Issues in Utilization Management

Approved by Council, June 1990
To be reviewed

External utilization management, an organized process of managing medical services provided by others, is a rapidly growing method of quality assurance and cost containment. Managed care is an important issue for the members of the American Academy of Child and Adolescent Psychiatry because it directly affects the quality and availability of medically necessary treatment.


Utilization management organizations: organizations that monitor care provided by others.

Utilization review: a review of the use of medical diagnostic and/or treatment services (resources) based upon established criteria.

Psychiatric peer review: the evaluation by a practicing psychiatrist of the quality and efficiency of services ordered or performed by other practicing psychiatrists.

Quality assurance: care of high quality such as that which consistently contributes to the maintenance or improvement of health and well-being.

Medically necessary: the evaluation of the severity off illness and degree of impairment so as to determine issues of the frequency, intensity, complexity and location of treatment.

The National Utilization Review Committee states that a utilization management organization conducts a review of the proposed site of service, and a review of the health care resources required or the proposed procedure or treatment. In addition, utilization management organizations assist in discharge planning, catastrophic case management and other health care review or benefit coordination services. Based on the information provided at the time of the review, the utilization management organization advises the claim administrator by issuing a certification that the proposed site and/or service appears to meet the applicable health benefit plan's health care review requirement.

From the clinician's point of view, many utilization management reviewers are intruding into clinical practice in a way that has a negative effect on quality of care by disturbing the potentially fragile treatment alliance, by compromising confidentiality, and by inappropriately mixing fiscal and medical treatment concerns. This appears to be particularly true for the child or adolescent who needs treatment for a serious psychiatric illness or drug or alcohol problem. Improperly managed utilization review may grossly compromise the ongoing treatment process so that significant psychiatric or physical harm may result.

Measure to manage the cost of health care are necessary. Appropriately implemented, utilization management may be able to balance the clinical needs of the patients with cost-containment objectives. Some of the better designed plans are able to redistribute resources devoted to inpatient treatment and facilitate appropriate utilization of residential, outpatient or day hospital treatment. There is a larger number of utilization management organizations, and they vary widely in terms of organizational structure and quality. Considering concerns expressed by a number of child and adolescent psychiatrists, there are at least fifteen areas where there are issues that need to be addressed. The following statements, if adopted by these organizations, would resolve problem areas:

  • Utilization review procedures should be designed so they do not inhibit or intimidate patients from seeking or continuing to use medically necessary and appropriate psychiatric services.
  • Review criteria for the initiation of services, continuation of services, and changes in levels of care should be made available to clinicians who are being reviewed. This should be consistent with the standards of national professional organizations, such as those outlined by the American Academy of child and Adolescent Psychiatry in their publication Guidelines for Treatment Resources, Quality Assurance, Peer Review and Reimbursement (Washington, D.C.: AACAP, March 1989).
  • Utilization management organizations should formally introduce themselves to clinicians and institutions. Prior to initiating any review procedures, the utilization management organization should provide in writing its name, address, telephone number, organizational structure, contact person, Medical director, review procedure, nature of their informed consent procedures and appeal process.
  • A utilization management organization should provide a program of educating providers and beneficiaries about the organization and its procedures, particularly its appeal procedures.
  • Parents of minors and when appropriate, patients, must be informed fully of the utilization review process. This is a shared responsibility of the utilization management company to provide necessary general information and the hospital and/or physician in obtaining informed consent for their participation in providing the information.
  • The utilization management organization should have policies in force to ensure that no more information is obtained than is necessary to make appropriate reviews, that the information is held confidential, and that it is used only for the purpose of making a determination on the medical necessity and level of care for a particular episode of illness.
  • The individual conducting the review will accept information about the patient provided by a designated member of the hospital staff. When the utilization management organization requires the direct input of the attending psychiatrist, the reviewer will be a board certified child and adolescent psychiatrist.
  • The utilization management professional staff should have training, continuing education and ongoing experience in the specialty field under review and with the treatment setting being reviewed. Specifically, child and adolescent patients in psychiatric inpatient treatment should be reviewed by board certified child and adolescent psychiatrists with psychiatric hospital experience.
  • Utilization management organizations and the payer that contracts them (usually the employer) must accept the fact that communication with managed care organizations is a separate, billable medical service (American Medical Association's current Procedural terminology code 99080 or 90889) provided by the psychiatrist and therefore may result in an extra fee paid by the insurance company or the patient.
  • Utilization management organizations are not to be involved in the process of a patient's treatment. Prescribing a particular course of treatment for a patient is the practice of medicine--the responsibility of the patient's physician. The prescribing of treatment by a physician who has not personally evaluated that patient and who does not have an agreement with the patient to be the treating physician, is unethical.
  • Interviewing patients and family members, or discussing or recommending a specific course of treatment, is an unacceptable intrusion into the physician authorized by the attending physician, the patient and the family and done in accordance with medical staff policy.
  • It is unethical for a reviewer to encourage the patient to enter into treatment with the reviewer or the reviewer's affiliated professionals or organization.
  • The final appeal process regarding medical necessity must utilize a mechanism that has sufficient independence that one can be confident that there is an objective assessment regarding issues of medical necessity and level of care. The reasons for denial should be specific and communicated in writing.
  • Managed care organizations should have a formal process of contact and feedback with major provider groups, professional organizations and beneficiary groups. There should be a specific process to deal with feedback and criticism offered by these groups.
  • Each state should have a readily available and well-publicized mechanism to resolve situations where patients, providers or their advocacy groups disagree with the utilization management organization.

To maintain the patient's accessibility to high-quality effective health care and also to control costs requires a careful balancing of interests. Utilization management companies must be effectively regulated so as not to unduly disrupt that balance. Since these are generally multistate companies, the regulation process will be complicated and will have to be done on a state-by-state- basis. The Academy should accept the challenge to advocate for such regulations. To do otherwise would jeopardize the care of our patients and the professional autonomy of our members.