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Managed care plans rarely deny reimbursement for hospital care

Publicized instances of managed care denials of reimbursement for hospital care generate fear and distrust when, in reality, few managed care patients ever experience a denial, according to a recent study that was supported in part by the Agency for Healthcare Research and Quality (HS10667). Researchers found that less than 1.5 percent of managed care patients hospitalized at a large teaching hospital were denied reimbursement of care. Managed care and other insurance plans use utilization review (UR) to contain care costs and improve quality.

Plan reviewers employed by insurance companies or by review companies determine if a given episode of hospital care meets the criteria of medical necessity and appropriateness and is allowable under the terms of the hospital/payer contract and the individual insurance policy. Care that meets these criteria is certified for reimbursement, explain Mary Ellen Murray, Ph.D., R.N., and Jeffrey B. Henriques, Ph.D., of the University of Wisconsin School of Nursing. They examined more than 50,000 concurrent utilization reviews completed over a 4-year period (1998-2001) at a large teaching hospital for patients enrolled in managed care plans. Throughout the study period, only 270 patients out of more than 80,000 admissions were denied reimbursement of their care.

Denial of hospital care reimbursement increased over the study period, from 0.67 percent of patients in year 1 to more than double that amount (1.43 percent) in year 4. Similarly, the number of patients with hospital days denied increased from 49 to 91. The most frequent reason given for reimbursement denial was a lack of acute-care criteria—either the patient's condition did not warrant hospitalization or care could have been given safely in another setting.

See "Denials of reimbursement for hospital care," by Drs. Murray and Henriques, in the April 2003 Managed Care Interface, pp. 22-27.

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