Differences in resource use and cost among facilities treating alcohol, drug abuse, and mental disorders: implications for design of a prospective payment system.

Specialized psychiatric facilities, including qualified distinct-part units in general hospitals, are exempt from Medicare's diagnosis-related group prospective payment system (PPS). One major reason for continuing the exemption is the redistribution of revenue that would probably occur if a single national price were established for care at the diverse facilities that treat patients with psychiatric and substance abuse disorders. This study investigated the extent of such potential redistribution in a private health insurance data base and found that a PPS would systematically underpay specialized facilities and systematically overpay general hospitals without specialized units. Alternatives for addressing this problem are discussed.

The triple option choice: self-selection bias in traditional coverage, HMOs, and PPOs.

Health care costs and utilization by salaried employees and their dependents at a large self-insured midwestern industrial manufacturing corporation were analyzed for the year before employees were first offered a triple option choice. Members had the option of retaining traditional Blue Cross and Blue Shield of Michigan (BCBSM) coverage or switching to either a number of health maintenance organizations (HMOs) or a number of preferred provider organizations (PPOs). Members who switched to HMOs or PPOs were generally younger and had lower average expenses and utilization rates than those who retained the traditional BCBSM plan. The results suggest that a selection bias does occur in this population, as lower cost members were more attracted to the HMOs and PPOs than were more expensive members. Implications for the corporation as well as for the drive toward managed care alternatives are discussed.

Reliability and validity of utilization review criteria. Appropriateness Evaluation Protocol, Standardized Medreview Instrument, and Intensity-Severity-Discharge criteria.

A study was conducted to assess the reliability and validity of the Appropriateness Evaluation Protocol (AEP), the Standardized Medreview Instrument (SMI) and the Intensity-Severity-Discharge criteria set (ISD), three utilization review instruments used to determine whether inpatient care is required. Reliability and validity were assessed for retrospective application of these instruments to charts of a sample of 119 medical cases from 21 hospitals in the state of Michigan. The reliability of each instrument was determined by having the instrument applied by two different nurse reviewers to each hospital record. Results indicated that the AEP and ISD were moderately reliable, while the SMI had low reliability. The validity of each instrument was tested by comparing the judgments of nurse reviewers using the instruments with the judgment of a panel of physicians. The AEP and ISD were found to be moderately valid and the SMI was found to have low validity. Results suggested that the SMI should not be used. The modest level of validity of the other two instruments suggests that payment should never be denied on the basis of the instrument alone. Payment should be denied only if a physician confirms the judgment based on the instrument that inpatient care was not required.

Focused utilization review strategies.

Researchers from the Michigan Health Care Education and Research Foundation, a research affiliate of Blue Cross and Blue Shield of Michigan, compared three focused utilization review (UR) strategies to determine which method most effectively and efficiently identifies nonacute inpatient hospital admissions. Intensity, Severity, Discharge-Appropriateness (ISD-A) criteria were used to identify nonacute admissions in 8,973 cases in 73 Michigan hospitals. Significant proportions of nonacute admissions were found in medical, psychiatric, and substance abuse cases; surgical admissions had the lowest rates. Strategies involving the concentration ratio were most effective at indicating potential efficiency gains. Focused UR on Diagnosis-Related Groups (DRGs) with nonacute rates greater than 15% captured 41% of admissions and accounted for 85% of nonacute admissions, 85% of nonacute days, and 80% of potential dollar savings. This suggests that UR efforts focused primarily on DRGs with high nonacute rates would significantly improve the efficiency and effectiveness of the overall UR process.

Efficiency gains in utilization review.

A study was conducted to determine which Major Diagnostic Categories (MDCs) accounted for most of the nonessential hospital admissions in 73 Michigan hospitals in 1986. The Intensity, Severity, Discharge-Appropriateness (ISD-A) criteria set was used to identify nonessential admissions. Large concentrations of nonessential admissions were found in medical, psychiatric, and substance abuse cases; surgical admissions had low rates of nonessential hospitalization. Focusing utilization review on MDCs with nonessential rates exceeding 15% results in an examination of 44% of admissions, while capturing 77% of nonessential admissions and 73% of potential dollar savings. Implications for UR activities are discussed.