August 2003

Grant Results

National Program

Changes in Health Care Financing and Organization

SUMMARY

In this 2000–2001 project, Linda Bergthold, Ph.D., and researchers at Stanford University, Stanford, Calif., surveyed health plan medical directors in 48 states about medical necessity decision making. The study provides input for policy-making at the state and national levels.

The project was part of the Robert Wood Johnson Foundation (RWJF) Changes in Health Care Financing and Organization (HCFO) national program (for more information see Grant Results).

As the project came to a close, researchers tested the findings among attendees of a research dissemination conference funded by the federal Agency for Healthcare Research and Quality. They asked the attendees to consider the findings, discuss their day-to-day implications and outline potential policy initiatives.

Key Findings
Researchers reported the following findings in a Findings Brief available on the HCFO Web site:

  • Medical directors and state regulators hold significantly different views on the definitions of "medical necessity" and "coverage" and on how they should be applied.
  • Variation between medical directors and regulators, and among regulators, contributes to a lack of a cohesive "coverage-decision" framework for consumers, health plans and regulators and to a state-by-state patchwork of regulations.
  • Over 50 percent of medical directors prefer to consult technology assessment reports from both private and public organizations (such as the BlueCross BlueShield Technology Evaluation Center; Hayes; and Medicare) to evaluate new clinical interventions.
  • Regulators tend to make decisions based upon a pre-determined set of rules, rather than on clinical factors. As a result variability in consumer protection from state to state is likely and health plans' policies may not be based upon the best available clinical and cost-effectiveness data.
  • Participants in the research dissemination conference agreed that clarity and consistency are needed in defining medical necessity and making coverage decisions.

Funding
RWJF supported the project with a grant of $337,864 between June 2000 and October 2001.

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THE PROJECT

Previous research at Stanford University indicated that use of the term "medical necessity" varied greatly among managed care organizations in California. In this project, researchers followed that study with national surveys of health plan medical directors and state regulators to investigate the concept of medical necessity and coverage decision-making in the national managed care market and state level managed care regulatory bodies.

Subcontractor Freeman, Sullivan & Co., a San Francisco-based professional survey firm, surveyed medical directors from 346 health plans in 49 states and the District of Columbia, with a 65.9 percent response rate. Questions addressed each health plan's operations, utilization and quality management tools; the role of evidence and cost data in evaluating medical interventions and developing contractual definitions; external forces that influence decision-making; and the medical directors' own definitions of medical necessity.

A survey of regulators in 65 agencies in 49 states and the District of Columbia addressed questions similar to those asked of the medical directors, as well as questions about the state regulatory process and other issues.

As the project was coming to a close, researchers tested the findings among attendees of a research dissemination conference funded by the federal Agency for Healthcare Research and Quality. They asked the attendees to consider the findings, discuss their day-to-day implications and outline potential policy initiatives.

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FINDINGS

Researchers reported the following in a Findings Brief:

  • Medical directors and state regulators hold significantly different views on the definitions of "medical necessity" and "coverage" and on how they should be applied. In addition, there is a substantial lack of consistency among the regulators themselves about these terms and their application. Medical directors hold more consistent views.
  • Variation between medical directors and regulators, and among regulators, contributes to a lack of a cohesive "coverage-decision" framework for consumers, health plans and regulators and to a state-by-state patchwork of regulations.
  • Over 50 percent of medical directors prefer to consult technology assessment reports from both private and public organizations (such as the BlueCross BlueShield Technology Evaluation Center; Hayes; and Medicare) to evaluate new clinical interventions. They also consider available randomized clinical trials and, to a lesser extent, professional guidelines and expert opinion. Medical directors rarely consider community standards of care as a preferred source of evidence. Cost was a factor in the decision making process for 90 percent of medical directors.
  • Regulators tend to make decisions based upon a pre-determined set of rules, rather than on clinical factors. As a result, given regulatory variation among states, variability in consumer protection from state to state is likely and health plans' policies may not be based upon the best available clinical and cost-effectiveness data.
  • Participants in the research dissemination conference agreed that clarity and consistency are needed in defining medical necessity and making coverage decisions. However, there was no consensus on how to establish clear and consistent definitions, with some participants arguing for more government intervention and others supporting market-based efforts.

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GRANT DETAILS & CONTACT INFORMATION

Project

Research on Medical Necessity Decision Making in Managed Care

Grantee

Stanford University (Stanford,  CA)

  • Amount: $ 337,864
    Dates: June 2000 to October 2001
    ID#:  039396

Contact

Linda Bergthold, Ph.D.
(650) 736-0396
lbergth@aol.com

Web Site

http://www.hcfo.net

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Report prepared by: Mary Geisz
Reviewed by: Robert Crum
Reviewed by: Molly McKaughan
Program Officer: Nancy L. Barrand

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