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Suggested Citation:"Index." Institute of Medicine. 1989. Controlling Costs and Changing Patient Care?: The Role of Utilization Management. Washington, DC: The National Academies Press. doi: 10.17226/1359.

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Acquired immune deficiency syndrome (AIDS), 119, 121, 128, 131, 138, 139

Admission review, 18, 37

Aetna Life and Casualty HEALTHLINE, 97

Allstate, 15

American College of Physicians, 36 n.5, 107

American College of Surgeons, 36 n.5

American Federation of State, County, and Municipal Employees, 42

American Hospital Association, 94, 107, 148, 154

American Medical Association, 107, 148, 154

American Society of Anesthesiologists, 36 n.5

Amyotrophic lateral sclerosis, 121

Anderson, Odin, 37

Assessment of care, see Criteria for assessment of care

appropriate use of medical services, 45-46, 48, 52, 83

data sources for, 49

extrapolation from rates of nonconfirming second opinions, 39

methods for assessing illness severity, 48-49

variations in use of medical services, 44-45, 46, 48, 65


Back pain, 80-81, 82, 104

Bank of America, 131

Blue Cross and Blue Shield

development of prior review guidelines, 107, 148, 154

effects of cost-management programs, 93, 98, 115

employer monitoring of cost-containment activities of, 41-42

first plan, 30, 35

of Greater Philadelphia (Independence), 95-96, 131

health planning efforts, 36

high-cost case management by, 119, 129, 131

integrated service/insurance products, 50

losses, 2

managed fee-for-service days under, 95

of Massachusetts, 95

of Minnesota, 45

of North Carolina, 93

of Northeast Ohio, 36

operational problems in, 222

of Pennsylvania, 43

small-area study by, 45, 69

Suggested Citation:"Index." Institute of Medicine. 1989. Controlling Costs and Changing Patient Care?: The Role of Utilization Management. Washington, DC: The National Academies Press. doi: 10.17226/1359.

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utilization review efforts/programs, 37, 59, 60-61, 93, 94, 98, 171


Cancer, 88, 121, 125

Cardiac pacemakers, 48, 83

Carotid endarterectomies, 46, 48, 83

Case management, see High-cost case management

Cataract surgery, 49, 158

Caterpillar, Inc., 131, 138

Ciba-Geigy, 122

Claims administrators

case management by, 123, 125

prior review by, 61, 68-69, 258-259, 261-262

Claims data

defects in cost and utilization data based on, 111, 158

high-cost case identification through, 127

HMO processing of, 220-221

quality-of-care information from, 115

Codman, Ernest, 36

Commercial health insurance companies, see Health insurance industry; Health insurance plans; and individual companies

Commission on Professional and Hospital Activities, 81-82

Committee on the Costs of Medical Care, 28

Concurrent review, see Continued-stay/concurrent review

Confidentiality of medical information

employer respect for, 7, 151

in high-cost case management, 132, 139 n.6

utilization management organization responsibility for, 7

Consumer price index, changes in, 15, 33

Continued-stay/concurrent review

appeals processes, 193

by Blue Cross plans, 37

criteria/standards for, 48, 81-82

defined, 18, 170

effectiveness of, 98

focus of, 120

high-cost case management and, 127, 139

liability for, 180

by PSROs, 39, 66

responsibility for, 66

variations in, 65, 66

Coronary angiographies, 46

Coronary artery bypass surgeries, 46, 147

Cost management/containment strategies

basic elements of, 32-33

benefit plan design, 20, 34-35, 214

control of provider payments, 21, 35

early efforts by third parties, 32-38

effectiveness of, 24-25

employer interest in, 40-43

federal government initiatives, 38-40

financial incentives to providers, 20-21

gatekeeping/triaging, 21

health planning, 35-36

inappropriate utilization as a target for, 44-46

physician education, 21

and quality assurance, 43

and quality of care, 46-47

risk pool management, 33-34

by small businesses, 42

utilization review, 36-38

Costs of health care

aging of population and, 24

causes of increases in, 23-24, 32, 115

and clinical judgments about value of treatments, 23

economic shocks and, 40

effects of utilization management on, 1-2, 3-4, 14, 52, 92, 95, 145-146

increases in, 2

information resources on, 47-48

number of providers and, 24, 35-36, 43

prior review and, 92, 100-101, 104

screening for untreatable diseases and, 24

third-party financing and, 28

trends in, 3-4

and U.S. competitiveness, 15

Council on Wage and Price Stability, 40

Criteria for assessment of care

adoption and modification of, 83-84, 177-178

appropriateness evaluation protocol (AEP), 80, 82

availability of, 5

competitiveness and, 22-23, 80, 154, 160

computerization of, 80, 107 n.3

diagnosis-specific, 48

differentiation by level of review, 84-85

exceptions to, 3, 72, 79, 173

of HMOs, 215

hospitalization, 79-82, 104

Suggested Citation:"Index." Institute of Medicine. 1989. Controlling Costs and Changing Patient Care?: The Role of Utilization Management. Washington, DC: The National Academies Press. doi: 10.17226/1359.

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ISD-A, 80-81, 82

length-of-stay norms, 48, 81-83, 84

and liability, 176-178

lists of procedures, 79

medical community involvement in, 147, 153, 205

procedure necessity, 45, 83, 172-173, 177

recommendations on, 6, 7, 9, 11, 147, 149, 154, 159-160

reliability of, 80

research needs on, 4-5, 159-160

sources of, 11, 83-84, 283

standardizations of, 178

statistical models for, 178

steps in generation of, 147

variation in, 89


Discharge planning, 18, 64, 121-122, 125

Dunlop Group of Six, 41

Dunlop, John, 40


Economic Stabilization Program, effectiveness of, 30, 40


enrollee/patient, on utilization management obligations, 7, 103-104, 109, 151, 156

physician, as cost-containment strategy, 21, 48-49, 147, 156

see also Health education

Employee Retirement and Income Security Act (ERISA), 30, 41, 174, 187-188, 189

Employers, see Private employers

Evaluation of utilization management

barriers to, 110

behavioral biases against, 22

biases in, 96, 101

compared to expected utilization with no intervention, 95

competition and, 22-23

conceptual and methodological problems, 21-23, 86, 93, 100-101, 102, 111-116, 145

cross-sectional and longitudinal analyses, 97

of high-cost case management, 125-126, 131, 145

by retrospective reviews, 87

review-versus nonreview groups, 96, 100

see also Studies and surveys of utilization management

Expenditures for health care

by business/private industry, 15, 16

by health plan members for high-cost illnesses/injuries, 120-121

hospital care, 31

by major sources of funds, 31

number of physicians and, 24

personal health care, 31

physician services, 31

prior review and, 96

total, trends in, 14-15

Experimental Medical Care Review Organizations, 39


Federal government

health care cost-containment initiatives, 38-40

see also Medicare; Peer review organizations


high-cost case management and, 129

managed programs for, 50

and volume of physician services, 44

Foundations for Medical Care, 30, 35, 37, 39


General Motors, cost-containment reports, 30, 41-42

Greater Phoenix Affordable Health Care Foundation, 42

Group Health Association of America, 31

Group Health Association of Washington, D.C., 30-31, 35


Health benefits, see Health insurance plans

Health Care Financing Administration, 121 n.1, 154

Health education, employer support for, 41

Health Insurance Association of America, 107, 148, 154

Health insurance industry

growth of, 27-32

integrated service/insurance products, 50

Suggested Citation:"Index." Institute of Medicine. 1989. Controlling Costs and Changing Patient Care?: The Role of Utilization Management. Washington, DC: The National Academies Press. doi: 10.17226/1359.

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losses, 2, 15, 60

premium setting, 100-101

utilization management by, 60

withdrawals from group insurance market, 15

Health Insurance Plan of Greater New York, 35

Health insurance plans

coinsurance rates, 104

community rating, 33

cost controls in, 20, 34-35

cost sharing in, 96, 109, 115, 151

coverage of alternatives to hospitalization, 41

derision-making process, 212

deductibles, 104

defined contribution programs, 110

design of benefits, 20, 34-35, 94, 115, 148, 151, 214

duplicate coverage, 114

enrollee/patient navigation of, 103-104

enrollment trends, 30-32

exceptions to limitations in, 19-20, 122, 140-141, 173

expenditures by businesses, 14-15

experience rating, 33

HMO underwriting practices, 214

individually purchased, 34, 153

information on prior review policies in, 79

limits on coverage, 141 n.8, 173

premium increases, 15

prior review integrated with, 66, 68-69

refusal to certify, 4

risk pool management for, 33-34

second-surgical-opinion provisions, 37

for self-employed people, 34

sources of, 32

triple option benefit package, 51

see also Costs of health care; Uninsured people

Health maintenance organizations (HMOs)

antitrust liability, 184

benefit design, 214

carrier-sponsored, 235-240

case studies, 213, 229-243

claims processing, 220-221

clinical protocols/guidelines, 215, 218

congressional support for, 47

data analysis by, 215-216, 219

data integrity in, 221-222

defined, 206

delivery of health services, 215-219

employer support for, 41

enrollee understanding of benefit restrictions in, 205-206

enrollment criteria, 214

enrollment information, 114

enrollments, 50, 214, 219, 220

factors affecting performance, 209-213

federally qualified, 214, 219

goals of, 210-211

group-model, 207, 217, 233-235

growth in, 50

high-cost case management by, 129, 218

hospital-sponsored IPA, 230-232

hospital use in, 44, 177

integrated service/insurance products, 50

losses, 2, 209

management information systems, 220-221, 222, 223, 231, 234, 236-237, 238-239, 241-242

market effects of and on, 209-210

medical director's role, 222, 232, 237, 240

medical necessity determinations, 173

network model, 207

open-ended, 51

operational problems, 220-222

operations, 211-213

organizational structure, 65, 207-209, 210-211, 216

patient flow procedures, 215, 218

patient payment obligations, 195

peer review in, 216, 219, 222

physician contracting arrangements with, 211-212, 217

physician incentives used by, 47, 211, 216, 224-227, 230-231, 233-234, 236, 238, 241

physician selection, 215

physician-sponsored IPA, 240-243

policy and research issues, 227-229

quality assurance in, 206, 216, 219-220, 222-224

quality of care in, 50, 205, 210, 211, 223

regulation of, 50, 207, 210, 219-220, 223

staff model, 207, 215

types of, 207

underwriting benefits, 214

utilization management approaches, 6, 66, 214-222, 229, 231-232, 234-235, 237, 239-240, 242

Suggested Citation:"Index." Institute of Medicine. 1989. Controlling Costs and Changing Patient Care?: The Role of Utilization Management. Washington, DC: The National Academies Press. doi: 10.17226/1359.

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see also Independent practice associations

Health planning

cost-containment effects of, 35-36, 40

employer support for, 41

High-cost case management

administrative aspects of, 133, 139

basic process, 3, 123-130

case manager responsibilities, 121-122, 126, 128-130, 139, 140, 280-281

confidentiality concerns, 132, 139 n.6

cost-effectiveness judgments in, 5, 66, 149

costs of, 130

definition of, 19, 119

denial rates, 145

employee awareness of, 127

employer support for, 41, 133-134

enrollee preceptions of, 132-133

evaluation of, 134-138

exceptions to limitations in benefit contracts, 19-20, 122

focus and characteristics of, 3, 19, 120-122, 134, 145

freestanding programs, 123-124

growth of, 119

hypothetical case summaries, 123, 125-126

identification and screening of cases, 68-69, 123, 126, 127-128, 137-139, 148

impact of, 4, 130-131, 146

improvements in, 138-139

legal issues in, 140-141

measures of, 135-136

of Medicare patients, 138

negative aspects of, 132-133

number of patients in programs, 137

objectives of, 122-123

on-site, 129

operational variations in, 123-127

positive aspects of, 132, 133, 141-142

protocol standardization, 139, 148

provider effects, 133

purchaser effects, 133-134

purchaser's role in, 122-123

and quality of care, 133, 134

savings opportunities with, 121-122, 131

sources of, 122

team approach to, 128

utilization management categories applying to, 123-124

Hill-Burton program, 30, 35

Home care, 135, 136, 138, 141


criteria for determining need for, 79-81, 104

for diagnostic purposes, 171

effects of utilization management on use and costs of, 3-4

elective, 3

emergency admissions, 3, 108

HMO rates, 44

length-of-stay norms, 81-83

prior to day of surgery, 79

versus outpatient care, 93-94


attitudes on high-cost case management, 133

diversification by, 106

incentive payments to physicians, 47

multihospital systems, 50

occupancy rates, 106

physician relations with, 106

preadmission checks on insurance coverage, 70

responsibilities on utilization management, 155-156

third-party-payer relationships with, 106-108

unnecessary ancillary services, 45-46

utilization management by, 64-65, 106; see also Discharge planning

Hysterectomy, 46, 88


Independent practice associations (IPAs)

financial incentives in, 224-225, 226, 241

management information system in, 241

model for, 35, 37

operational responsibilities of, 212-213

peer review in, 216, 222

physician contracting arrangements with, 217

physician selection by, 215, 218-219

physician-sponsored, 240-243

quality assurance in, 216, 218

utilization management procedures, 51, 59, 217-218, 242

Information resources, on cost and use of health services, 47-48

International Medical Centers Inc., 205

Intracorp, 131

Suggested Citation:"Index." Institute of Medicine. 1989. Controlling Costs and Changing Patient Care?: The Role of Utilization Management. Washington, DC: The National Academies Press. doi: 10.17226/1359.

Page 306


John Deere & Company, 30, 93

Joint Commission on the Accreditation of Health Care Organizations, 116

Joint Commission on the Accreditation of Hospitals, 36 n.5


Kaiser Foundation Health Plan, 30, 35

Kaiser Permanente, 218

Kemper, 15

Knee arthroscopy, 83


Labor-Management Group, 30, 40-41

Legal issues and litigation

appeal rights, 180-181

award of attorneys' fees, 188

discriminatory treatment claims, 141

ERISA preemption, 174, 187-188, 189

exceptions to limits in benefit contracts, 140-141

expedition of judicial review, 193-194

in high-cost case management, 140-141

independent contractor defense, 189-190

and jury sympathies, 174-175

limits on damages, 187

medical necessity concept, 171, 172-173, 174, 176-177, 184, 185, 187, 194

ostensible agency doctrine, 190

for patients, 193-195

payment for unnecessary medical services, 194-195

qualified privilege defense, 184

racketeer influenced and corrupt organization action, 188

Sarchett v. Blue Shield of California, 88, 170-171

in utilization review, 88-89, 169-196

Wickline v. California, 88, 109, 140, 170, 171-172, 174-176, 178-179, 186, 188, 191, 192


antitrust, 184-185

of attending physician, 88, 105, 190-192

bad faith in insurance and, 175, 180-181, 187, 189

for breach of contract, 175, 179-180, 189

causation and, 172, 174, 178-179, 180, 181, 187

of consultants and employees, 185-186

for defamation, 183-184

direct, 189

and duty of care, 175-177, 180

of employer/payer, 109, 188-190

fiduciary relationship and, 181, 187-188

indemnity, 190

infliction of emotional distress, 182

and informed consent, 192

for interference with contractual advantage, 183-184

negligence, 175-179, 180, 181, 189

products, 182-183

of review organization, 4, 78, 83, 88, 89, 140, 145, 173-188, 284-285

and standard of care, 176-178, 185

vicarious, 189-190

and warranty theories, 182

Louisiana, regulation of utilization review organizations, 186


Maine, regulation of utilization review organizations, 186-187

Mammography screening, 23

Maryland, regulation of utilization review organizations, 186

Massachusetts Business Roundtable, 42

Mayo Clinic, utilization review plans, 59, 107

McCarthy, Eugene, 37

Medicaid programs

cost-containment strategies, 38

evaluation of cost-containment strategies, 96

geographic data integration on, 69

liability for cost-containment mechanisms, 88, 171

second-opinion programs for, 39

Medical malpractice, 41, 105, 159, 191; see also Liability

Medical organizations, see individual groups

Medical practice

employer influence on standards for, 109

guidelines, 10-11, 23, 49, 107, 147, 159-160, 215

medical necessity concept, 171, 172-173

reasons for changes in patterns of, 136-137

variations in physician styles of, 46

Suggested Citation:"Index." Institute of Medicine. 1989. Controlling Costs and Changing Patient Care?: The Role of Utilization Management. Washington, DC: The National Academies Press. doi: 10.17226/1359.

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Medical services/procedures

criteria for determining necessity of a procedure, 45, 83

expenditures for, relative to number of physicians, 24

fee-for-service payment rates and volume of, 44

geographic variation in patterns of, 44-45

inappropriate/unnecessary, 2, 15, 39, 44-46, 103, 194-195

methods for indentifying inappropriate use, 45

payment for unnecessary services, 194-195

rationing of, 24, 148-149

variations in utilization, 44-45


cost-containment strategies, 38, 43

costs of, 38

denials of payments, 77, 102

economic incentives to minimize days of care, 64

high-cost case management in, 138

preadmission review for, 14, 102

precertification of beneficiaries, 59, 60

prospective payment system, 30, 40, 98, 101, 102, 106, 115, 116, 121 n.1

quality assurance program for, 116

quality of care in HMOs, 205

responsibility for reviewing care for beneficiaries, see Peer review organizations

second-opinion programs for, 39

Methodological problems in studies of utilization management

behavioral biases, 22

claims data, 111, 137, 158

confounding by other interventions, 93-94, 96, 102, 115, 138

cost/price change considerations, 100

data availability and quality, 48

evaluator knowledge of data sources, 100

group data, 94, 111, 114, 137

high-cost case management, 134-138

measures of impacts and limitations, 22, 86, 112-113, 134, 135-136

medical care prices, 115

noneconomic effects, 115-116

nonprogram variables, 100

program data, 100, 114

in review versus nonreview groups, 100

savings calculations, 114-115, 134-137

short time series, 100

Midwest Group on Health, 42

Muscular dystrophy, 121, 136


National Conference on Medical Costs, 40

Nazemetz, Patricia M, 42

Nightingale, Florence, 36 n.5

Nurse reviewers/managers

high-cost case management by, 128, 140 n.7

liability of, 177

monitoring of, 73

qualifications, 72-73, 140 n.7, 276-277

responsibilities, 66, 70, 71-73, 77, 84, 85, 89, 103-104, 276-277

scope of assessments, 148-149

training, 73, 104

Nursing homes, prospective payment system and utilization of, 102


Office of Personnel Management, 122 n.2



case manager relationship with, 128-130

high-cost, types of, 121

legal issues for, 193-195

medical abandonment of, 192

payment obligations for unnecessary services, 194-195

penalties for noncooperation in review, 18-19, 69, 88

responsibilities on utilization management, 9, 69-70, 108, 155-156

Peer review organizations (PROs)

appeals processes, 85

case management by, 121 n.1

claims data tracking by, 116

congressional support for, 47

demonstration project on small-area analyses for, 45 n.7

denials of Medicare payments, 77, 102

federal oversight of, 11-12, 65, 154

geographic data integration, 69

high-cost case management by, 131

liability of, 185

physician adviser role in, 74-75

Suggested Citation:"Index." Institute of Medicine. 1989. Controlling Costs and Changing Patient Care?: The Role of Utilization Management. Washington, DC: The National Academies Press. doi: 10.17226/1359.

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preprocedure review by, 83

private clients, 39, 60

second opinion programs, 39

utilization management in, 40, 66, 69, 89, 246-249

variation in, 65, 89

Physician incentives

administering, 226-227

HMO, 205, 211, 216, 224-227, 230-231, 233-234, 236, 238, 241

punitive/negative, 49

and quality of care, 205, 224-225

to reduce Medicare services, 47

restrictions on, 47, 225

surveys on, 225-226

types of, 224-225

Physician-patient relationship

liability and, 183-184, 191, 192, 194

prior review and, 105-106

Physician Payment Review Commission, 107

Physicians, advisers

attitudes of practicing physicians toward, 75

bases for decisions, 73-74, 85, 176, 177

caseloads, 76, 278-279

liability of, 176, 177, 185-186

licensing of, 77, 88

local versus nonlocal, 76

monitoring performance of, 75, 77

PRO use of, 74-75, 77

productivity incentives, 77

qualifications of, 77, 278-279

role in prior review, 66, 72, 73-78, 83, 86, 89

scope of assessments, 148-149

training of, 77

Physicians, attending

attitudes on high-cost case management, 133

attitudes on prior review, 102-103, 105, 146, 170

case manager relationship with, 128-130

contracting arrangements with HMOs, 211-212

defamation suits by, 183-184

education of, as cost-containment strategy, 21, 49, 147, 156

fee-for-service payments and volume of services, 44

goals of, 211

-hospital relations, prior review and, 106

incentives for acceptance of utilization management, 153-154

information feedback to, 49

interference with contractual advantages of, 183-184

involvement in developmental criteria, 147, 153, 205

liability of, 88, 105, 172, 178-179, 190-192

number of, and costs of health care, 24

obligation to provide treatment to patient who cannot pay, 192

response to prepaid plans, 35

responsibilities on utilization management, 8, 155-156

review organization's handling of, 72, 74, 78

third-party-payer relationships with, 106-108

variation in practice styles, 46

Preadmission review

cost assessments during, 66

defined, 18

for emergency admissions, 108

employer support of, 41

focus of, 120

high-cost case screening by, 127

by hospitals, 106

impact on Medicare beneficiaries, 102

and inpatient hospital days, 93, 98

patient initiation of, 87

physician certification of necessity of admission, 37

by PSROs, 39

variations in, 65

waiver of second-opinion requirement because of, 88

Predetermination programs, 134 n.4, 137

Preferred provider organizations (PPOs), 50, 69, 184

Prepaid group practices (PGPs), 30-31, 35, 51

Preservice/preprocedure review, 18, 79

Prior review

and actuarial estimates of savings, 101

anxiety and inconvenience caused by, 4, 103, 146

appeals processes, 6, 7, 85-86, 107, 108, 149-150, 171, 172, 179, 183

before-and-after studies of, 91-93, 94

comparative studies of, 93-96

components of, 3, 18, 66-67, 83

Suggested Citation:"Index." Institute of Medicine. 1989. Controlling Costs and Changing Patient Care?: The Role of Utilization Management. Washington, DC: The National Academies Press. doi: 10.17226/1359.

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contingent nature of, 19

contractual descriptions of services, 282-283

criteria for assessment of care, 7-8, 79-85, 89, 159-160

definition of, 17-18, 170

employer/purchaser reactions to, 42, 108-110

enrollee/patient education on, 7, 103-104, 109

financial penalties for noncooperation in, 18-19, 104

focus of, 66, 89, 110

guidelines for conduct of, 108, 148

handling of attending physicians, 72, 74, 78

impact of programs, 91-116

initiation of, 42, 69-70

and inpatient hospital utilization, 92, 93, 96-97, 110

integration with benefit plan administration, 66-69

liability in, 180

limitations of data on, 114

measures of impact, 112-113

for Medicare recipients, 14

multivariate studies of, 96-98

nurses' role in, 66, 71-73, 89

and outpatient/physician office services use, 92, 97

and patient costs, comfort, and convenience, 92, 104, 109

physician adviser role in, 66, 72, 73-78, 83, 86, 89

and physician-hospital relations, 106

and physician-patient relationship, 105-106

and provider-purchaser relations, 106-108

and quality of care, 4, 7, 102-103, 110, 115-116, 146, 149

refusals to authorize services, 19

reporting and feedback mechanisms, 86-87

responsibility for obtaining, 108

retrospective denial of claims following, 19, 98, 106

spillover effects of, 98, 101, 110

targeting of, 108

timeliness in handling of requests, 107, 108

trends in use of, 14

weaknesses in evidence on, 99-101, 145

see also Admission review; Continued-stay/concurrent review; Discharge planning; Preadmission review; Second-opinion programs

Private employers

attitudes on high-coat case management, 133-134

education of employees on utilization management requirements, 7, 103-104, 109, 151, 182

effects of prior review on, 108-110

expenditures for health benefits, 2

factors shaping decisions on prior review, 109-110

health care cost-containment initiatives, 40-43

with insured health benefit plans, 2; see also Health insurance plans

liability for utilization review, 109, 188-190

population covered by health insurance plans through, 32

PRO review contracts with, 39

responsibilities in utilization management, 6-7, 69-70, 150-151

self-insurance by, 2, 41, 60, 61, 182, 189

share of spending for health services, 40

Professional Standards Review Organization (PSROs), 39, 59, 60, 66, 79, 93

Proprietary information, and competition, 7-9, 286-287

Prospective Payment Assessment Commission, 102

Prospective reimbursement

employer support for, 41

see also Medicare

Prostatectomy, 46, 156

Provident Mutual, 15

Provider payments

controls on, 35

Psychiatric cases

health plan coverage for, 141 n.8, 149

high-cost case management for, 128, 138, 141 n.8


Quality assurance

defined, 219

in high-cost case management, 140

in HMOs, 206, 216, 219-220, 222-224

Suggested Citation:"Index." Institute of Medicine. 1989. Controlling Costs and Changing Patient Care?: The Role of Utilization Management. Washington, DC: The National Academies Press. doi: 10.17226/1359.

Page 310

monitoring performance of nurse-reviewers and physician-advisers, 73, 75, 77

operational problems impairing, 222-224

in utilization management, 6, 73, 75, 77, 140, 150

Quality of care

guideline development for, 154

high-cost case management and, 133, 134

in HMOs, 205, 210, 211

physician incentive plans and, 205

prior review and, 4, 7, 102-103, 110, 115-116, 146

utilization management and, 4, 36 n.5, 46-47, 146, 154


Rand Corporation, 46, 107

RCA Plan for Health, 95


appeals of review decisions, 6, 149-150

disclosure criteria, 6, 7, 149, 160

employer/purchaser responsibilities, 6-7, 150-151

long-term, 9-12, 157-161

near-term, 6-9, 150-157

oversight of utilization management, 11-12, 160-161

patient responsibilities, 9, 156-157

practice guidelines, 10-11, 159-160

practitioners/institution responsibilities, 8, 155-156

quality assurance mechanisms, 6, 150

research on effectiveness, 6, 9-10, 149, 157-159

review criteria, 6, 7, 9, 11, 149, 159-160

utilization management organizations' responsibilities, 7-8, 151-154

Research on appropriate care, 45-46, 48, 52, 83

Research on utilization management

clinical, limits on, 158, 159

feedback and education strategies, 4-5, 147

impediments to, 10

programmatic, 158-159

recommended, 6, 9-10, 157-159

targets of, 89, 158

see also Evaluation of utilization management; Studies and surveys of utilization management

Research on variations in utilization management, 44-45, 46, 48, 65

Retrospective utilization review

advantages and disadvantages of, 20

appeals processes, 193

denial of claims following prior certification, 19, 98, 106

of high-cost cases, 127

hospitalization criteria, 79-80

initial focus of, 35

litigation, 88, 170-171

by PROs, 69

by PSROs, 39, 69, 79-80

regulation, 39; see also Legal issues and litigation

targeting problem providers, 69

Risk pools, management of, 33-34

Ross-Loos Medical Group, 30, 35


Second-opinion programs

impact of, 98-99

objectives of, 87

participation rates, 99

and patient anxiety, 103

penalties for nonparticipation in, 99

prior review combined with, 83, 99

procedures subject to, 68, 79, 87

requirements of, 87-88

resistance from medical community, 37

screening referrals for, 18

types of, 87


advantages of, 41

claims processing, 61

and insurance industry structural changes, 60-61

and liability, 182, 189

monthly costs for family coverage, 41

Service Employees International Union, 95, 130-131

Services Interaction Targets for Opportunities program, 120

Social/Health Maintenance Organization demonstration projects, 120

Social Security Amendments of 1972, 39

Spinal injury cases, 131, 138

Store Workers Health and Welfare Fund, 37

Studies and surveys of utilization management

before-and-after, 91-93, 94

Suggested Citation:"Index." Institute of Medicine. 1989. Controlling Costs and Changing Patient Care?: The Role of Utilization Management. Washington, DC: The National Academies Press. doi: 10.17226/1359.

Page 311

case studies of HMOs, 229-243

case studies of PSROs, 93

comparative, 93-96, 145

control for systemwide influences, 95

Health Interview Survey, 94

Hospital Discharge Survey, 94

multivariate, 96-98, 145

small-area, 44-45

see also Methodological problems in studies of utilization management


Third-party financing of health care

cost management efforts, 32-38

defined, 28 n.1

growth of, 27-32

see also Health insurance industry

Tonsillectomy and adenoidectomy, 68, 76, 80, 82, 104

Transamerica Occidental, 15

Tympanotomy tube insertion, 83


Uninsured people

access to health care, 24

number of, 31-32

United Mine Workers Union, 37

Utilization management

administrative burdens on providers, 4, 5, 7, 107, 144, 146, 147, 154

assessment strategies, 48-49, 66; see also Criteria for assessment of care; Methodological problems in studies of utilization management

case studies, 229-243

claims administration integrated with, 61, 68-69

common elements of programs, 66

computerization of, 5, 70, 71, 73, 139, 145, 148, 182-183, 221

concerns about, 5-6, 149-150

definition of, 2-3, 17

education strategies for, 48-49

effects on health care use and cost, 1-2, 3-4, 14, 52, 145-146, 220

employer initiatives, 40-43

evolution of, 147-149

federal government initiatives, 38-40

focus of, 4, 145, 169

growth of, 2, 14, 105, 143, 169

guidelines for conduct of, 108, 154

in health maintenance organizations, 205-243

industry structure and process, 58-90

information resources for, 47-48

and inpatient days, 95-96

operational efficiency, 148

operational problems impairing, 220-222

origins of, 21-52

in peer review organizations, 246-249

policy and research issues, 227-229

public hearings on, 250-252

quality assurance in, 6, 7, 43, 150

and quality of care, 4, 7, 36 n.5, 46-47, 102-103, 110, 146, 154

and rationing of medical services, 148-149

recommendations on, 5-12, 143-162

refusals to certify benefits, 4

regulation/oversight of, 4, 11-12, 73, 89, 144, 150, 160-161

research influences on, 5, 43-46, 145, 147

scope of review, 66, 147

spillover effects of, 98, 101, 110

standardization of processes, 107

status of, 144-146

and surgical days/rates, 95-96, 97

third-party efforts, 32-38

see also Cost management/containment strategies; Prior review; Second-opinion programs

Utilization management organizations

agreements with clients, 282-287

analysis and reporting of utilization and cost data, 109

antitrust liabilities, 184-185

breach of contract by, 179-180

constraints on growth of, 5

consultant/employee liability, 185-186

contact with patients or physicians, 66

defamation by, and interference with contractual advantage, 183-184

duty of care, 175-176

effects of organizational differences in, 65

employer/purchaser investigation of, 150-153

financial incentives offered by, 50, 73

freestanding services, 51, 62, 63, 123-124, 145

geographic data integration in, 69

growth of, 50, 59-61

Suggested Citation:"Index." Institute of Medicine. 1989. Controlling Costs and Changing Patient Care?: The Role of Utilization Management. Washington, DC: The National Academies Press. doi: 10.17226/1359.

Page 312

handling of attending physician, 72, 74, 78

improvement of provider relations with, 153-154

independent review organization, 62, 173-174, 179-180, 185, 187-188, 259-260, 266-268

infliction of emotional distress, 182

insurance bad faith liability, 180-181

insurance company subsidiaries, 62, 262-264

insurer-based service, 63

insurer- or broker-based service, 63-64

IPA model HMO, 62, 271-272

largest firms, 60

liability of, 4, 5, 78, 83, 88, 145, 173-188, 284-285

management priorities, 5

moral obligations of, 153

negligence by, 175-179

not-for-profit PRO, 269-270

peer review organizations, 60, 66, 272-274

procedural safeguards for, 176-177

proprietary information and competition among, 7-8, 286-287

provider-based, 64

quality assurance mechanisms, 6, 62

regulation of, 50, 65, 75, 88, 94, 145

responsibilities of, 7-9, 151-154

reviews/audits of, 62

role specification in contracts, 283-284

selection of, 6-7

site visit summaries, 62, 253-281

small, private, for-profit, 253-256

staff model HMO, 62, 268-269

staffing and performance criteria, 71-78, 276-281, 285-286; see also Nurse-reviewers/managers; Physicians, advisers

state regulation of, 186-187

subsidiary of third-party payer, 256-257, 264-266

telephone call handling, 70-71

third-party claims administrators, 61, 258-259, 261-262

triple option benefit package, 51

types and numbers of, 49-51, 59-62

variability in programs, 4, 65, 89, 144-145

volume of business in, 275

Utilization review

admission review, 18, 37

ambulatory care review, 37

computerized claims screening, 37

continued-stay/concurrent review, 3, 18, 37, 39, 48, 65, 66, 81-82, 93, 98

effectiveness of, 38-39

historical background, 36-38

model treatment profiles, 37

preadmission, 3, 18, 37, 39, 41, 65, 66, 87, 88, 93, 98

as a prerequisite to Medicare participation, 38

retroactive, 41

timeliness in handling of requests/appeals, 107, 108, 186-187, 193-194


Value Health Sciences, 107 n.3


Washington Business Group on Health, 30, 42

Wellness programs, 45

Wennberg, John, 30, 44

Workers compensation, high-cost case management in, 131


Zenith, 122

1. See generally Byrnes, "Corporation's Institution of Healthcare Utilization Review," Medical Trial Technique Quarterly (Spring 1987), at 478; Carabillo, "The Manageable Risks of Managed Care," Health Cost Management, Vol. 3, No. 6 (Nov./Dec. 1986), at 1; Eisenberg and Rosoff, "Physician Responsibility for the Cost of Unnecessary Medical Services,'' New England Journal of Medicine, Vol. 299 (July 13, 1978), at 776; Hershey, "Fourth-Party Audit Organizations: Practical and Legal Considerations," Law Medicine & Health Care, Vol. 14, No. 2, at 54; Lanzafame, Provider Liability Under Public Law 98-21: The Medicare Prospective Payment System in Light of Wickline v. State, 34 Buffalo L. Rev. 1011 (1985); Jespersen and Kendall, "Utilization Review: Avoiding Liability While Controlling Health Costs," HEALTHSPAN, Vol. 4, No. 7, at 3 (July 1987).

2. For a contrary decision, see Van Vactor v. Blue Cross Association, 50 Ill. App. 3d 709, 8 I11. Dec. 400, 365 N.E. 2d 638 (1977), which found no justification for the denial of benefits solely on the ground that the insurer disagrees with the honest judgment of the treating physician. The court concluded that decisions of medical necessity are "vested solely and exclusively in the judgment and discretion of the treating physician." Id. 365 N.E. 2d, at 647.

3. The court also concluded that Blue Shield acted in bad faith when it failed to inform the insured of his fight to impartial review and arbitration as provided in the policy. Although this aspect of the case turned on the particular conduct of Blue Shield, which went beyond a simple failure to inform of appeal fights, the decision emphasized the duty of the insurer to protect the rights of the insured at least equally with its own. 233 Cal. Rptr., at 84-86. Thus, even if the insurance policy contains clear and conspicuous language regarding remedial rights, the insurer should take affirmative steps to inform the insured of his or her rights if a denial of coverage is disputed.

4. The decision proceeds to review the beneficial aspects of the Medi-Cal program and the Medi-Cal regulations providing for prior authorization for hospitalization. Id., 228 Cal. Rptr., at 671. Although the court may have been citing this material in connection with the alternative defense of immunity raised by the state, the court states that it declines to address the immunity defense. See 228 Cal. Rptr. 669, at

672. The purpose of discussing the Medi-Cal regulations appears to be simply to show that prior review is an integral part of the payer's system.

5. Several courts have held an exclusion for "experimental" procedures to be inherently ambiguous, and hence unenforceable. See Johnson v. District 2 Marine Engineers Beneficial Assoc., 857F. 2d 514 (9th Cir., July 11, 1988); DiDomenico v. Employers Cooperative Industry Trust, 676 E Supp. 903 (N.D. Ind. 1987).

6. Some policies simply use the term but do not define it. These policies run the risk that a denial based on medical necessity will not be upheld because the term is not adequately defined. See, e.g., Dallis v. Aetna Life Insurance Co., 100 F.R.D. 765 (N.D. Ga. 1984); Zuckerberg v. Blue Cross Blue Shield of Greater New York, 119 Misc. 2d 834, 464 N.Y.S. 2d 678 (1983), rev'd on other grounds. 487 N.Y.S. 2d 595, 108 A.D. 2d 56 (1985).

7. Sarchett, supra, 233 Cal. Rptr., at 78.

8. One plan defines "medically necessary services" as those which are:

"(1) Appropriate for the symptoms and diagnosis or treatment of a condition, illness or injury.

(2) Provided for the diagnosis, or the direct care and treatment of the condition, illness or injury.

(3) In accordance with the standards of good medical practice.

(4) Not primarily for the convenience of the Member, or the Member's physician and surgeon, or the provider.

(5) The most appropriate supply or level of service which can safely be provided to the Member.

When applied to hospitalization, this further means that the member requires acute care as a bed patient due to the nature of the services rendered or the member's condition, and the Member cannot receive safe and adequate care as an outpatient."

9. Hughes v. Blue Cross, 199 Cal. App. 3d 318, 245 Cal. Rptr. 273 (1988), upheld liability against an insurer which applied a standard of medical necessity which was more restrictive than that of the medical community. Citing Sarchett, the court emphasized that the term medically necessary must be construed liberally so that uncertainties are resolved in favor of coverage. The court noted that by employing a standard of medical necessity significantly at variance with the medical standards of the community, the insurer places the insured at risk of incurring unforeseen liability, which is contrary to the insured's reasonable expectations. "[G]ood faith demands a construction of medical necessity consistent with community medical standards that will minimize the patient's uncertainty of coverage in accepting his physician's recommended treatment." Id. 245 Cal. Rptr., at 279.

10. See Wickline, supra, 228 Cal. Rptr., at 669; Rowland v. Christian, 69 Cal. 2d 108, 70 Cal. Rptr. 97, 443 P. 2d 561 (1968). Rowland lists the following factors as the major considerations in determining whether a duty exists: "The foreseeability for harm to the plaintiff, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the defendant's conduct and the injury suffered, the moral blame attached to the defendant's conduct, the policy of preventing future harm, the extent of the burden to the defendant and consequences to the community of imposing a duty to exercise care with resulting liability for breach, and the availability, cost and prevalence of insurance for the risk involved." Id. 69 Cal. 2d, at 112. Although the Wickline decision states that these factors lead it not to find liability, it appears that Wickline's holding is based on lack of causation rather than on the nonexistence of a duty. This is evident from a statement later in Wickline to the effect that third-party payers may be held liable for medically inappropriate decisions resulting from their cost-containment program. 228 Cal. Rptr., at 670.

11. UR contracts usually expressly distinguish between the role of the UR organization in determining the availability of coverage, the roles of the payer in making payment decisions, and the roles of the provider and patient in deciding whether to proceed with treatment. One UR contract states that the UR provider "shall not determine a participant's eligibility for benefits under the Group Contract. Group shall have final and sole authority for all benefit determinations." Another contract states that "the decision or determination to obtain or deliver any health care service is always made only by the [patient] and/or his or her physician, and any decisions made by the [UR organization] ... or the health benefit insurer... shall relate only to the obligation for payment for any such service under the terms of the group insurance policy "

12. The patient who requires treatment and is harmed when care that should have been provided is not provided should recover for the injuries suffered from all those responsible for the deprivation of such care, including, when appropriate, health care payers. Third-party payers or health care services can be held legally accountable when medically inappropriate decisions result from defects in the design or implementation of cost-containment mechanisms, as, for example, when appeals made on a patient's behalf for medical or hospital care are arbitrarily ignored or unreasonably disregarded or overridden. Wickline, supra, 228 Cal. Rptr., at 670-671.

13. Every person or entity is expected to exercise the care that the ordinary, reasonable person of common skill and prudence would use under the circumstances of the case. The standard of care is heightened if the person causing the injury enjoys some specialized skill or knowledge. Professionals such as doctors and lawyers are expected to use the skill and care common to their professions, not merely that of the "ordinary person." Prosser and Keeton, The Law of Torts, Section 32, at 185-186 (1984).

14. Wickline, supra, 228 Cal. Rptr., at 666.

15. Wickline's suggestion that the burden is on the treating physician to provide the reviewer with sufficient information is no': a panacea for every utilization review liability case. In Hughes v. Blue Cross of Northern California, 199 Cal. App. 3d 318, 245 Cal. Rptr. 273 (1988), the reviewing physician consultant testified, in explaining why his file lacked complete medical information, that he felt it was the responsibility of the treating doctor or the hospital to submit any information they felt was important. The court nevertheless upheld liability for bad faith claims denial, noting that the letters sent to the treating physician did not explain the medical basis for denial and failed to advise what information the reviewer already had and what additional information would be useful. Id. 245 Cal. Rptr., at 280.

16. See generally Jesperson and Kendall, supra note 1, at 7.

17. For a discussion of state regulation, see the section State Regulation.

18. See the sections Liablity of Consultants and Employees and Liability of the Treating Physician infra regarding the vicarious liability of the UR organization for the torts of its agents.

19. See Hughes v. Blue Cross, 199 Cal. App. 3d 318, 245 Cal. Rptr. 273 (1988) (bad faith verdict upheld in a case in which the insurer applied a standard of medical necessity that was more restrictive than the community standard).

20. See generally J. Restuccia, "The Appropriateness of Hospital Use," Health Affairs, at 130 (Summer 1984).

21. See the section The Elusive Concept of Medical Necessity for a discussion of situations in which criteria are expressly included as part of the plan benefits.

22. For example, a criteria that disallows all fertility services under an HMO plan that covers all medically necessary physician services may be too sweeping an exclusion.

23. Wickline, supra, 228 Cal. Rptr., at 671.

24. Id. 228 Cal. Rptr., at 668.

25. Id. 228 Cal. Rptr., at 669.

26. The payer's liability for tort damages resulting from the negligent act of an independent review organization may be more complicated, depending on whether the UR entity is viewed as an independent contractor or an agent or employee of the payor (see Liability of the Treating Physician).

27. When a contractual duty is delegated, the obligor remains liable to the obligee, unless the delegate assumes the obligations and the assumption is accepted by the obligee in substitution for the original obligor. See Calamari and Perillo, The Law of Contracts, Sections 277-280 (1970) and Restatement (2d) of Contracts, Section 150(3). There also would be a significant question of whether the duty to perform UR functions is a delegable duty under the law. See Calamari and Perillo, supra, Section 278; Hughes v. Blue Cross, 199 Cal. App. 3d 318, 245 Cal. Rptr. 273, (1988) (an insurance company generally cannot delegate its responsibilities to the insured).

28. See Calamari and Perillo, Restatement (2d) of Contracts, Section 302. The court will look to the surrounding circumstances to determine whether the patient is an appropriate third-party beneficiary. In cases in which the benefit literature describes the UR program as a beneficial service for the insureds, for example, in helping to avoid unnecessary hospitalization, the employee has a better chance of establishing a third-party beneficiary relationship.

29. This issue is likely not to be of much practical importance, since the patient can probably assert a negligence claim directly against the review organization. Whatever benefits the patient can obtain from a contract action, such as an action for breach of the implied covenant of good faith and fair dealing, ordinarily can be obtained in an action directly against the payor.

30. Restatement (2d) of Contracts, Section 351.

31. See generally Pilot Life Insurance Co. v. Dedeaux, 107 S. Ct. 1549 (1987); Fletcher v. Western National Life Ins. Co., 10 Cal. 3d 376, 401, 89 Cal. Rptr. 78, 93 (1970).

32. See, e.g., Egan v. Mutual of Omaha, 24 Cal. 3d 809, 157 Cal. Rptr. 482, 598 P. 2d 452 (1979) (bad faith failure to properly investigate claim); Taylor v. Prudential Ins. Co. of America, 775 E 2d 1457 (11th Cir. 1985) (reversing summary judgment for the insurer on the issue of bad faith where the insurer relied on a Medicare determination of no medical necessity without making its own investigation); Hughes v. Blue Cross, 199 Cal. App. 3d 318, 245 Cal. Rptr. 273 (1988) (bad faith verdict upheld where insurer denied claims without reviewing all relevant medical records, applied a standard of medical necessity that was more restrictive than a community standard, failed to explain medical grounds for denial of coverage, and failed to advise treating physician of what additional information would be useful for decision); Mordecai v. Blue Cross/Blue Shield of Alabama, 474 So. 2d 95 (Ala. 1985) road faith allegations arising from failure to consider portions of nurses' notes and to consult with treating nurses and physicians); AEtna Life Insurance v. LaVov, 470 So. 2d 1060 (Ala. 1984) (bad faith claim upheld where insurer misrepresented the extent of its medical review in denying the claim).

33. See generally Sarchett v. Blue Shield, supra; Davis v. Blue Cross of Northern California, 25 Cal. 3d 418, 158 Cal. Rptr. 828 (1979) (bad faith upheld in a case in which the insurer failed to inform the insured of rights to appeal an arbitration).

34. In such a case, the payer could seek indemnity from the reviewer, unless prohibited by some provision of the contract between the payer and reviewer. See Hughes v. Blue Cross, 199 Cal. App. 3d 318, 245 Cal. Rptr. 273 (1988).

35. Gruenberg v. AEtna, 9 Cal. 3d 566 (1973) (demurrer sustained as to bad faith liability of insurer's independent contractor adjusters and attorneys who were not party to the

insurance contract); Iversen v. Sup. Ct., 57 Cal. App. 3d 168, 127 Cal. Rptr. 49 (1976) (reversal of judgment against claims supervisor and claims examiner, both found to be independent contractors, because they were not party to insurance contract); Hale v. Farmers Insurance, 42 Cal. App. 3d 681, 117 Cal. Rptr. 146 (1974) (insurer not liable for employee's bad faith handling of claim where insurer has not ratified employee's acts). See also Reiderscheid v. Comorecare. Inc., 667 P. 2d 766 (Colo. Ct. App. 1983) ("The test of bad faith failure to exercise due care in discharge of a contractual duty and the granting of damages for mental anguish caused by a willful and wanton breach of contract are grounded in basic common law, and not solely in the area of insurance law."); Taylor v. Prudential Ins. Co. of America, 775 F. 2d 1457 (11th Cir. 1985) (upholding cause of action against insurer for bad faith and emphasizing the weight to be given to treating physician's opinion); Linthicum v. Nationwide Ins. Co., 723 P. 2d 675 (Sup. Ct. Ariz. 1986) (punitive damages may be recoverable against insurer for failure to disclose medical basis for denial or failure to seek direct input from treating physician).

36. 93 Cal. App. 3d 642, 155 Cal. Rptr. 843 (1979).

37. See Sprague v. Equifax Inc., 166 Cal. App. 3d 1012, 213 Cal. Rptr. 69 (1985); Younan v. Equifax Inc., 111 Cal. App. 3d 498, 169 Cal. Rptr. 478 (1980).

38. Fletcher v. Western National Life Ins. Co., 10 Cal. App. 3d 376, 89 Cal. Rptr. 78 (1970).

39. See Schlauch v. Hartford Acc. & Indem. Co., 146 Cal. App. 3d 926, 936, 194 Cal. Rptr. 658, 665 (1983), quoting Ricard v. Pacific Indem Co., 132 Cal. App. 3d 886, 895, 183 Cal. Rptr. 502, 507 (1982).

40. See Pulvers v. Kaiser Foundation Health Plan, 99 Cal. App. 3d 560, 160 Cal. Rptr. 392 (1979) (advertisement of "high standards" of medical service held not to warrant a specific result, but was generalized "puffing," to the effect that physicians would exercise good judgment in care).

41. The Restatement (2d) of Torts, Section 402A, states as follows: "... One who sells any product in a defective condition unreasonably dangerous to the user or consumer or to his property is subject to liability for physical harm thereby caused to the ultimate user or consumer, or to his property, if (a) the seller is engaged in the business of selling such a product, and (b) it is expected to and does reach the user or consumer without substantial change in the condition in which it is sold." In California, the plaintiff need not show that the product was "unreasonably dangerous," but only that the product was "defective." See Cronin v. J.B.E. Olson, 8 Cal. 3d 121, 104 Cal. Rptr. 433 (1972).

42. See Restatement (2d) of Torts, Section 402A, Comment f.

43. See generally CCH Products Liability Reporter, Section 4235.

44. See AEtna Casualty and Surety Co. v. Jeppesen & Co., 642 E 2d 339 (9th Cir. 1981); Brocklesby v. United States, 767 F. 2d 1288 (9th Cir. 1985), cert. denied sub nom, 106 s. Ct. 882 (1986).

45. See Slaughter v. Friedman, 32 Cal. 3d 148, 185 Cal. Rptr. 244, 649 P. 2d 996 (1982) (defamation; interference with prospective economic advantage); Teale v. American Manufacturers Mutual Ins. Co., 687 S.W. 2d 218 (Mo. Ct. App. 1985) (tortious interference); Moore & Assoc. v. Metropolitan Life Ins. Co., 604 S.W. 2d 487 (Tex. Civ. App. 1980) (claim stated for tortious interference with doctor-patient relationship by association of anesthesiologists against group medical insurer for insurer's letters to former patients advising that claims would not be paid in full because associaton's charges were excessive).

46. Supra.

47. See, e.g., California Civil Code, Section 47(3).

48. Slaughter, supra, 185 Cal. Rptr., at 248-249. The court pointed out that defendants were only required "to inform dental patients of the basis for rejection of their claims; they were not required additionally to defame plaintiff with accusations regarding his dental practices."

49. See Chicago Board of Trade v. U.S., 246 U.S. 231 (1981); Dos Santos v. Columbus-Cuneo-Cabrini Medical Center, 684 F. 2d 1346 (7th Cir. 1982) (under rule of reason analysis, the hospital was permitted to grant exclusive privileges where policy is grounded in ensuring quality patient care and necessary hospital services).

50. See generally Northwest Wholesale Stationers. Inc. v. Pacific Stationery Printing, 105 S. Ct. 2613 (1985) (unless an organization possesses market power or controls access to an element essential for competition, expulsion for failure to follow reasonable rules is not per se illegal); see generally remarks of Charles E Rule, Assistant Attorney General, U.S. Department of Justice, March 11, 1988.

51. 15 U.S.C., Section 1.

52. Cf. Copperweld Corp. v. Independent Tube Corp., 467 U.S. 752, 104 S. Ct. 2731, 81 L. Ed. 2d 628 (1984).

53. Plaintiffs often attempt to rely on the doctrine of "conscious parallelism." Conscious parallelism is easy to allege but exceedingly difficult to prove. It requires proof that the parallel conduct was against the defendant's self-interest and was not based on good faith business judgment. See Supermarket of Homes v. San Fernando Valley Board of Realtors, 786 E 2d 1400 (9th Cir. 1986); Proctor v. State Farm Mutual Ins. Co.. 675 F. 2d 308 (D.C. Cir.), cert. denied, 459 U.S. 839 (1982).

54. See, e.g., California Civil Code, Sections 43.7, 43.8; California Health & Safety Code, Section 1370.

55. For example, Norcal Mutual Insurance Company's malpractice policy only covers claims alleging negligence in "direct patient treatment" or involving professional committee activities (which are limited to hospital staff committees or American Medical Association or medical society committees). Coverage is specifically excluded for "the performance of administrative duties, which are not direct patient treatment, as a medical director." If liability is found against an independent physician reviewer in a Wickline-type case, it is not clear whether the coverage for "direct patient treatment" applies. The physician providing consultant services should seek clarification from the carrier.

56. See, e.g., California Corp. Code, Section 317(d).57.

58. Md. Health Code Ann., Sections 19-1301 et seq.

59. Minn. Stat. 1988, Section 72A.20(4a).

60. Maine Ins. Code Title 24-A, Section 2679. Maine also has legislation pending that, if enacted, would impose certain criteria on independent review organizations, such as requiring prospective UR decisions to be made within a set time.

61. La. Revised Stat. 22:657(D).

62. 107 Sup. Ct. 1549 (1987).

63. See 29 U.S.C., Section 1144. See generally Helvestine, "ERISA Preempts Insurance Bad Faith Actions," HEALTHSPAN, Vol. 4, No. 10, at 8 (Dec. 1987).

64. Significant exceptions to ERISA coverage are government employee plans (including local government plans, such as school districts), certain church plans, and certain statutorily required workers' compensation, unemployment, and disability laws. UR cases will not be preempted when they arise under these kind of plans. See 29 U.S.C., Section 1003(b).

65. One major area of uncertainty has been whether ERISA preempts causes of action based on state statutes governing unfair insurance practices, such as California

Insurance Code, Section 790.03(h). In Kanne v. Connecticut General Life Ins. Co., 857 F. 2d 96, No. 85-5641, 5642 (9th Cir., Oct. 4, 1988), the Ninth Circuit held that ERISA preempts such claims. This issue is of considerably less importance following the California Supreme Court's decision in Moradi-Shalal v. Fireman's Fund Ins. Co., 46 Cal. 3d 287, 250 Cal. Rptr. 116 (1988), which overturned 10 years of precedent and held that no private right of action exists under Section 790.03(h). At this time, only Montana and West Virginia continue to recognize private actions under unfair insurance practices statutes. See Moradi-Shalal, supra, 250 Cal. Rptr., at 121 and note 6.

66. 29 U.S.C., Section 1002(21)(A); see Stanton v. Shearson Lehman/American Express, Inc., 631 E Supp. 100, 102 (N.D. Ga. 1986).

67. See Nieto v. Ecker, 945 F. 2d 868 (9th Cir. 1988) (rejecting a theory of liability under ERISA for aiding and abetting a fiduciary); So. Cal. Meat Cutters Unions v. Investors Research, 687 F. Supp. 506 (C.D. Cal. 1988) (ERISA only applies to those defendants against whom ERISA provides a statutory right of action); Munoz v. Prudential Ins. Co. of America, 633 F. Supp. 564 (D. Colo. 1986) (same findings as previous case).

68. See 29 U.S.C., Section 1132(a)(1)(B); Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 105 S. Ct. 3085 (1985) (emotional distress damages prohibited); Sokol v. Bernstein, 803 F. 2d 532 (9th Cir. 1986) (same findings as previous case).

69. See 29 U.S.C., Section 1132 (a)(3).

71. See, e.g., Blau v. Del Monte Corp., 748 F. 2d 1348 (9th Cir. 1984).

72. 18 U.S.C., Section 1961 et seq.

73. See Marcial v. Coronet Ins. Co., No. 87C 3072 (N.D. Ill., 1987 WL 19532); Unocal Corp. v. Superior Court (Harbor Ins. Corp.), 198 Cal. App. 3d 1245, 244 Cal. Rptr. 540 (2d Dist. 1988), decertified (June 2, 1988).

74. Under the theory of respondeat superior, an employer may be held liable for the torts of its agents or employees acting within the scope of their employment. See Witkin, Agency and Employment, Sections 113 et seq.; California Civil Code, Section 2338.

75. See Witkin, supra, Agency and Employment, Section 61, at 67.

76. See Hughes v. Blue Cross, 199 Cal. App. 3d 318, 245 Cal. Rptr. 273 (1988).

77. See note 24, supra.

78. See, e.g., Restatement (2d) of Tons, Section 411; Elam v. College Park Hospital, 132 Cal. App. 3d 332, 183 Cal. Rptr. 156 (1982) (hospital negligently allowed podiatrist to remain on staff despite malpractice complaints). See Burch 122 Mich. App. 798, 333 N.W. 2d 140 (Mich. 1983); Kendall v. Gore Properties, 236 F. 2d 673 (D.C. Cir. 1956); Giles v. Shell Oil Corp., 487 A. 2d 610 (D.C. 1985) (employer responsible for harm caused by employee in a case in which the employer negligently failed to screen the employee's background).

79. The general rule that parties are not liable for the torts of their independent contractors is fiddled with exceptions. When the plaintiff can show that one party retains control over the enterprise, benefits from it, selects the independent contractor, and is free to require indemnity and insurance from the contractor, that party may be found vicariously liable for the torts of its independent contractor. Also, when the plaintiff can demonstrate a "special relationship" giving rise to an affirmative duty of care owed by the defendant, vicarious liability may result. See Witkin, supra, Tons, Section 997. An insurance company is likely to be found to have a special relationship with its insureds, thus increasing the likelihood of liability for the acts of independent contractor UR organizations.

80. The fact that the contract between the payer and reviewer specifies independent contractor status is not dispositive. The reviewer may be considered an independent

contractor for purposes of its relationship with the payor, and yet be considered an agent of the payor in matters involving the patient. Cf. Arthur v. SL Peter's Hospital, 169 N.J. Super. 575, 405 A. 2d 443 (1979) (physician may be considered an independent contractor in his relations with the hospital, but be deemed an employee of the hospital in his relations with the patient). The principal factor in distinguishing an independent contractor from an employee is the freedom from control by the employer over the details of the work. See Witkin, supra, Agency and Employment, Sections 12, 14, at 28-31; Prosser and Keaton, The Law of Torts (5th ed., 1984) for a discussion of the doctrine generally and a suggestion that it is disfavored.

81. See Restatement (2d) of Agency, Sections 8, 159 (apparent authority of agent); California Civil Code, Section 2300, Quintal v. Laurel Grove Hospital, 62 Cal. 2d 154, 41 Cal. Rptr. 577, 397 P. 2d 161 (1964) (whether the physician was ostensible agent of the hospital is a jury question); Mduba v. Benedictine Hospital, 384 N.Y.S. 2d 527, 52 App. Div. 2d 450 (1976) (emergency room physicians may be named agents of the hospital despite independent contractor language in their contracts).

82. Many of the same dilemmas discussed in this section apply to hospitals as well. Indeed, in a concurrent review situation like Wickline, the hospital has the largest financial stake in the patient's discharge because it is the hospital bills that would remain unpaid. The rights and responsibilities of a hospital are similar to those of a physician and are not treated separately for the purposes of this paper.

83. If the physician is named in a lawsuit, he or she may cross-complain against the review entity for indemnity or contribution. Likewise, a review entity named in a Wickline type of case will consider cross-complaining against the treating physician.

84. See, e.g., Goldman v. Ambro, 512 N.Y.S. 2d 636 (1987); Harper v. Baptist Medical Center-Princeton, 341 So. 2d 133 (Ala. 1976). In Harper, the Alabama Supreme Court held that a doctor and hospital who rendered emergency treatment to the plaintiff, but refused to accept him as a patient because he did not have insurance, were not liable for subsequent injuries because the plaintiff had not been accepted as a patient. Until a professional doctor-patient relationship is established, the physician's only duty is to provide emergency care; there is no duty to accept a patient under other circumstances.

85. See generally, Mains, "Medical Abandonment," Medical Trial Technique Quarterly, at 306 (1985).

86. See, e.g., Meiselman v. Crown Heights Hospital, 285 N.Y. 389, 34 N.E. 2d 367, 217 N.Y.S. 2d 12 (1941) (liability against hospital where the patient was discharged prematurely because he was unable to pay for further care). See generally Lanzafame, supra, note 1, at 1023-1030.

87. Informed consent requires disclosure of all information that the patient would consider material in deciding whether to undergo the treatment. See Canterbury v. Spence, 464 F. 2d 772 (D.C. Cir. 1972). Presumably, economic consequences would be a material consideration for the patient.

88. Physicians should be mindful, however, of the UR organization's legitimate concerns regarding the disclosure of its review criteria and systems, which are usually considered protectable trade secrets.

89. See In Re Quinlan, 70 N.J. 10, 355 A. 2d 647, 649, cert. denied, 429 U.S. 922 (1976) (review would be "inappropriate," not only because that would be a gratuitous encroachment upon the medical profession's field of competence, but because it would be impossibly cumbersome").

90. For a thoughtful treatment of this issue, see Eisenberg and Rosoff, supra, note 1.

91. The implied covenant of medical necessity should not, however, supplant the patient as the final decision maker in matters of medical care. Rather, it obligates the

physician to add a new economic dimension to the physician's determination of medical necessity, which must be communicated to the patient.

92. In one case, the court apparently refused to relieve the patient of payment responsibility, even though the insurer denied coverage because the treatment was not medically necessary. Albert Einstein Medical Center v. Lipoff, No. 3872X (Ct. of Common Pleas, Phila., Apr. 23, 1973), described in Eisenberg and Rosoff, supra, note 1. In that case, the patient sought to hold her physician contractually liable for the hospital bill. The court denied her claim, reasoning that her claim sounded in tort and that she could recover only by proving that the doctor's treatment was medically unsound. That it was economically unsound was irrelevant to a tort claim.

1. Page, Leigh, ''New Era in Utilization Review,'' American Medical News, Vol. 1, December 9, 1988, pp. 48-49. (See also Scheier, Ronni, "Medicine by the Book," American Medical News, January 6, 1989, pp. 1, 20).

2. U.S. General Accounting Office, Medicare Issues Raised by Florida Health Maintenance Organization Demonstrations, Report to Congress, GAO/HRD-86-97, Washington, DC, July 1986.

3. U.S. Congress, House, Maintaining Medicare's HMOs: Problems, Protections, and Prospects, Hearing before the Select Committee on Aging, 100th Congress, First Session, Washington, DC, June 11, 1987.

4. U.S. General Accounting Office, Medicare: Physician Incentive Payments by Hospitals Could Lead to Abuse, Report to the Chairman, Subcommittee on Health, Committee on Ways and Means, U.S. House of Representatives, GAO/HRD-86-103, Washington, DC, July 1986.

5. Trauner, Joan B., "The HMO Identity Crisis." Best's Review 87, April 1987, pp. 60-70.

6. The Group Health Association of America's 1988 analysis of HMO industry performance, using 1986 survey data, showed that 39.2 percent of 181 plans submitting financial data had a profit or surplus. Of the HMOs that we reviewed, 25 percent were profitable in 1986. See Group Health Association of America, Inc., HMO Industry Profile: Financial Performance, Vol. 3, Washington, DC, September 1988.

7. In a study of physician incentives in HMOs, ICF researchers noted that they were unable to check the consistency or accuracy of information supplied by the plans. They also noted that information on file at the federal Office of Prepaid Health Care (OPHC) was not always reliable; in some cases, financial incentive arrangements contained in applications for federal qualification had never become operational, and in other cases, design of incentives had changed without being reported to OPHC. ICF, Inc., Final Report: Study of Incentive Arrangements Offered by HMOs and CMPs to Physicians, Submitted to the Office of the Assistant Secretary for Planning and Evaluation, Department of Health and Human Services, Washington, DC, May 18, 1988, p. II21.

8. InterStudy, The InterStudy Edge, Excelsior, MN, Spring 1988, p. 54.

9. For a different approach, when traditional community- or foundation-based IPAs are contrasted with newer group-based IPAs, see Welch, W. P., "The New Structure of Individual Practice Associations, Journal of Health Politics Policy and Law, Vol. 12, Winter 1987, pp. 723-739.

10. ICF, Inc., Final Report, p. IV-6 (see note 7 above).

11. Gnessin, Alan M., "Physician Incentive Payment Systems and Risk Sharing Alternatives," in Group Health Association of America, Inc., Physician Incentive Programs: Defining the Risk, Washington, DC, October 28-30, 1987.

12. For a description of an HMO in which individual physician incentives are used within pods, see the statement by Jerome Beloff, Corporate Medical Director, Av-Med Health

Plan of Florida before the Physician Payment Review Commission, Washington, DC, July 15, 1988.

13. Gnessin, Alan M., "Physician Incentive Payment Systems and Risk Sharing Alternatives," 1987 (see note 11 above).

15. Neipp, Joachim, and Zeckhauser, Richard, "Persistence in the Choice of Health Plans," Advances in Health Economics and Health Services Research, Vol. 6, 1985, pp. 47-72.

16. Borok, Gerald M., "Appropriate Utilization of Resources Program," Quality Assurance and Utilization Review, Vol. 2, May 1987, pp. 57-61.

17. Donabedian, Avedis, "Explorations in Quality Assessment and Monitoring," The Definition of Quality and Approaches to Its Assessment, Vol. I, Ann Arbor, MI: Health Administration Press, 1980.

18. Mosser, Gordon, "Quality Assurance in HMOs," Presentation to Management and Physician Orientation Program, Group Health Association of America, Inc., New Orleans, December 9-11, 1987.

19. For a discussion of 15 ways in which out-of-plan use may occur, see Mott, Peter D., "Hospital Utilization by Health Maintenance Organizations: Separating Apples from Oranges," Medical Care, Vol. 24, May 1986, pp. 398-406.

20. For a discussion of the process used by the Rand Corporation to impute mental health visits and expenditures at one large HMO (Group Health Cooperative of Puget Sound), see Wells, Kenneth, Manning, Willard Jr., and Benjamin, Bernadette, "Comparison of Use of Outpatient Mental Health Services in an HMO and Fee-for-Service Plans: Sensitivity to Definition of a Visit," Medical Care, Vol. 25, September 1987, pp. 894-903.

21. Joint Commission on Accreditation of Health Care Organizations, Report of the Findings of the Joint Commission's Quality Assurance Evaluation and Medical Records Audits of Health Maintenance Organizations in Ohio under the Medical Assistance Program, Submitted to the Bureau of Alternative Delivery Systems, Ohio Department of Human Services, December 1987.

22. Conversation with Jo Ellen Ross, Chief Executive Office, California Medical Review Inc., San Francisco, January 17, 1989.

24. Mathematica Policy Research, Inc., National Medicare Competition Evaluation, Final Analysis Report: The Structure of Quality Assurance Programs in HMOs and CMPs Enrolling Medicare Beneficiaries, Washington, DC, February 1987.

25. Gold, Marsha and Reeves, Ingrid, "Preliminary Results of the GHAA-BC/BS Survey of Physician Incentives in Health Maintenance Organizations (HMOs)," Group Health Association of America, Inc., Research Briefs, Vol. 1, November 1987, pp. 1-15.

26. Findings from the BC/BS survey have been used to augment the GHAA survey, with duplications removed. For the BC/BS results, see Blue Cross and Blue Shield Association, "A Survey of Physician Financial Payment Arrangements in Blue Cross and Blue Shield Plan HMOs," Chicago, January 1987.

27. Hillman, Alan, "Sounding Board: Toward Full Disclosure of Referral Restrictions and Financial Incentives by Prepaid Health Plans," New England Journal of Medicine, Vol. 317, December 31, 1987, pp. 1743-1748.

28. ICF, Inc., Final Report (see note 7 above).

29. Memorandum from Lewin/ICF, Inc. and Group Health Association of America to Chris Bladen, Division of Health Financing Policy, U.S. Department of Health and Human Services, Washington, DC, June 24, 1988.

30. For a review of early research studies on utilization rates in HMO and fee-for-service settings and across HMOs, see Luft, Harold S., Health Maintenance Organizations: Dimensions of HMO Performance, New York: Wiley, 1981.

31. See, for example, Yelin, Edward H., Henke, Curtis J., Kramer, Jane S., Nevitt, Michael C., Shearn, Martin, and Epstein, Wallace V., "A Comparison of the Treatment of Rheumatoid Arthritis in Health Maintenance Organizations and Fee-for-Service Practices," New England Journal of Medicine, Vol. 312, April 11, 1985, pp. 962-967. Also see Quick, Jonathan D., Greenlick, Merwyn R., and Roghmann, Klaus J., "Prenatal Care and Pregnancy Outcome in an HMO and General Population: A Multivariate Cohort Analysis," American Journal of Public Health, Vol. 71, April 1981, pp. 381-390.

32. For a study that assumed that the differential use of diagnostic testing was due to its increased profitability to fee-for-service providers, see Epstein, Arnold M., Begg, Colin B., and McNeil, Barbara J., "The Use of Ambulatory Testing in Prepaid and Fee-for-Service Group Practices: Relation to Perceived Profitability," New England Journal of Medicine, Vol. 314, April 24, 1986, pp. 1089-1094.

33. Scovern, Henry, "Hired Help: A Physician's Experiences in a For-Profit Staff-Model HMO," New England Journal of Medicine, Vol. 319, September 22, 1988, pp. 787-790.

34. For an example of a discussion on referral patterns, see Piland, Neil E, White, Robert E., and Smith, Howard L., "Physician Referral Patterns: Implications for Group Practice," GHAA Journal, Vol. 7, Winter 1986, pp. 4-12. For an example of a discussion on provider feedback, see Berwick, Donald M., and Coltin, Kathryn L., "Feedback Reduces Test Use in a Health Maintenance Organization," Journal of the American Medical Association, Vol. 255, March 21, 1986, pp. 1450-1454. See also Braham, Robert L, and Ruchlin, Hirsch S., "Physician Practice Profiles: A Case Study of the Use of Audit and Feedback in an Ambulatory Care Group Practice,'' Health Care Management Review, Vol. 12, 1987, pp. 11-16.

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Utilization management (UM) has become a strong trend in health care cost containment. Under UM, some decisions are not strictly made by the doctor and patient alone. Instead, they are now checked by a reviewer reporting to an employer or other paying party who asks whether or not the proposed type or location of care is medically necessary or appropriate.

This book presents current findings about how UM is faring in practice and how it compares with other cost containment approaches, with recommendations for improving UM program administration and clinical protocols and for conducting further research.


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