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The committee did not focus on utilization management activities undertaken directly by employers. Rather, it looked at the broad and varied array of organizations that either contract directly with employers to provide utilization management services or, like some HMOs and insurers, provide utilization management as part of a larger package of services. The products, target markets, philosophies, and technologies of these organizations vary widely, but the industry is evolving so rapidly that summary is difficult. What follows is a snapshot of the field of utilization management.

Industry Overview

In 1980, there was no utilization management industry to speak of, although some of the building blocks existed in HMOs, professional standards review organizations (PSROs), insurance plans, and hospital utilization review programs. Now hundreds of organizations offer utilization management services to thousands of clients who employ perhaps half to two-thirds of all American workers (Foster Higgins, 1987; Gabel et al., 1988). A precise count of utilization management organizations is virtually impossible because the industry is changing constantly, and no single trade association or industry information source exists. A 1987 publication listed 158 private independent utilization review companies (McGraw-Hill, 1987). However, this list did not include the utilization management departments of those commercial insurers and Blue Cross and Blue Shield plans that do not have separate utilization management subsidiaries. Also not included were the internal utilization management departments of HMOs, independent practice associations (IPAs), and PPOs. A 1989 survey by Business Insurance reported 125 review organizations (Business Insurance, 1989). Again, utilization management departments of many insurers were not listed. The companies listed in this second survey covered from 10,000 to over 11 million individuals, and review services accounted for 2 to 100 percent of company revenues. The ten largest firms are listed in Table 3-1.

Figure 3-1 charts the industry's growth, a growth vividly illustrated by the experience of the Mayo Clinic (Mayo Clinic, 1988). In 1984, the Mayo Clinic was dealing with only one utilization management program—precertification for Medicare beneficiaries. Four years later it was working with approximately 1,000 utilization review plans. This does not equate to 1,000 review organizations, however, because many review companies alter some details of their programs to fit particular client preferences. (The Mayo Clinic, for example, reported dealing with over 200 Blue Cross and Blue Shield review programs, but there are fewer than 75 Blue Cross and Blue Shield organizations in existence.) The American Hospital Association (1989) reports that hospitals may deal with from 50 to 250 organizations doing prior and retrospective review.



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