Utilization Review Services Offer a Solution to Competing Payment Pressures

One of the most pressing issues in the high-stakes healthcare arena is the financial tension between providers and health plans. Providers are focused on receiving fair compensation for their services, while health plans prioritize cost management in an effort to maintain competitive premiums.

This financial tug-of-war often results in disputes, delayed payments, and a burdened healthcare system. One promising solution lies in using cost-effective utilization review (UR) services, which offer an objective approach to managing healthcare costs by evaluating the medical necessity, appropriateness, and efficiency of services provided.

Today’s Payment Pressures

The cost of healthcare has soared, thanks to factors such as technological advancements, complex treatment plans, and regulatory compliance. These pressures affect providers and health plans differently. 

Providers like physicians and healthcare facilities need timely payments to sustain operations. However, discrepancies in coding, documentation requirements and coverage standards can lead to prolonged payment cycles and denied claims. 

The frustration is evident in recent comments from Chip Kahn, President and CEO of the Federation of American Hospitals, who emphasized the need for adequate compensation for the care provided, highlighting managed care abuses and the challenges of utilization review requirements. Similarly, Community Health Systems' CFO Kevin Hammons noted the doubling of payer denials, linking these to aggressive utilization review tactics.

Opposite providers are health insurers accountable for maintaining manageable premiums while ensuring quality care. Rising medical costs make it difficult for insurers to balance premium pricing with necessary medical expenses. 

For instance, health insurance companies have endured higher-than-expected medical utilization, a federal rate cut, tightened screws on risk-adjustment payments, lower star ratings and stricter marketing rules. All of these challenges combined to make the Medicare Advantage business less profitable.

Medicaid, too, has seen rising expenses. Twenty-five of 41 states surveyed increased Medicaid capitation payments for fiscal 2024 and fiscal 2025 to reflect rising acuity in the aftermath of mass eligibility redeterminations, according to a report from the research institution KFF. 

The friction between providers and health plans is evident in denied claims, underpayments, and lengthy appeals processes, all of which divert attention from improving patient outcomes.

Utilization Review, a Cost-Effective Approach to Balance

An effective utilization review system can provide a crucial middle ground, reducing these challenges. UR services offer a systematic and objective approach to healthcare cost management by emphasizing medical necessity, integrating an ongoing review process, streamlining claims and payments, and minimizing disputes. 

Objectivity and Medical Necessity Determination

Utilization review also aligns diagnostic procedures and treatments with established medical standards, objectively assessing whether requested services meet clinical criteria. Through rigorous medical necessity assessment, UR services help reduce redundant or unnecessary services, allowing both providers and health plans to prioritize quality care over quantity.

Real-Time and Retrospective Reviews

Improved Claims Process and Faster Payments

UR services attempt to streamline claims processes, expediting payments when services meet criteria. Thus, they minimize the financial strain and administrative burdens that contribute to frustration among providers and payers. 

Reduced Disputes and Enhanced Relationships

By setting clear expectations on coverage, utilization review services can also reduce disputes and foster collaborative relationships focused on delivering effective patient care at sustainable costs.

Overcoming the Challenges to UR Adoption

While utilization review services offer immense benefits, implementing them effectively requires addressing several common challenges:

• Initial costs may deter some health plans, but partnering with third-party providers can reduce this burden. Long-term savings from reduced disputes and faster claims processing often outweigh initial expenses.
• Providers may view utilization review as scrutiny, but effective communication and education can result in acceptance, emphasizing UR’s role in timely payments and evidence-based practices. Providers who understand that UR services support sustainable billing practices are likelier to engage positively.

FHAS Provides Third-Party Utilization Review

Friction between providers and health plans remains a growing concern and a substantial driver of rising healthcare costs. Fortunately, cost-effective utilization review services offer one viable path forward. By balancing quality patient care with cost constraints, reducing payment pressures, and promoting financial sustainability, UR services enable better alignment between providers and health plans. 

Utilization review services offer a meaningful opportunity for an industry facing constant pressure to evolve. Payers and providers interested in adding UR services to their business via an independent third party can view more about FHAS’s UR services to connect with our team. FHAS's expertise and experience can ensure patients receive necessary, cost-effective care while fostering a healthier financial future for all stakeholders.