Blog, Revenue Cycle, The Hospital Finance Podcast®

The Importance of Utilization Management in Healthcare [PODCAST]

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The Hospital Finance Podcast

In this episode, we are joined by BESLER’s Meliza Weiner to discuss the important issue of utilization management  and how it affects revenue at hospitals.

Learn how to listen to The Hospital Finance Podcast® on your mobile device.


Highlights of this episode include:

  • The different ways hospitals interpret and implement utilization management plans and processes.
  • Reasons why it is prudent to have utilization management involved and aligned with a hospital’s revenue cycle.
  • Ways that utilization management can help manage the cost and delivery of services at a hospital.
  • How a utilization management department can facilitate and coordinate resources and services in a quality-conscious and cost-effective manner.
  • And more…

To view the transcript of this podcast episode, click HERE

For more insight from BESLER’s experts on revenue cycle, listen to our podcast episode “Strengthening the healthcare revenue cycle” which discusses how creating cross-functional initiatives can improve the revenue cycle.


The Importance of Utilization Management in Healthcare

In the fast paced, ever-changing healthcare environment hospitals and health systems must be agile to ensure a quality-driven and financially stable operation. Between care complexities, endless reimbursement rules and regulation changes, utilization management in healthcare is paramount.

Regulatory Compliance

Regulatory agencies such as The Centers for Medicare and Medicaid Services (CMS) mandate for Medicare and Medicaid conditions of participation (Title 42 CFR), The Social Security Act (Sect 1861 Regulation), and the Quality Improvement Organization (QIO) require that hospitals and health systems have an effective utilization review plan in place. Foundational elements of the Utilization Management department such as medical necessity, resource utilization, Length of Stay (LOS), denials and outcomes all affect reimbursement. Thus, it is prudent to have the Utilization Management department involved and aligned with the Revenue Cycle.

Payors and health plans set forth many requirements in contracts which also affect reimbursement. Armed with the knowledge of payor and health plan intricacies, the Utilization Management department can bridge the gap between quality care provisions and clinical medical necessity, intensity of services, coverage and reimbursement.

Having utilization management processes tied to financial policies ensures compliance from regulatory, quality and risk perspectives and provides a course for hospital and health system operations. Different hospitals interpret and implement utilization management in different ways. Utilization management could be a plan, process or approach used for claims processing, resource utilization, denial prevention, risk management and quality review.

Cost containment

The Utilization Management department can help with managing the cost and delivery of services.

The integration of the Utilization Management department and its processes within hospital operations can increase care efficiency and decrease revenue loss. For example, reviewing for medical necessity is one of the various utilization management processes. It involves a prospective (review of medical necessity for procedures and services before admission), concurrent (ongoing review of medical necessity for procedures and services during the stay) and retrospective (review after the discharge) reviews. This process alone can significantly decrease the length of stay, help manage the appropriate use of resources and services as well as preventing denials thus protecting revenue.

Some of the various activities that Utilization Management may be responsible for include:

  • Preadmission and admissions certification
  • Prospective review
  • Concurrent review
  • Retrospective review
  • Discharge planning review
  • Case Management referrals for:
    • Nursing services and Social Work services
    • Pharmacy and Respiratory services
    • Physical and Occupational Therapy services

Operational Efficiency

The Utilization Management department typically interacts with all, if not most, hospital operation services. By working with the healthcare team, Utilization Management department can facilitate and coordinate resources and services in a quality-conscious and cost-effective manner.

Quality Department

The Utilization Management department should be involved in quality assessment (QA)/Quality Improvement (QI) activities such as evaluating patient care systems that includes standards, protocols, and documentation for efficiency.

Admissions, Registration and Scheduling

Appropriate communication and documentation of patient status (inpatient, observation, outpatient) and discharge dispositions helps to ensure accurate coding, thus reducing denials and improving reimbursement potential.

Case Management

While Utilization Management departments are typically focused on cost management and Case Management looks after continuum of care transitions, both departments have overlapping responsibilities and must work together. Both Utilization Management and Case Management incorporate patient care navigation through the entire health care continuum from engagement to discharge/post discharge.

Revenue Cycle/Finance

With the impact utilization management has on the financial health of the hospital, it is important that collaboration exists between the Utilization Management department and the Revenue Cycle/Finance department. Today’s Revenue Cycle teams have access to data and information technology that can assist Utilization Management to manage length of stay, appropriately allocate resources, prevent denials and ensure accurate documentation for coding and appeals.

Originally, utilization management in healthcare started with a narrow focus. Now that Utilization Management department activities increasingly influence reimbursement and affect revenue, there is a move towards re-organizing or realigning Utilization Management to the finance function. Whether it be a solid or dotted line to Finance, these teams must work together to ensure the financial health of their institutions.


Transcript for “The Importance of Utilization Management in Healthcare”:

Mike Passanante: Hi, this is Mike Passanante. And welcome back to the Hospital Finance Podcast®.

Today, we’re going to be talking about the importance of utilization management in healthcare. And joining me to discuss this topic is Manager and Clinical Review Nurse, Meliza Weiner, from the BESLER team.

Meliza, welcome back to the show.

Meliza Weiner:  Hi, Mike! Thank you very much for inviting me.

Mike: So Meliza, you and I have talked about this topic before. And when we think about how utilization management affects revenue at a hospital, we kind of think about it in maybe three separate areas.

So, I thought in today’s podcast, we could walk through those and go through some of your ideas and thoughts there.

So, the first being regulatory compliance. Why don’t you tell us about that?

Meliza Weiner:  Well, you know, it’s funny you mentioned that because no matter which organization you go through, they will always talk about regulatory compliance. And it actually makes sense.

So, regulatory agencies are there to make sure that we are doing what we’re supposed to be doing for patients and our customers—and one of which is our lovely CMS.

So, the Centers for Medicare and Medicaid Services basically have a mandate. For any hospitals that participate with Medicare, they have to have a utilization management in place. In fact, that’s actually stated in the rules, in title 42. So, that needs to occur.

And for an organization to make sure that they are in compliance with Medicare, they have to show them that they have in policy that they have a committee that looks at utilization management.

And what utilization management really means is that you have to take a look at what are you doing exactly for your clients? For healthcare organizations, these are your patients. Are you actually doing what you’re supposed to be doing? Are you using the resources that you’re supposed to be doing?

And it makes sense. It makes sense because the whole point of a healthcare organization is to take care of patients. But you have to make sure that you’re doing the right thing for them—and rightfully so as well because healthcare organization are also, let’s face it and be transparent, they’re a business. So they need to have the financial stability to operate that way.

And so, you need some sort of a guideline. And that’s where regulatory agencies come in.

You also have your Social Security Act that comes in place in there. And you have all the various payers, your quality improvement organizations as well come into place for that.

Mike: Right. So, the second area that we’ve talked about is cost containment which there’s revenue and there’s costs, and of course, utilization management can help with the cost side too.

Meliza Weiner: Right! So, utilization management, basically, what they do is they look at from the beginning to the end. So when it comes to cost containment, they can increase the care efficiency, and they can also decrease the revenue loss.

So, a good example is reviewing basically for medical necessity. Now, medical necessity, you’re going to hear this term used all the time. It’s interpreted broadly. People can interpret it in different ways. But in essence, the focus of medical necessity is basically is the illness of that patient severe enough that you also have the intensity of the services severe enough that it warrants the care to be safely delivered in the hospital?

So, that being said, you have to make sure that you cover all those entities. The only way to do that is you have utilization management in place. We’re not sacrificing quality care. What they tend to look at is they look at criteria which is evidence-based, it’s clinical, science or evidence-base. And they want to make sure that do you need to be there when you’re supposed to be there, and are you getting the right care.

So, a good example—and we call this a review. You take a look—I always use an example of if you’re coming in let’s just say for one diagnosis. Let’s just say chest pain, you’re coming in, and you’re getting treated for chest pain. You have to take a look, okay, while you’re in there are you going to get—while you’re in here, let’s go take a look, and let’s do another test. And since you’re going to be doing this test two months later, it has nothing to do with what you can.

So, we’re not saying not to do the test. Is it the appropriate time to do the test?

So, that’s one of those things that utilization management can help and work with cost containment, keeping the revenue as well and not losing it. Because the one thing you don’t want to do is not get your revenue. You have to make sure that you get everything which you can get and take credit for it because you did the care.

Mike: Of course, collaboration leads to operational efficiency. And you and I have also talked about the appropriate place for utilization management departments within an organization. And we’re seeing more alignment within the revenue cycle, for instance. But not everyone does it that way.

So, talk to us about some of the collaboration that does occur between utilization management departments and other areas of the hospital and perhaps where you see the future of that department landing.

Meliza Weiner:  Okay! So, let’s start from the beginning. I always start everything from the beginning.

So, when we look at utilization management, you have the front-end. Here’s the front-end. You’ve got patients coming in. Before they come in the door, you can have utilization management take a look at “Are we ready for that patient to come in? Do we have the necessary services to provide for that patient? Are the necessary payers aware? Did we get certification? Did we get all the papers in place?”

They have to work with admissions. That’s a department that, at the front line, they have to work with-work with admissions, work with registration because they are focused on what they’re doing.

I’m not saying that they’re siloed. A lot of people use the word siloed. They’re not siloed; they’re focused on what they’re doing. Utilization management come in and help support the admission department, the registration department saying, “This person is coming in. This is what they got approved with insurance. Do we have all the paperwork in place? Do we have all the information we need?” So that’s one.

With registration as well, they can help as far as coding. When the patient gets discharged, do we have the correct disposition? They’re the ones who’s going to put that into the system, which is going to carry through to finance and billing. So if they are putting in information that’s not really true to do the picture of the patient, that could be a revenue loss.

A good example is if they’re going to be discharged to a long-term facility, but it’s being coded as a skilled nursing facility. That’s a difference of revenue. There’s a difference of reimbursement right there.

So, that’s where utilization management can come in. And it can say, “This patient was in for this condition. And they’re getting discharged to a long-term facility. It should be coded that way.”

So, it helps also with coding. And it helps with reimbursement.

Another department that they work very well with is case management. We just talked about discharge planning. So, when discharge planning occurs, sometimes the focus is just the patient was here, let’s just make sure the patient goes home, when are they supposed to go home.

But do they have the necessary services?

Utilization managers can see that upfront. When they come in, they can actually see the patient, and they can say, “We’re going to need maybe respiratory services to help, maybe we need physical therapy.” They can work in tandem with case management. And they can work on that at the beginning, so then when it’s time for discharge, they’re not working on it at the back end, and then you increase the length of stay.

So, they can decrease the length of stay by working on discharge planning as soon as the patient comes in. We want to make sure that the patient gets discharged safely and appropriately; and then, make sure that we do get our reimbursement for that care and services provided.

Quality department, the quality department focuses on the quality of care provided. They have improvement activities. Sometimes they call it quality improvement; sometimes, they call it quality assessment. They can work with utilization management as far as standards, protocols, policy, as far as processes involved. So that’s another area that utilization management can work with that department.

Another department is revenue cycle. Revenue cycle in the finance department, they get all the information as far as contracts with the payers, what’s going to be reimbursed, limitations and denials.

If they work with the utilization management upfront, they can mitigate those risks. As far as denials, they can work on making sure that everything that’s a required part of the contract is documented. And so, it will affect coding, and it will affect the reimbursement.

So, that alone helps with decreasing the revenue loss and making sure that they get the appropriate reimbursement.

Mike: Well, it’s certainly a hot topic today. And it’s certainly also a very important area of the hospital and any operations. And certainly everyone needs to contribute to ensuring that revenue is optimized at each facility that you’re capturing—every dollar that you’ve earned.

Meliza Weiner:  Correct, correct. I totally agree. I totally agree.

And right now, there’s trends on where utilization management falls. Way back at the beginning, utilization management started actually with the payers and have a very narrow focus. And now they are actually out there in the open, working with hospital operations.

And some have moved towards maybe working in tangent with revenue cycle, with finance. And to be frank, it doesn’t matter whether utilization management is a solid line or a dotted line to finance and revenue cycle. I think what needs to be taken into account is that utilization management needs to be part of that team. They need to work in tangent with the finance department.

The finance department have their knowledge of finances. Utilization management have their knowledge as far as payer requirements, guidelines, and clinical—which is the most important thing, not to lose focus on the clinical aspect—that they can put it together and bridge that gap that usually occurs between clinical and finance. They just need to work together because, nowadays, a stable healthcare organization needs to be agile enough to work with the regulatory agencies, contract changes, reimbursement rules and regulations, everybody.

Just in a sense of what we always say, everybody seems to work together.

Mike: Right! Great thoughts here today, Meliza. Thank you so much for joining me on the podcast.

Meliza Weiner:  Thank you very much.


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