Current efforts at cost control.

• Author: Fuller, Warren D.
• Position: Chairman's Agenda: Managing Health Care Costs

A review of the sometimes basic, sometimes innovative cost-containment steps that companies are taking.

Seeking solutions to the urgent problem of soaring medical costs ranks high on the agenda of corporate concerns. Annual health care inflation is out of control for companies of all sizes. With $650 billion spent annually for health care, there is no single solution to such a complicated problem. If a thousand-mile trip begins with the first step, similarly, those concerned with health care cost containment must look at each cost-containment mechanism as a step in the right direction.

The health care cost-containment and disability management industry is still relatively young, having taken its first steps in the workers' compensation arena some 20 years ago. Initial efforts focused on rehabilitating injured employees and in expediting their return to productive lives.

The early steps were often the most obvious, and immediately generated significant and calculable savings. For example, the impact of pre-admission certification (PAC) and continued stay review (CSR) was quickly felt, and continues to save up to thousands of dollars per claim.

Some of the first steps in containing costs, though swift in generating significant returns, in the longer term resulted in cost shifting from one medical arena to another. For instance, in the past decade, outpatient care, normally a speedier and, therefore, less costly approach to treatment, evolved as a popular alternative to expensive hospital admissions -- so popular, in fact, that hospital revenues from outpatient visits almost tripled over an eight-year period.

First seen as the answer to rampant inpatient costs, outpatient service became the victim of its own success. Now, industry, government, insurers, and employers are confronting the health care challenge by finding new ways to rein in spiraling costs.

Pre-admission certification and continued stay review continue to provide major underpinnings in the cost-containment industry. PAC assures patients that their hospital stay is appropriate and meets their insurance requirements. Similarly, CSR assures a patient that he or she is receiving appropriate care within a reasonable length of stay.

Auditing hospital and provider bills is another effective mechanism in containing costs. Hospital and provider bill claims are examined for appropriateness of care, bill accuracy, and applicability of covered service. Other established medical review services include: second surgery opinion (SSO), which can benefit the patient by exploring alternatives to expensive surgery; prospective procedure review (PPR) for outpatient services; and discharge planning.

Another important component in cost containment requires...