HealthLeaders: The Many Faces of UM: UM's Dark Side

By: Laura Beerman |  August 1, 2024 

A 2023 study found that initial overall health plan denials were 11.99% through last year’s third quarter (Kodiak RCA benchmarking analysis). A 2022 study found that prior authorization and denials increased 67% in 2022. (Acdis).

Recall from part one in this series that, in addition to cost containment, utilization management “helps ensure that patients have the proper care and the required services without overusing resources” and that the “organizations making these decisions are following objective, evidence-based practices” (NCQA).

Before we measure the statistics against the objective, let’s begin with a brief primer of UM.

The types of UM

UM can happen at any point of healthcare service delivery: before delivery (prospective), at delivery (concurrent), and after delivery (retrospective). In addition, health plans apply UM in m multiple ways:

• Prior Authorizations (PA): Review of a provider’s service request before they deliver care.
• Step Therapy and Quantity Limits: Types of PA that require a less-expensive drug or limited quantities of a drug before a health plan approves or continues current therapies.
• Preferred Physician Network and Drug Lists: Steering patients toward providers and medications that demonstrate higher quality and/or lower costs.
• Denials: Refusal to pay for a healthcare service
• Medical Necessity: Care that is proper and needed to diagnose or treat a medical condition.

This feature will focus on PAs, denials and medical necessity — through the lens of automation and federal regulations.

An automated river in Egypt

When discussing the role of denials in an early UM analysis, CMS (then called HCFA) noted that “denial of certification only means the insurer will not pay for (all or part of) the services.”

“Only” means? CMS continued: “Although this does not prevent the patient from receiving treatment, it may act as a significant deterrent for expensive services.” Given that nearly one-quarter of Americans today report that they could not pay an unexpected medical bill over $250 (2024 Healthcare Financial Experience Study), “expensive” is a highly relative term.

The personal stories of unpaid claims are strain logic — everything from life-saving $140k heart procedures preauthorized then denied to infants receiving denials for extended neonatal ICU care because they could now drink from a bottle and breathe on their own (KFF Health News-NPR “Bill of the Month” project).

Meanwhile, automated denials — including those for medical necessity — strain credulity that payer UM objectives are about little more than cost cutting. Attorney Lindsey Fetzer, chair of multi-disciplinary Managed Care practice at Nashville-based law firm Bass, Berry & Sims, adds: “What’s changed is in how organizations leverage tools to arrive at those decisions – without undermining the need for clinical judgment and decision making.

These tools may be part of the solution, but they are also a part of the problem.

Jama Health Forum notes: “Utilization review by health insurers is the type of problem that seems, on the surface, to cry out for solutions using artificial intelligence (AI) … however, the results illustrate that seemingly perfect opportunities for using AI can become clear examples of how algorithms can go awry when humans do not provide the expected bulwark against error.”

The Jama article notes class-action suits filed against UnitedHealthcare, Humana and Cigna. The Cigna suit involving an algorithm that would “allegedly batch deny thousands of claims in an average of 1.2 seconds each.” A separate investigation found that an automated system allowed human reviewers to sign off on 50 charts in 10 seconds, presumably without medical record review (ProPublica 2023).

Regulators tackle UM irregularities

The Jama article adds: “These reports stoked the ire of congressional committees already provoked by other evidence of insurers’ wrongful denials of prior authorization requests.”

The ire of federal agencies too and on a rapid timeline:

• April 2022: The OIG reported its concerns with prior auth denials for medically necessary care by Medicare Advantage plans.
• April 2023: CMS clarified in a Final Rule that MA plans must cover inpatient stays that require care for at least two nights (“the two-midnight rule).
• January 2024: CMS issues two UM-related Final Rules:
  1. Medical Necessity: MA plans must make medical necessity determinations “based on the circumstances of the specific individual…as opposed to using an algorithm or software that doesn’t account for an individual’s circumstances” and those determinations “must be reviewed by a physician or other appropriate health care professional.”
  2. Prior Authorization: Payers must improve the timeliness and reporting of their prior auth decisions, including clear reasons for denials.
• February 2024: CMS issues guidance to emphasize the applicability of not only the two-midnight rule to MA plans but other medically necessary hospital admissions.

“The regulatory landscape continues to evolve, which requires all organizations to adapt when considering the question of medical necessity,” notes Fetzer.

But too often, payer adaptation means simply adhering to their own commitment for clinically appropriate care that members’ plans are supposed to cover.

“Decades ago, insurers’ reviews were reserved for a tiny fraction of expensive treatments to make sure providers were not ordering with an eye on profit instead of patient needs. These reviews — and the denials — have now trickled down to the most mundane medical interventions and needs, including things such as asthma inhalers or the heart medicine that a patient has been on for months or years. What’s approved or denied can be based on an insurer’s shifting contracts with drug and device manufacturers rather than optimal patient treatment” (Jama Network).

Fetzer adds: “UM processes always should focus on driving clinically appropriate decision making . . . Moving forward, we can expect continued use of UM and — in all likelihood — reliance on technology in various ways.”

Part 3 of this series examines how UM can function successfully in these ways and the efforts of Aetna, a CVS Health company, to do so.