Managing prior approval for site-of-service referrals: an algorithmic approach

Maqbool Dada,Kayode A Williams,Zhihua Xing,Yunong Gan,Mohammad Ali Alamdar Yazdi,Edward Kumian,Ernest Smith,Vishal Mundly,Yi Zhou,Chester G Chambers,Sonia E Toporcer,Changhun Ha,Mark Mooney

doi:10.1186/s12913-022-07523-3

Maqbool Dada, Kayode A Williams + Show 11 more

Open Access

https://doi.org/10.1186/s12913-022-07523-3

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Abstract

ObjectivesMany payers and health care providers are either currently using or considering use of prior authorization schemes to redirect patient care away from hospital outpatient departments toward free-standing ambulatory surgical centers owing to the payment differential between these facilities. In this work we work with a medium size payer to develop and lay out a process for analysis of claims data that allows payers to conservatively estimate potential savings from such policies based on their specific case mix and provider network.Study DesignWe analyzed payment information for a medium-sized managed care organization to identify movable cases that can reduce costs, estimate potential savings, and recommend implementation policy alternatives.MethodsWe analyze payment data, including all professional and institutional fees over a 15-month period. A rules-based algorithm was developed to identify episodes of care with at least one alternate site for each episode, and potential savings from a site-of-service policy.ResultsData on 64,884 episodes of care were identified as possible instances that could be subject to the policy. Of those, 7,679 were found to be attractive candidates for movement. Total projected savings was approximately $8.2 million, or over $1,000 per case.ConclusionsInstituting a site-of-service policy can produce meaningful savings for small and medium payers. Tailoring the policy to the specific patient and provider population can increase the efficacy of such policies in comparison to policies previously established by other payers.

Highlights

As the cost of health care delivery continues to grow in the US, governmental and commercial payers are implementing prior authorization policies that strive to take advantage of the site-of-service (SOS) payment differential [1, 2]
Precis We develop a rule-based algorithmic approach to enhance prior approval policies for smaller insurance providers that leverages the site of service differential to reduce costs
Findings include: 1) Average savings of $1000 per episode of care are projected for roughly 12% of such episodes; 2) Savings are maximized when the policy is provider-specific; 3) Policies for 4 CPT (Current Procedural Terminology)

Summary

Introduction

As the cost of health care delivery continues to grow in the US, governmental and commercial payers are implementing prior authorization policies that strive to take advantage of the site-of-service (SOS) payment differential [1, 2]. Commercial payers are motivated to shift the SOS for these procedures away from HOPDs to ASCs and mobile and telehealth units. In 2019 United Healthcare implemented a SOS policy that adds medical necessity criteria (MNC) to roughly a thousand surgical procedures. Under this policy, providers are required to request prior authorization to perform a procedure in the HOPD rather than at a lower cost ASC. While evidence to date suggests that there are enough safeguards in place that quality of service does not deteriorate, [3, 4] authorization to use the HOPD is automatically given for any patient with a condition of complication specified in the MNC

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