Claims Review, Preventive Care, Encouragement of External Cost-Control Systems

Claims Review
There is no doubt that claims review can generate substantial cost savings. In general, this review is done not by the employer but by the provider of medical expense benefits, a third-party administrator, or some independent outside organization. At a minimum, claims should be reviewed for patient eligibility, eligibility of the services provided, duplicate policies, and charges that are in excess of the usual, customary, and reasonable amounts. Many medical expense plans routinely audit hospital bills, particularly those that exceed some stipulated amount, such as $5,000 or $10,000. They check for errors in such items as length of stay, services performed, and billed charges. Many insurance companies have found that each dollar spent on this type of review results in two or three dollars of savings.

A newer trend in claims review is utilization review or case management, which may be done on a prospective basis, a concurrent basis, a retrospective basis, or a combination of the three. A prospective review involves analyzing a case to see what type of treatment is necessary. Hospital preadmission authorization, second surgical opinions, and predetermination of dental benefits fall into this category. However, when a patient is hospitalized, concurrent review can lead to shorter stays and the use of less expensive facilities. Concurrent review is normally carried out by a registered nurse and typically begins with precertification of a hospital stay for an initial specified length of time. The nurse then works with the patient's physician to monitor the length of stay and to determine whether other alternatives to hospitalization—such as hospice or home health care—can be used. Many providers of medical expense benefits pay for these alternative forms of treatment even if they are not specifically covered under the medical expense plan, as long as their cost is lower than the cost of continued hospitalization.

A retrospective review involves an analysis of care after the fact to determine if it was appropriate. Such a review may lead to a denial of claims, but its purpose is often to monitor trends so that future actions can be taken in high-cost areas. For example, a retrospective review may lead to the establishment of a concurrent review program for a hospital with excessive lengths of stay.

Health and Preventive Care
There is little doubt that persons who lead healthy lifestyles tend to have fewer medical bills, particularly at younger ages. It is also evident that healthier employees save an employer money by taking fewer sick days and having fewer disability claims. For these reasons, employers are increasingly establishing wellness programs and employee-assistance plans. With increasing health awareness among the general population, the existence of these programs has a positive side effect—the improvement of employee morale.

Encouragement of External Cost-Control Systems
While a certain degree of cost containment is within the control of employers, the proper control of costs is an ongoing process that requires participation by consumers (both employers and individuals), government, and the providers of health care services. Many agencies and committees of the Department of Health and Human Services carry out these activities at the federal level. This government department has the primary responsibility for identifying health care needs, monitoring resources, establishing priorities, recommending courses of action, and overseeing laws that pertain to health care.

At the state and local level, many employers are active in coalitions whose purpose is to control costs and improve the quality of health care. These groups—which may also involve unions, providers of health care, insurance companies, and regulators—are often the catalyst for legislation, such as laws authorizing PPOs and establishing hospital budget-review programs. Some coalitions act as purchasing groups to negotiate lower-cost coverage for members. For example, one midwestern coalition consists of several large corporations and offers a uniform health plan to the 50,000 employees of its members. The plan is self-funded by the coalition and utilizes the services of about 1,000 primary care physicians and 4,000 specialists. Another coalition, an example of a different approach, represents over 10,000 companies with fewer than 150 employees each. The coalition negotiates with providers of medical expense coverage and offers its members a choice of about a dozen different group plans. The annual increase in cost to coalition members has been significantly less than the annual increase in cost for other companies in the area that do not belong to the coalition.