As part of the 1994 workers' compensation reform, KRS 342.035 required the commissioner of the Department of Workers' Claims to promulgate administrative regulations governing medical provider utilization review activities conducted by an insurance carrier, group self-insurer or self-insured employer. 803 KAR 25:190
, requiring every individual self-insured employer, group self-insurance fund and insurance carrier to implement a utilization review and medical bill audit program and submit a written plan describing the program to the commissioner for approval, became effective Sept. 19, 1995.
Amendments to the utilization review regulation were filed Aug. 15, 1996. The amendments were primarily housekeeping measures, clarification of the utilization review process and an attempt to ensure greater compliance. The amended regulation became effective Dec. 13, 1996.
In response to issues raised by medical providers and medical payment obligors, the regulation was revisited during the last quarter of 1997. Amendments to the regulation were promulgated and became effective June 15, 1998.
Legislative changes dealing with private review agent certification necessitated the most recent regulatory amendment effective March 19, 2001.
1. What is utilization review?
Utilization review is generally defined as a review of the medical necessity and appropriateness of medical treatment and services. It is defined for the workers' compensation process as "a review of the medical necessity and appropriateness of medical care and services for purposes of recommending payments for compensable injuries or diseases." Medical services that are rendered or requested for incidents that are noncompensable under KRS Chapter 342 are not subject to utilization review under this administrative regulation. In other words, the assessment of the medical necessity and appropriateness of medical treatment and services is ultimately for purposes of determining the availability of payment for those treatments or services. Medical necessity includes a review of the setting, frequency and intensity of the treatment or service.
2. What is medical bill audit?
Medical bill audit is the review of all medical bills for services that have been provided to assure compliance with adopted fee schedules. Also, every injured employee must designate a physician pursuant to 803 KAR 25:096. The medical bill audit process must confirm that a physician has been designated.
3. Who is required to implement a utilization review program?
All insurance carriers who write workers' compensation insurance in Kentucky, individual self-insured employers and group self-insurance funds must implement a utilization review and medical bill audit program by April 1, 1996. A written plan describing the program must be filed with the commissioner of the Department of Workers' Claims for approval prior to implementation of the program. Utilization review for an employer that has contracted with an approved Managed Care Organization (MCO) will be carried out within the MCO.
4. How does the utilization review process work?
First level - review
Once a claim is selected for review, medical personnel review the treatment or service for medical necessity and appropriateness. Only licensed physicians, registered or practical nurses, medical records technicians or other medically trained personnel can approve utilization review decisions. The decisions are based on recognized treatment protocols and standards such as the low back pain practice parameter. Utilization review must begin immediately upon notice of a claim selection criteria. An initial decision must be rendered within two working days, if preauthorization, and within 10 days if retrospective in nature. There is a provision for expedited utilization review wherein a decision is rendered in 24 hours.
If the initial reviewer detects a problem, the claim is referred to a licensed physician. Only licensed physicians can render denials. A written notice of denial entitled "UTILIZATION REVIEW - NOTICE OF DENIAL" must be issued to the treating physician and the employee within 10 days of the initiation of utilization review.
A notice of denial must include a statement of the reasons for denial, the name, state of licensure and medical license number of the reviewer and a statement of reconsideration rights. The notice of denial must include the reason for the denial and a statement of appeal rights. Notice of the right to appeal must also be provided to anyone aggrieved by the initial decision and decisions upon appeal must be in writing.
Second level - appeal
A party adversely affected by the initial decision may appeal the decision within the utilization review program. The aggrieved party must request reconsideration within 14 days of receipt of the written notice of denial. A review of the initial utilization review decision must be conducted by a different reviewer of at least the same qualifications as the initial reviewer. The decision must be rendered within 10 days of the request for appeal and must be entitled "UTILIZATION REVIEW - RECONSIDERATION DECISION." If the reconsideration decision is made by an appropriate specialist or sub-specialist, the decision is the final utilization review decision and must be entitled "FINAL UTILIZATION REVIEW DECISION."
Third level - specialist review
If a party remains unsatisfied with the decision upon appeal, specialty or sub-specialty review may be requested. The right to request specialty review exists only when a specialist has not previously reviewed the matter.
Many utilization review programs send all requests for appeal directly to an appropriate specialist or sub-specialist, which in essence eliminates the third level of appeal. A decision upon specialty review must be rendered within 10 days of the request for specialty review and must be entitled "FINAL UTILIZATION REVIEW DECISION."
5. What claims must be selected for utilization review?
Compensable claims are subject to utilization review when any of the following occur:
A medical provider requests pre-authorization of a medical treatment or procedure;
Notification of a surgical procedure or resident placement pursuant to an 803 KAR 25:096 treatment plan is received;
The total medical cost cumulatively exceed $3,000;
The total lost work days cumulatively exceed thirty (30) days; or
An administrative law judge orders a review.
These are minimum criteria. Some utilization review programs review additional claims based on the program's own internal criteria.
6. What claims are subject to utilization review upon implementation of a utilization review program?
Utilization review and medical bill audit plans were required to be implemented April 1, 1996. Upon implementation, the following claims are subject to review:
All outstanding medical bills as of April 1, 1996, must be reviewed for fee schedule compliance, irrespective of the date the bill was incurred. Every injured employee must designate a physician in accordance with 803 KAR 25:096;
Utilization review should be applied to all open claims (those claims that have not been concluded by the entry of a final award or settlement) and concluded claims (those claims that have been concluded by the entry of a final award or settlement and the employer or carrier is responsible for the claimant's medical treatment) where: (1) lost work days exceed 30, and the employee remains off work, irrespective of the date of injury; or (2) the records indicate that for the previous one-year period the total medical expenses total $3,000 or more;
Utilization review should be applied to all concluded claims where compensability has been determined and the payment obligor is responsible for medical expenses for the cure and relief of the work-related injury; or
Utilization review should be applied in any case where a medical provider requests preauthorization and in any case upon notification of a surgical procedure or resident placement pursuant to a KAR 25:096 treatment plan.
7. Acute low back pain practice parameter
Pursuant to the authority granted by KRS 342.035(8)(a), the commissioner of the Department of Workers' Claims has adopted the acute low back pain practice parameter created by the Kentucky health policy board for use in workers' compensation cases. Therefore, the parameter must be incorporated in all utilization review plans as the standard for evaluating low back claims.
8. 803 KAR 25:096, Selection of Physicians and Treatment Plans
Utilization review programs must include a process to assure compliance with the requirements of 803 KAR 25:096 that a physician is designated by the injured employee and that treatment plans are obtained when required.
9. How will utilization review affect 803 KAR 25:012, Medical Fee Disputes?
The request to resolve medical fee disputes, Form 112, has been amended to include a question concerning whether utilization review has been performed. The initial notice of denial and final appeal decision with supporting medical opinions are required attachments to the Form 112.
Some utilization review programs include an independent medical exam of the patient in certain situations as part of the utilization review process. If such an independent medical exam has been performed, the medical report should also be attached to the Form 112.
If utilization review is applicable and has not been completed, the medical fee dispute will not be subject to adjudication by an administrative law judge.
10. How will utilization review interact with KRS 342.020(1)?
The employer's obligation to render payment for medical treatment and services within 30 days of receipt of a statement for services is tolled during the utilization review process. Following utilization review, the obligation to render payment will be within 30 days of the final utilization review decision.
11. Pre-certification - not a synonym for utilization review
Utilization review can occur retrospectively, concurrently or prospectively. In Kentucky's workers' compensation program, "pre-certification" is not a synonym for utilization review, as is often the case in general health care. In Kentucky much of the mandatory utilization review is "retrospective"--i.e., after the medical treatment has been delivered and a bill for services has been generated. Arguments are often made that this frustrates the expectation for utilization review to effectively prevent unnecessary medical services and waste and that utilization review is most effective when it includes "pre" and "concurrent" review. In "pre" and "concurrent" review, proposed treatment is reviewed before services are rendered and before the patient's condition is altered. However, KRS 342 does not authorize such broad preauthorization in workers' compensation cases. 803 KAR 25:096, Selection of Physicians and Treatment Plans, requires treatment plans to be submitted to the payment obligor in advance of certain medical services (i.e., elective surgeries and resident work hardening, pain management and rehabilitation programs).
The following guideline should be used to determine whether prospective, concurrent or retrospective utilization review is required:
- Claims are subject to utilization review upon:
- A medical provider's request for preauthorization;
- Notification of a surgical procedure or resident placement pursuant to an 803 KAR 25:096 treatment plan;
- Total medical costs reaching $3,000; or,
- Total lost work days exceeding 30.
- A carrier is required to perform pre-authorization only in situations where a medical provider requests it. See the first bulleted item directly above.
- A carrier may require pre-authorization in situations where a treatment plan must be prepared and furnished to the employer under 803 KAR 25:096:
- Seven days in advance of an elective surgical procedure; and,
- Placement in a resident work hardening, pain management or medical rehabilitation program. See the second bulleted item directly above.
Any entity that fails to comply with utilization review and medical bill audit regulations may be fined by the commissioner of the Department of Workers' Claims pursuant to KRS 342.990(7)(e). Additionally, group self-insurance funds and individual self-insured employers that fail to implement a utilization review and medical bill audit plan place their self-insurance certification in jeopardy. Insurance carriers that fail to comply with 803 KAR 25:190 may be reported to the Kentucky Office of Insurance.
For more information, contact: Kelly Tharpe, Department of Workers' Claims, 502-782-4445, email Kelly.Tharpe@ky.gov
or Pamela Knight, Department of Workers' Claims, 502-782-4449, e-mail firstname.lastname@example.org