Need for utilization management grows

With the growing insured population, payers are relying on utilization management (UM) now more than ever. One key to reducing costs is being choosy about preferred sites of care.

“The payers are understanding, in depth, the need to manage clinical appropriateness across the emerging specialty care areas,” says Brandon Cady, president and CEO of AIM Specialty Health, owned by WellPoint. “They understand the growth from an actuarial perspective, and we’ve proven the value of the programs.”

Cady says some UM programs can yield a return on investment as high as 10-to-1. And the market demand for UM will increase in the next few years not only as the number of payers increases but also as providers begin taking on risk as accountable care organizations.

“I see as one of the trends, the provider systems struggling to implement the same programs that large payers have been successful at implementing simply because of scale challenges and coverage challenges,” he says. “It’s one thing to implement a program within your own four walls or your own system, but how you cover an entire state or patient population with any degree of scale will be a challenge.”

New clinical areas

Cady says cardiology and sleep medicine are two up-and-coming clinical areas for UM programs. Particularly with sleep medicine, the use of diagnostic testing is increasing.

According to the Office of the Inspector General, Medicare payments for polysomnography increased from $62 million in 2001 to $235 million in 2009. Sleep studies are reimbursable for Medicare enrollees who have symptoms such as sleep apnea, narcolepsy or parasomnia. Typically, Medicare coverage trends are echoed in the commercial market as well.

In diagnosing sleep disorders, providers should evaluate patients to decide on the most appropriate testing method. The typical test includes overnight patient monitoring. In many cases, patients can use a less-costly home-based test rather than a test in a hospital facility.

Polysomnography tests (PSG) record biophysiological changes during sleep by monitoring brain function, eye movement, muscle activity and other measures. PSG in a hospital lab can cost $1,000 to $4,000 for an overnight test, Cady says. In contrast, a home sleep test can cost $200 to $500.

“Not all patients are suitable for home testing, but it’s estimated that 70% to 80% of patients can be effectively tested at home,” he says.

He says payers are examining not just the type of testing that members require but also the location and the type of provider conducting the tests because there are significant variations in price. And members should also be made aware of opportunities to opt for a lower-cost option with price transparency.

“Clinical appropriateness and managing utilization is one thing but at some point as a system we have to figure out what to do about price and the price variation that exists,” he says. “That is the main difference between healthcare in American and healthcare in other countries: It’s price.”

As a whole, the industry has done a good job in benefit management and ensuring appropriate use of services, Cady says. But the competition among providers regarding price variation will become increasingly more important over the next three to five years.

“The [marketplace] exchange movement is just one thing causing that trend,” he says.