Can You Solve the MLR Riddle?

A(nother) Tale of Two Health Plans

Two Medicare Advantage plans, Health Plan A and Health Plan B, face rising costs in musculoskeletal (MSK) care.

• Plan A implements a traditional (“downstream”) utilization management (UM) strategy, requiring prior authorization for all scheduled surgeries, injections, and advanced imaging.
• Plan B adopts a proactive ("upstream") UM approach, introducing at-risk members to preventative and comprehensive non-operative care before referring them to specialists.

After one year, both plans achieve similar cost savings. However, Plan A reports an average satisfaction score of 6/10 among members and providers, while Plan B boasts a much higher satisfaction score of 9/10.Which plan pursued the better approach? More importantly…which plan are you?

“The Times They Are A-Changin’”
‍- Bob Dylan

The healthcare industry stands at a crossroads. As the costs of care continue to rise and patient outcomes often fail to meet expectations, health plans must reevaluate their approach to managing care. For decades, the focus has been on downstream utilization management (UM) — intervening after care is already underway or when costs have spiraled out of control. While this approach has its place, it’s reactive by nature and often too little, too late. The worst part is the friction it creates between relationships of the plan, member, and provider.

The time has come for health plans to totally rethink utilization management.  Health plans must modernize their cost-saving strategies and abandon their overreliance on abrasive downstream UM.  This redesign shifts focus to an upstream approach that includes prevention, early intervention, and value-based care strategies that address the root causes of high costs and poor outcomes.

One thing you may be asking…what is Upstream UM?  Read on to find out.

The Limitations of Downstream Utilization Management

Traditional UM often acts as a gatekeeper, reviewing prior authorizations, managing formularies, and scrutinizing claims to control unnecessary spending. While these measures can curb over-treatment or low-value care, they have significant downsides. Providers frequently view UM processes as burdensome, and patients can experience delays in accessing care, leading to dissatisfaction and potential adverse outcomes. Additionally, downstream UM tends to address symptoms of inefficiency rather than underlying causes, perpetuating a cycle of high costs and fragmented care.

The problem is particularly acute in specialty care, where costs have ballooned in recent years. For example, musculoskeletal (MSK) conditions now account for a significant portion of healthcare spending across all major lines of business. Traditional UM strategies may approve or deny individual procedures, but they rarely address upstream factors like poor patient engagement, inadequate care coordination, or need for lifestyle modifications — all of which contribute to the growing MSK cost burden.

Take a look at the flowchart below.  In traditional UM, when a surgery is recommended by a specialist, the record review by the UM vendor will determine if authorization is required or not.  If not, the patient will be authorized to undergo the surgery.  We know that up to 30% of orthopedic surgery is deemed inappropriately performed, so there is a 30% chance that the approved surgery was inappropriately recommended (there are many loopholes and ways to “game the system” with documentation to ensure this practice continues).

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For those cases that require review, there are four possible outcomes by the UM vendor after additional peer review (or painful and laborious submission of additional documentation).  These include:

• Surgery was appropriately recommended and eventually approved
• Surgery was appropriately recommended and still denied
• Surgery was inappropriately recommended and eventually approved
• Surgery was inappropriately recommended and denied

Why Upstream Utilization Management Is the Solution

Upstream utilization management flips the script. Instead of reacting to care delivery, it proactively shapes it. By focusing on prevention, early intervention, and holistic patient engagement, upstream UM tackles the drivers of high-cost episodes before they occur. This results in BOTH cost savings and improved health outcomes.

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Take a look at the flowchart of Upstream UM below.  Now compare it to the one on downstream.  Which is better for patient care and provider satisfaction?  What about the benefit to the plan, now spared significant expenses on the path to cost savings?

Here are the key reasons why health plans should prioritize the Upstream UM approach:

1. Addressing Root Causes of Healthcare Costs

Upstream UM emphasizes prevention and early detection of conditions that lead to costly interventions. For instance, in the realm of MSK health, early physical therapy and patient education can prevent minor aches from progressing to severe, chronic conditions requiring surgery. Similarly, proactive mental health support can mitigate the downstream impact of untreated depression and anxiety on overall health.

By investing in preventive measures, health plans can reduce the incidence of expensive procedures, hospitalizations, and readmissions. This approach aligns with the goals of value-based care, which prioritize better outcomes and lower costs over the volume of services delivered.

2. Improving Member Experience and Satisfaction

Traditional UM often frustrates members by introducing delays, denials, and administrative hurdles. In contrast, upstream UM focuses on delivering timely, appropriate care that meets patients where they are. By providing members with tools, resources, and support to manage their health proactively, plans can foster trust and engagement.

For example, digital health platforms that offer personalized care plans, telehealth consultations, and symptom tracking can empower members to take control of their health. These tools not only improve satisfaction but also drive better adherence to treatment plans, ultimately reducing costs.

3. Enhancing Provider Relationships

Providers frequently view traditional UM as a source of friction, with cumbersome approval processes and perceived interference in clinical decision-making. Upstream UM shifts the focus to collaboration. By partnering with providers to implement evidence-based protocols and share data insights, health plans can align incentives and streamline care delivery.

Consider the example of bundled payment models in specialty care. These arrangements incentivize providers to focus on outcomes rather than volume, encouraging them to adopt proactive strategies like prehabilitation programs for surgical patients. Such initiatives benefit both providers and payers, creating a win-win dynamic.

4. Leveraging Technology and Data

Advances in technology and data analytics make upstream UM more feasible than ever before. Predictive analytics can identify high-risk members who would benefit from targeted interventions, while machine learning algorithms can uncover patterns that inform care strategies. Wearables, remote monitoring devices, and patient-reported outcome measures (PROMs) provide real-time insights into member health, enabling timely action.

For example, a health plan might use predictive analytics to flag members with early signs of MSK conditions and offer them access to virtual physical therapy. By addressing issues early, the plan can prevent progression to costly surgeries or chronic pain management.

5. Aligning with Regulatory and Market Trends

The healthcare landscape is increasingly shifting toward value-based care, with an emphasis on accountability, outcomes, and cost containment. Regulatory frameworks like the Medicare Advantage Star Ratings reward plans that prioritize preventive care and chronic disease management. Additionally, employer-sponsored health plans and Medicaid programs are seeking innovative solutions to address rising costs, creating a market demand for upstream UM strategies.

Health plans that adopt upstream UM are better positioned to meet these demands and differentiate themselves in a competitive marketplace. By demonstrating a commitment to proactive care, plans can attract members, employers, and provider partners who value innovation and results.

Implementing Upstream Utilization Management

Covered in next week’s edition!

Conclusion

The healthcare industry is evolving, and health plans must evolve with it. Downstream utilization management, while necessary in some cases, is no longer sufficient to address the complex challenges of rising costs and fragmented care. By shifting to upstream utilization management, health plans can proactively tackle the root causes of inefficiency, improve member outcomes, and align with the broader shift toward value-based care.

The time is now to embrace this paradigm shift. Health plans that act decisively will not only reduce costs but also enhance their reputation as leaders in innovation and quality care. In doing so, they will position themselves to thrive in a rapidly changing healthcare landscape.

Are You Ready to Implement Upstream UM?

If you are ready to take the next step in improving value-based care delivery at your organization, we can help in the following ways:

• Assess your current UM approach for opportunity to implement upstream processes
• Share typical clinical and cost-savings outcomes that come from an upstream approach

- Schedule a demo to show you the provider and member experience

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