical necessity determination includes all available clinical data and also the narratives for x-ray and lab work. This company is at the high-tech end of utilization management in both computerization and telephone systems. It strives for a paperless process from initial phone call until discharge, except in those instances in which case management is involved. The system captures 150 data elements, including clinical information beyond just diagnoses and procedures. Calls for review come to an operator who directs each call to one member of a team of review nurses (the goal is to do this within 30 seconds), who enter data into the computer. The average call lasts less than 5 minutes. Nurses collect and enter data but can neither certify nor deny certification for cases. All cases are transmitted electronically to a member of the full-time medical staff for review. An estimated 25-30 percent of cases involve virtually automatic decisions (for example, admission for childbirth), and an estimated 60 percent present significant complexities for the reviewing physician to evaluate. The review physician calls the attending physician in virtually all mental health and catastrophic rehabilitation cases, 65-70 percent of medical cases, 40 percent of surgical cases, and 15 percent of obstetrical cases. As many as 20-30 percent of the initial negative decisions are appealed, first to another staff physician and then to an external consultant. The company reports utilization levels comparable to those of a staff model HMO. The organization emphasizes internal quality control. Nurses are monitored through the computerized telephone system by supervisors and physician reviewers. Physicians' decisions are reviewed by a team supervisor, and a random 10 percent of cases are sent each month to members of external advisory panels for review. They prefer to report to clients on before-and-after utilization levels rather than on days of care averted.

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Page 261 Organization 5 Organization 5 is a third-party administrator that has been doing utilization management since the early 1980s. It has about 40 clients, most with 5,000 or more employees, and covers about 600,000 lives. Its services include benefit plan design, preadmission review, concurrent review, discharge planning, case management, second surgical opinions, and preferred provider organization (PPO) management and referral, bill audits, and claims payment. Though committed to cost containment, this organization also takes a strong pro-employee/patient stance. The staff seeks to eliminate care that is of questionable medical necessity. It believes that patient cost-sharing is an important element of cost containment but seeks to have employers also hold patients harmless for costs incurred when providers do not follow review requirements or when bill audits identify unnecessary services. It contends that it is on solid ground in making those decisions and will go to court to defend its judgments. It considers assisting clients with their benefits packages to be an integral part of its service. Staff are also directly involved in educating employees about utilization management. Physician advisers and nurse reviewers meet with employees, benefits personnel, and representatives of physicians and hospitals in the communities at key locations of new clients. The physician or nurse reviewer may spend up to 2 weeks at a client company holding small group educational sessions. The company's toll-free 800 telephone number is also open to all employees 1 month before services are to begin, to enable employees to call in for information. As a claims payer, Organization 5 has extensive data on its review programs and on actual utilization. It offers clients a wide selection of standard reports and will prepare ad hoc reports as clients request. The staff uses internally developed criteria that they base on InterQual and Professional Activity Study lengths of stay, but nurse reviewers and physician advisers can make exceptions based on clinical judgment. A medical advisory committee of physicians from across the country develops and modifies criteria. They hold that the burden is on the provider to show that services are necessary, not on the review organization to show that they are unnecessary. In the preadmission review process, about half of the initial calls come from patients, and about half come from physicians' offices. Staff members say that they can get most of the needed information from patients and hospitals "without disturbing the physician." Nurse reviewers can certify cases immediately if they meet the criteria, or they can negotiate with providers' offices. If an attending physician challenges the nurse reviewer, the case goes to a physician adviser. About I percent of the cases are

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Page 262 referred. Most referrals are handled by the medical director (who works at the organization's offices nearly full-time) and four other advisers. The advisers may call specialists for advice. A majority of the referred cases are denied. Appeals are made directly to employers through benefit plan grievance processes. Savings are measured by days of care averted. The organization also monitors provider charges to evaluate whether they are within reasonable and customary rates according to its own and Health Insurance Association of America data. It can address quality of care to some extent through bill audits and through second opinions if the proposed service seems unusual. The organization solicits feedback by sending comment cards to patients who have gone through utilization management. It believes that its impact has been greatest from disallowing preoperative days, managing long-term-care cases, arranging transfers to lower levels of care, and getting concurrence to outpatient rather than inpatient care. The leaders of this organization expressed the following concerns. (1) The preadmission review system is being evaded by patients who are admitted on an emergency basis for diagnostic workups only. They seek to have these patients discharged. (2) About half the hospitals they deal with do not cooperate with concurrent review. Patients may end up paying for services not certified for payment by the employee's benefit plan. (3) Staff described "rolling" laboratories, mobile labs that offer complete testing for patients and then submit big bills for comprehensive, unnecessary tests. Most of these claims are denied. (4) Many companies lack the baseline data needed to evaluate changes in costs. The organization plans to do more outpatient reviews and focused reviews based on historical data. It is developing a data base with claims histories for each patient. Organization 6 Organization 6 started doing disability and rehabilitation management and workman's compensation review in the 1970s. It then moved into medical case management and, more recently, into prior review services. A subsidiary of an insurance company, it now offers preadmission review, continued-stay review, second surgical opinion referrals, discharge planning, disability and rehabilitation management, vocational rehabilitation, hospital bill and provider auditing, and case management. It covers 8.5 million lives for large and small companies, insurers, third-party administrators, and self-insured employers. Because this company's program grew from case management, it emphasizes appropriateness of services and review of the entire spectrum of

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Page 263 services a patient receives. The staff is very patient-oriented. For example, reviewers will arrange patient appointments for second opinions, and case managers will help identify new jobs for partially disabled employees through the vocational rehabilitation program. Case management is done face-to-face with patients. The company has more than 100 local offices for the case management program. Case managers typically make several visits to patients in their homes to monitor the services they are receiving. The company also emphasizes data collection, auditing, and monitoring of their services. The size of the quality assurance staff is proportional to the volume at each service center. One to five quality assurance staff per site is the range. Every month the quality assurance staff reviews a 2 percent sample of preadmission review cases, examining 14 different elements such as timeliness, accuracy of data entry, and application of criteria. They also review a 5 percent sample of physician advisers' decisions for consistency. Physician advisers also review a sample of one another's cases each month to monitor accuracy and the appropriateness of the determination. The quality assurance staff also tracks second-opinion referrals and provider billing accuracy. The company also has a sophisticated telephone monitoring system that tracks call volume, duration, hold time, abandon rates, and turnaround time. Daily reports on telephone activities are reviewed by a supervisor, who also regularly evaluates reviewers on their telephone performance. The company assesses the medical necessity of admissions and the appropriateness of the level of care. It does not accept responsibility for determining whether services are otherwise covered under a client's benefit plan. The staff does, however, remind callers to check the provisions of their benefit plan. The organization uses a modified version of InterQual to judge the medical necessity of services. It modifies the criteria on the basis of its own data and other information data on medical practice. A panel of physicians approves modifications. The inpatient and outpatient lists vary, depending on client benefit plans. Nurse reviewers work in teams to serve particular clients. Nurse reviewers have hospital and review experience and are allowed to use their own judgment in conjunction with the organization's written criteria. They can negotiate with providers and can make exceptions to the guidelines. All nursing judgments must be accompanied by supportive documentation in the patient's file. An administrator of the company said "we don't want to keep [the nurses] on a ball and chain." Physician advisers use their own judgment to decide cases. They work in the company's office 1 day per week; one physician adviser is on-site each day. Management suspects that nurse reviewers are more aggressive than physician advisers in negotiating lower lengths of stays or use of outpatient care. The organization's review process is intended to be paperless. The

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Page 271 Organization 11 Organization 11 is an IPA model HMO. It has been operating since 1974 and began preadmission review in 1981. It has 175,000 members and 2,000 participating physicians. Most activity is concentrated in the local area. The organization offers preadmission certification, preprocedure review, concurrent review, case management, retrospective claims audit, discharge planning, second surgical opinions, and some outpatient procedures review. It also reviews claims and conducts physician profiling. The organization states its utilization management objectives as follows: (1) to monitor the medical needs of patients; (2) to monitor the level of care; (3) to ensure that appropriate resources are used; and (4) to develop and evaluate utilization data and identify potential utilization problems. It emphasizes education and physician cooperation but has strict sanctions for noncompliance. Physicians are fined $25 of the fee the first time, $50 the second time, and $100 the third time they fail to comply with the preadmission review program within 1 calendar year. Sanctions also are imposed for allowing unnecessary days of care (20 percent of hospital per diem for the first offense, 50 percent for the second offense, and 100 percent plus an appearance before the membership committee for the third offense) and referral to nonplan physicians (20, 50, and 100 percent of nonplan charges, respectively). In addition, time limits are set on referrals. Physicians are paid on a discounted fee-for-service system and split a surplus risk pool at the end of each year. The pool is accumulated from savings derived from hospital days saved. The organization has a utilization review and quality assurance committee composed of five physicians who hold monthly meetings. They review physician utilization patterns and assess the utilization review program annually. They also conduct some special studies. The preadmission review process can be initiated either in writing or by telephone. The IPA physician is responsible for beginning the process. Clerks take the preadmission calls and ask physicians (or their representatives) a series of questions from a one-page questionnaire. The questionnaires identify conditions for admission for a variety of disorders. The criteria are used by the state PRO. If the clerks receive a yes response to any of their questions, they give the questionnaire to one of two supervisors, who signs the form and authorizes the admission. The clerks can tell physicians that they will receive certification. The organization believes that this procedure is more efficient than having nurses handle the calls, because a vast majority of the admissions are routine. Concurrent review begins on admission and continues every 2 days thereafter. Nurse reviewers work on-site at the hospital, review medical charts, and may negotiate with the attending physician. They use the

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Page 272 InterQual criteria and professional activity study lengths of stay for their region. Standards for any new procedures are developed by the firm's health care standards committee, which meets every 2 months. Medical necessity standards for about 12 medical procedures have been developed by the utilization review and quality assurance committee. If criteria are not met, the nurse reviewer refers the case to one of the two supervisors or to the medical director, who is a full-time employee in charge of the utilization review program. The medical director then discusses the case with the attending physician. He may also ask two members of the utilization review and quality assurance committee to review the case. Denials are rare. Only the medical director can deny a case. Appeals may be made to the grievance committee. If a physician is sanctioned she or he may appeal to the utilization review and quality assurance committee and then to the HMO board of directors. The organization has decreased its days of care from 560 days per 1,000 members in 1980 to 319 days per 1,000 in 1988. It believes that it has had an impact on quality of care. Reviewers use a generic quality screen developed by the utilization review and quality assurance committee on all discharges. The nurse reviewer conducts a retrospective chart review on cases that do not pass the screen. Quality problems are categorized into three levels of severity. If there is any potential harm associated with the quality discrepancy, the attending physician will be called before the utilization review and quality assurance committee. The physician is reviewed by three peers. The committee evaluates the case and recommends corrective action. Corrections can take the form of continuing education, intensified review of the physician's cases, or limiting the physician's services within the IPA. This process takes place only occasionally. The organization also monitors members and has a grievance committee that receives member complaints. The organization expressed the concern that assigned lengths of stay can become a floor and that assigned days will be used even if they are not necessary. Therefore, reviewers do not assign specific lengths of stay. Organization 12 Organization 12 is a PRO that was begun by the state medical society in 1970. It started conducting private reviews in 1976; currently, more than half its business is private review. It covers about 600,000 employees. Reviews are conducted for 40-50 relatively small companies and for part of the CHAMPUS program. The organizations offers preadmission review, concurrent and retrospective review, second surgical opinion, case management, hospital bill certification, bill audit, claims administration,

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Page 273 long-term-care review, workman's compensation reviews, discharge planning, substance abuse review, and quality reviews of hospital care. Because it was one of the original PSROs, this organization claims to have set precedents in many programs. One strength is its historical and political base in the state. Leaders of the organization know the state, and providers in the state know them. Most nurse reviewers conduct reviews on-site in the hospitals. They claim to have strong support from the physicians. Ninety-five percent of the county medical societies participate in the PRO. The organization has a 23-member board made up of physicians, administrators, business representatives, and a consumer representative, and it also has five regional councils with the same composition. These representatives "have made a commitment to make the system work" and devote a good deal of volunteer time to the program. The organization emphasizes cooperation with physicians and providers. It takes an educational approach to solving problems. Written agreements with each hospital allow private reviews on-site. Physicians are responsible for initiating reviews. Most are very familiar with the process. The PRO also accepts information from a physician's designee. About 15 percent of admissions in the state are reviewed by nurses operating from the PRO office. These admissions are mostly in small rural hospitals. The remaining 85 percent of admissions are reviewed by nurse reviewers on-site. This provides a direct check on the diagnostic and clinical information reported by physicians. Nurse reviewers can certify cases that meet the PRO criteria. Criteria were developed by an internal health care standards committee and cover intensity of service and severity of illness. Quality of care is considered in each review. There are guidelines for making exceptions to the criteria. Nurses have some authority to negotiate. About 15 percent of the cases are referred to physician advisers. About 200 physicians serve as advisers, working part-time out of their own offices. They may certify or deny a case based on their own clinical judgment. They may decide on the basis of the record provided by the nurse reviewer, or they may call the attending physician. The organization denies slightly more than 3 percent of cases. Denial is a last resort. Appeals go to a second physician adviser. The patient or physician requesting the appeal may ask for a physician of the same specialty. The organization claims to reduce client admissions rates by 10-15 percent. It claims to have had a dramatic effect on preoperative days, which used to be common practice and are now rare. Reviewers have criteria to screen cases for certain quality-of-care problem and can refer any case with a potential quality problem to an internal committee for review. The organization expressed several concerns. (1) Some hospitals bill

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Page 274 patients for care for which the PRO has denied certification. (2) Most medical admissions are emergency admissions, the necessity of which is evaluated only through concurrent review. (3) Sometimes it is difficult to get physicians to act as advisers in remote rural areas where the physicians all know each other. (4) Specialists who develop review criteria tend to be too generous.

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Page 275 TABLE E-1 Summary of Volume of Business at Sites Visited       Reviewer to Population Ratio Site Number of Covered Lives or Employees Average Number of Cases Reviewed Nurse Physician 1 70,000 lives (comprehensive review) 450 cases/mo 1:15,000 1:70,000   2 million lives (case management) 550 cases/mo 1:285,000 1:400,000   3 million lives (independent physician review) 2,000 cases/mo   1:850,000 2 1.1 million lives 2,000 cases/mo 1:16,000 1:16,000 3 2.3 million lives NA 1:7,500 1:365,000 4 2 million lives Up to 4,500 cases/mo 1:32,000 1:200,000 5 600,000 lives NA 1:10,000 1:80,000-100,000 6 8.5 million lives NA 1:20,000 1:180,000 7 1.7 million lives NA 1:25,000-30,000 1:375,000 8 1 million employees 2,000 cases/day 1:5,000 1:125,000 9 235,000 lives NA 1:47,000 1:47,000 10 NA 1.5 million cases/year 1:8,000 1:8,000 11 175,000 lives NA 1:2,500 1:25,000 12 600,000 employees NA 1:15,000 1:3,000 NOTE: NA indicates not available.

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Page 276 TABLE E-2 Profile of Nurse Reviewers Site Experience Training RN Staffing Supervision 1 5 yrs 1:1 supervision 5 RNs; 1 RN director Informal observation 2 5 yrs FTE trainer; 2 wks; review all decisions for 1 month 25 RNs; 2 supervisors; 1 UM director; 1 trainer Accuracy of work; consistency; number of cases/mo 3 5 yrs 3 wks 17 RNs; 2 supervisors; 1 manager Telephone monitoring; listen, review 5 cases/wk; weekly meetings 4 1 yr and some UR 4 wks 81 RNs; 5 LPNs; 1 supervisor per team Telephone monitoring; listen, report daily on telephone activity, productivity 5 5 yrs 4-6 wits; in-house CE 56 RNs; 7 supervisors Telephone monitoring; listen, review a percentage of cases weekly 6 Clinical, UR 2 wk class; 2-3 wks in unit 53 RNs; 7 supervisors; 1 director Telephone monitoring; biweekly evaluation 7 5 yrs 2 FT trainers; 4 wks; CE 130 RNs; 1 supervisor per team Telephone monitoring; random sample of cases; meetings (Table continued on next page)

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Page 277 (Table continued from previous page) Site Experience Training RN Staffing Supervision 8 Clinical, several yrs 6 wks; in-house CE 200+ RNs; 1 supervisor per team of 18 RNs; 1 manager/4 teams; 1 director Telephone monitoring; referrals 9 Hospital experience 1:1 supervision 5 RNs; 1 supervisor NA 10 5 yrs clinical 2 wks 76 RNs; 1 supervisor MD advisers fill out questionnaire reviewing RNs; internal committee monitors decisions for 95% accuracy of documentation; application of criteria; referrals; turnaround time 11 Clinical NA 7 RNs; 1 supervisor; 1 director Medical director does random clerk review 12 3-yr med/surg, ICU or ER Orientation, 1:1 supervision 40 RNs; 1 supervisor; 1 director Telephone calls/hr; number of reviews/hr; sample of cases; appropriateness of referrals and consistency, number of cases/reviewer NOTE: Abbreviations are as follows: RN, registered nurse; FTE, full-time equivalent; UM, utilization management; UR, utilization review; LPN, licensed practical nurse; FT, full-time; CE, continued education; MD, physician; ICU, intensive care unit; ER, emergency room; NA, not available.

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Page 278 TABLE E-3 Profiles of Physician Advisers Site Experience Training Physician Staffing Payment On- or Off-Site Full- or Part-Time 1 Board-certified On-site Med dir +60a; 7 FTE MDs Per case; incentive for more cases/hr On-site; work together PT 2 Board-certified; in practice l-day orientation; ongoing contact with med dir 25 do most reviews; FT med dir Per call; assume 15 min/call Work in own offices; 1 MD adviser on-site; med dir on-site PT; on call 3 Board-certified; UR experience; in practice In UR 21 MD advisers; 1 PT director By hr Work in own offices PT, 3 hrs/wk 4 Board-certified; in practice Several days 18 MDs (10 FTE on med/surg; 2.5 psych); 1 FT dir Salaried or by hr On-site (consultants off-site) PT; 60% more than 20 hrs/wk 5 Experienced and respected; most board-certified Briefed and observed for a couple days Med dir; 6 FTE med/surg; 4 psych By hr On-site PT; 1; 1 on-site at all times 6 Board-certified; UR; in practice Manual; meet with director 6 MD advisers; 40 on call; 1 PT director Per hr or per case Some on-site; some in own office PT 7 UR; PRO Med dir trains on UR issues 8 MD advisers Per case 1 on-site; rest offsite; in group PT; 1 FT on-site (Table continued on next page)

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Page 279 (Table continued from previous page) Site Experience Training Physician Staffing Payment On- or Off-Site Full- or Part-Time 8 Clinical CE in-house; attend grand rounds at local hospital 24 MD reviewers; 3 MD middle management; 1 FT director Annual salary On-site FT 9 Clinical 1:1 supervision; CE 1 from each medical specialty; clinical supervisors; dept heads; med dir Salary On-site PT 10 In practice 1 day 200 MD advisers; 1 PT med dir $54.00/hr Work in own office PT 11 In practice NA 5 MD reviewers; 1 med dir $250.00/mo Work in clinic PT 12 Board-eligible; PRO credentialing process 1 yr of experience in hospital UR/QA 200 MD advisers; 1 PT med dir; 5 regional managers By hr Off-site PT NOTE: Abbreviations are as follows: med dir, medical director; PT, part-time; FT, full-time; MD, physician; UR, utilization review; FTE, full-time equivalent; CE, continuing education; QA, quality assurance; NA, not available. aMost physician review time is not devoted to prior review but to a review contract with an insurer. Most reviews are done by about five physicians.

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Page 280 TABLE E-4 Case Managers Site Staffing Patient Contact Authority Monitoring 1 1 RN By telephone Selects cases; identifies services None 2 3 RNs; 1 supervisor By telephone; site visits every 30-90 days Develops care plan; negotiates for services Supervisor oversees 3 7 RNs; 1 manager By telephone; may visit; contract with home health agency for site visits Selects cases; negotiates for services Weekly meetings; staff discusses cases 4 9 RNs Contract with home health agency for site visits Identifies cases; compares costs None 5 2 RNs By telephone Develop care plan; negotiate for services Staff meetings and case conferences with MD advisers 6 258 nurse coordinators; 25 supervisors; 5 regional supervisors RNs make site visits, work out of 130 local offices Develop care plan; can negotiate for services Supervisor evaluates RNs; regional supervisors evaluate random sample of cases; clients audit cases (Table continued on next page)

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Page 281 (Table continued from previous page) Site Staffing Patient Contact Authority Monitoring 7 8 RNs 1 initial visit; 1 follow-up visit 2-3 months after case terminated Identify cases; negotiate for services Monthly reports on cases 8 Physicians; 1 director Contact with patients if care (home health) is planned for longer than 1 wk Negotiates with provider for early discharge None 9 10 RNs; 5 discharge planners; 1 supervisor Site visits; provide services May negotiate for alternative services Med dir monitors all cases 10 None None None None 11 7 RNs who do CM part-time; consider physician as case manager None RNs negotiate with MDs and hospital discharge planner for alternative services Med dir oversees 12 1 coordinator who does CM part-time Site visits; provide services Puts together teams for each case; team develops care plan; provides care Med dir oversees NOTE: Abbreviations are as follows: RN, registered nurse; MD, Physician; meal dir, medical director; CM, case management