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Utilization Management

Jordan S. Laser, MD, FCAP

As the national healthcare environment changes, health systems, hospitals, and private laboratories must focus on providing not only quality laboratory results, but delivering value. This challenge becomes more acute with the advent of precision medicine, as laboratory directors, clinicians, patients, and payers are required to make critical assessments to balance care and cost. With respect to costs of emerging precision medicine approaches (genomic panels for cancer diagnosis, for example) we are no longer in the realm of a $1.50 CBC, but rather a single test may cost anywhere from $500-$15,000. Given the high cost per test and the potential for misuse, utilization management programs are critical to ensure the patient that we adhere to the central concept of precision medicine and perform the right test, for the right patient, at the right time.

Laboratory directors, clinicians, patients, and payers are required to make critical assessments to balance care and cost.

While advanced/molecular tests continue to expand in both scope and clinical utility, oftentimes tests are ordered outside the scope of clinical context or ordered overzealously. This causes concern for health care systems and hospitals as often their operating finances are impacted negatively by increasing costs. In good spirit, hospitals should want to pay for every test that impacts patient management however, they should not pay for tests that do not affect patient management. If left unchecked, advanced diagnostic tests may use resources that can be better allocated to improve patient care.

Utilization management methods in a hospital or inpatient setting

There are a few techniques for establishing a utilization management system in a hospital:

The Gatekeeper Method

The utilization management method I do for the most part is a gatekeeper methodology. The 'stop' is at the laboratory—if our lab gets an unusual request for a test, they alert me. I contact the provider who ordered the test and ask a few questions to determine if the test was appropriately ordered for this patient during this admission. This method has been very successful, however, there are gaps: by definition, the gatekeeper method relies on a few key individuals to make the decisions, thus providing 24/7 coverage for decision making is challenging. Other challenges include test requests bypassing the hospital lab altogether. Gatekeeping only works for those requests that come through our laboratory. If they are sent out directly to reference labs from the hospital units, we lose that opportunity to ensure appropriate utilization. Finally, the gatekeeper method takes time. It requires that I reach out to the provider to ask additional questions about the appropriateness. Amongst busy schedules, it can take a day or two to get the appropriate information to decide to run the test or not. For the most part, a delay of a day or two for these advanced diagnostics does not impact patient care. However, it could impact patient care in particular circumstances, so as with all processes, there are advantages and disadvantages of the gatekeeper method.

It should be noted that our implementation of the gatekeeper method has been very successful in spite of the limitations. Critical to its success has been outright transparency and consistency as to what we will approve or not. Accordingly, the providers ‘know’ what we are looking for to approve tests, and now only request these specialty tests when they know the approval criteria are met. As with all processes, it is in constant evolution, and vigilance needs to remain high as every year we get a new flock of young providers (ie, residents/new attendings) and new molecular diagnostics are developed, all contributing to the need for near constant education.

Diagnostic Algorithms

A second utilization management method is creating previously approved diagnostic algorithms— this transitions from the ‘reactive’ gatekeeper methodology to a ‘proactive’ method for test approvals. In order to do this successfully, one needs to meet with all stakeholders (laboratory directors, providers, etc.,) to develop, upfront, which tests are appropriate for specific patient presentations. As an example, stakeholders can a priori determine what diagnostic tests are needed during an inpatient visit for children with congenital heart defects so when this patient presents to the hospital, everyone is aware of what tests are needed and are preapproved. This addresses some of the limitations of the gatekeeper method, which as described, may impose some unnecessary delays while determining the appropriateness of the tests. Of course, there are also limitations to this method of utilization management as well, specifically, it requires for stakeholders to consider all possible patient care scenarios, which is unrealistic. In addition, the previously approved diagnostic algorithms are ill equipped to deal with patient to patient variables that may alter the appropriateness of the requested tests from appropriate to inappropriate, or vice versa. Finally, these approved algorithms are ‘set in time’ and as the world of diagnostics and clinical utility constantly change, without frequent review of the algorithms, one is at risk of falling below appropriate care. In short, without thoughtful and frequent review, the diagnostic algorithms are the best the day they are created… continuously declining in value until reevaluated.

Clinical Decision Support within Electronic Medical Records (EMRs)

This method is in essence an evolution of diagnostic algorithms, and what I consider the holy grail of inpatient utilization management as it combines diagnostic algorithms with ordering and approval rules within the EMR. There are distinct advantages of this approach, including real time data collection on the appropriateness of ordered tests (through ask on order entry questions (AOEs)) and improved adherence to the algorithms. In other words, it ensures that we do not over utilize diagnostic testing on patients that do not need the test while also helping identify patients that DO need these tests and preventing them from falling through the cracks. A hypothetical example of this could be cardiomyopathy genetic testing. Stakeholders and clinical experts can determine under what clinical presentation is it appropriate to order these tests, for example a young patient with heart failure with a specific ejection fraction. When these rules are embedded within the EMR (ie, heart failure, age < 50, ejection fraction by echo <50%), the EMR can alert the provider that cardiomyopathy genetic testing is appropriate when these conditions are met. Implementing clinical decision support such as this is obviously challenging both from a clinical and technical perspective, but when implemented correctly it has the ability to maximize clinical value while preventing waste of resources.

Utilization Management in an Outpatient Setting

Controlling utilization in an outpatient setting is different compared to inpatient, largely because of the different models for reimbursement. Hospitals are largely reimbursed for inpatient care based upon the Diagnosis Related Group (DRG), which is a fixed reimbursement rate for the reason of admission. For much of the outpatient encounters, providers are reimbursed on a fee for service basis, therefore the financial incentive to ‘save money’ is less prominent in the outpatient setting. Perhaps it is not surprising that providers and laboratories have not devised very effective utilization management programs for the outpatient setting. In contrast, payers (insurance companies) have employed a couple of techniques to ensure test appropriateness. The first method includes medical coverage policies. These are policies that determine under what clinical conditions is appropriate to order (thus pay for) particular tests. While effective, medical coverage policies suffer from the same limitations that the inpatient diagnostic algorithms face, specifically, they are decisions fixed in time and lack the frequent review and flexibility as medical knowledge advances. Overlaid on medical coverage policies, some payers require prior authorization for specific tests. In this scenario, even if the patient meets the clinical criteria set forth in the medical coverage policy for that insurance company, the provider is additionally required to contact the insurance company to get pre approval to order the test on this patient. This is an effective strategy, but suffers by imposing excessively burdensome processes on the provider to obtain such approval. One of the greatest concerns of prior authorization is the potential to limit patient access to testing. In short, and in contrast to the inpatient setting, the insurance companies are financially incentivized to control utilization in the outpatient setting, while hospitals are financially incentivized to control utilization on inpatients. These different settings have created different solutions to test appropriateness.

Role of Pathologists

For pathologists, it is incumbent upon us to make sure we have the right tests available and provide a quality level of service needed to take care of our patients. We should not underestimate our duty to responsibly use healthcare resources. Precision medicine approaches have a huge potential to benefit patients that will not become reality if precision medicine is viewed by payers as another potential source of waste in the healthcare system. We are uniquely positioned in both the inpatient and outpatient worlds to add significant value to our patients and society through responsible utilization management. I would encourage all pathologists to take advantage of this leadership opportunity.


In Closing

In the US, we overspend on health care in terms of dollars per outcome. With sound utilization management practices, we can rein in costs and provide evidence-based guidance on expenditures that have a positive impact on both our patients, and national healthcare resources.

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Jordan Laser, MD, is the Medical Director of Pathology and Laboratory Medicine at Long Island Jewish Medical Center at Northwell Health. In addition to professional interests such as utilization management and healthcare finances, Dr. Laser is an avid fisherman.