UTILIZATION REVIEW PROVISIONS

Medical Necessity
Any plan that limits coverage to medically necessary services and supplies must use the state statutory definition of medical necessity. The state law defines medical necessity as services or supplies that are:

• Provided for the diagnosis, treatment, cure or relief of a health condition, illness, injury or disease;
  
• Not for experimental, investigational or cosmetic purposes;
  
• Necessary for and appropriate to the diagnosis, treatment, cure, or relief of a health condition, illness, injury, disease or its symptoms;
  
• Within generally accepted standards of medical care in the community; and
  
• Not solely for the convenience of the insured, the insured’s family or the provider.
  

A health plan may examine cost-effectiveness when choosing between two or more services or supplies that are medically appropriate for the condition. However, a health plan may not consider cost-effectiveness in determining whether a service or supply is medically necessary (NCGS 58-3-200(b)).

Assessing Utilization of Health Services
Each HMO must have a utilization review system that collects data and assesses the use of health care services. Specifically, the system must have mechanisms to evaluate medical necessity, as well as the appropriateness, effectiveness and efficiency of health services. The utilization review criteria must be based on sound, up-to-date clinical criteria and must be applied consistently in all appropriate reviews. HMOs must monitor health care to see if providers are providing unnecessary care (overutilization) or withholding necessary care (underutilization). Any problems identified in the utilization review process should be used to improve the system (NCGS 58-50-61(c)).

Who Conducts Utilization Reviews
Qualified health professionals such as nurses must make all initial utilization review determinations. These reviewers act under the direction of one of the HMO’s physicians. An HMO medical physician must also review all decisions to deny requested services. The person making the utilization review decisions may not be paid on the basis of the numbers of services or treatments denied or the money saved (NCGS 58-50-61(d)).

The HMO can conduct utilization review procedures in-house or it can contract these functions to another body called a utilization review organization. Whether it does its own review or contracts with another organization, the HMO has overall responsibility to ensure that the review process meets state law (NCGS 58-50-61(b)).

Time Limits for Review
The HMO also has certain time limits to make utilization review determinations. HMOs must make all prospective and concurrent review determinations within three business days after the insurer obtains all necessary information about the admission, requested procedure or health care service (NCGS 58-50-61(f)). Reviews of services and supplies that are conducted after the services have been provided (retrospective review) must be conducted within 30 days of the time the HMO receives the necessary information to make the determination.

Utilization Review Procedures
HMOs and other utilization review organizations must notify members and prospective members about the review procedures, including the procedures to appeal denials of care. HMOs must have a toll-free telephone number for members to use in seeking prior authorization, and must include this number on its membership cards (NCGS 58-50-61(e)(3), (m)). In addition, insurers must make sure the utilization review staff is accessible by telephone by monitoring the average speed of answer and call abandonment rates on at least a monthly basis.

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