Managing prior approval for site-of-service referrals: an algorithmic approach

Area of Science:

• Health economics
• Healthcare policy analysis
• Claims data analytics

Background:

• Payers and providers are exploring prior authorization to shift care from hospital outpatient departments to ambulatory surgical centers due to payment differentials.
• This shift aims to reduce healthcare expenditures by leveraging lower costs at alternative sites of care.

Purpose of the Study:

• To develop a claims data analysis process for payers to estimate potential savings from site-of-service policies.
• To identify movable cases and recommend implementation strategies tailored to a payer's specific network and case mix.

Main Methods:

• Analysis of 15 months of professional and institutional payment data from a medium-sized managed care organization.
• Development of a rules-based algorithm to identify episodes of care eligible for site-of-service changes.
• Estimation of potential cost savings based on shifting care to alternate sites.

Main Results:

• Identified 64,884 episodes of care as potentially subject to a site-of-service policy.
• Found 7,679 episodes to be attractive candidates for shifting care.
• Projected total savings of approximately $8.2 million, averaging over $1,000 per case.

Conclusions:

• Site-of-service policies can generate substantial savings for small and medium-sized payers.
• Tailoring policies to specific patient and provider populations enhances their effectiveness compared to generic approaches.