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IROs: A Closer Look

Many decision-makers and interest groups, including the growing pharmaceutical industry, now intervene in the medical care delivery process. Consumers may be subject to medical judgement by their doctor, their health plan or Health Maintenance Organization (HMOs), and their Utilization Review Agent. Consumers also seek to make their own decisions and respond to advertising by drug companies.

Most of the decision-makers are subject to financial incentives. These include incentives to doctors to reduce referrals. Utilization review agents get paid to reduce over-utilization of services by denying treatments that are not "medically necessary." But overly aggressive denials may become a barrier to the care people really need.

In 1997, the Texas Legislature made an effort to provide consumers a system to address this dilemma.(1) The law developed a system of accountability for HMOs and health care professionals completely independent of financial incentives. The independent review process allows patients to question their HMOs' determinations and offers insight into doctors' decisions. Similar legislation is currently a topic of debate in Congress.(2)

When a health plan denies access to care, the consumer must first appeal the decision to the HMO itself before seeking a ruling by an Independent Review Organization (IRO). (See "How it Works, p. 6.) A Utilization Review Agent (URA) will conduct an "internal review" and determine whether the original denial was valid. If the internal reviewer also denies care, the consumer may then request an independent review.

TDI assigns the case on a rotating basis to one of three independent review organizations in Texas and checks for any conflict of interest between the IRO and the insurer. The IRO then decides whether the HMO's original finding was appropriate. The IRO decision is binding.(3)

Consumers Union Study

The Texas Department of Insurance (TDI) receives about 500 requests for independent review each year, and distributes them among three independent review organizations (IROs). Consumers Union analyzed every IRO decision completed during a six-month period, from March 22 through September 26, 2001. The sample (263 decisions) included all three review organizations and 63 health plans. We compared this time period to statistics maintained by TDI and found that the sample we used is representative of the kinds of disputes reviewed over the past five years.

With all identifying information about consumers and physicians removed, Consumers Union read the reviewer's narrative for every decision, categorized them by illness and procedure, and summarized the relevant medical issues in dispute. The amount of information varied. Some IRO decision letters offered great insight into the medical condition and the decision-making process, while others only included a few sentences with few details. Despite these limitations, Consumers Union could determine the key medical issues in most cases, as well as the standards used by IROs when evaluating these issues.

The "overturn rate" is the number of cases where treatment denials are overturned compared to the total sample. We use the term "partially overturned" for cases where the IRO agrees with the health plan on some issues but disagrees on others or where the IRO approves coverage for some additional treatment days but fewer than requested by the consumer.

General Findings

Five years after the law's passage, Consumers Union found that the independent review process is working for consumers. More than half of those who presented their case to an independent reviewer received some additional treatment (55 percent of denials were fully or partially overturned). This is a slightly higher rate than found in nationwide studies of independent review, and slightly lower than the overturn rate in Texas since inception of the system (59 percent overall).(4)

Consumers' use of independent review increases each year.
In 2000 and 2001 more than 60% of denials were overturned by reviewers

About 74 percent of the requests for review handled by the IROs consistently concerned: a handful of contested prescription drugs (19 cases), surgical treatment for obesity (17 cases), mental illness (46 cases), substance abuse (54 cases), and the number of days (if any) required for hospital care for physical illness (60 cases). The remaining disputes involved a wide array of other treatments (including chiropractic, physical therapy, occupational therapy, durable medical equipment, experimental treatments, and miscellaneous surgeries) from which it was difficult to discern any patterns of care.
For some conditions with similar details--including mental health problems and severe obesity--IROs consistently overturned treatment denials. This raises concerns about HMOs' practices with respect to these conditions, especially when there are clear guidelines that indicate how an IRO will decide.

Mental health and substance abuse treatment constitute only 8 percent of the nation's medical care costs (and private health insurance pays very little of that cost).(5) Yet, these conditions together accounted for 38 percent of care denials sent for independent review in our sample. Mental health treatments denials were overturned much more frequently than the general overturn rate (70 percent overturned or partially overturned).

In contrast, independent reviewers only rarely overturned an HMO's decision not to pay for name brand drugs. For the most part, reviewers supported alternatives proposed by the health plan.

TDI is distributing the cases evenly among the reviewers as required by law, but Envoy and Independent Review, Inc. (IR) overturned HMO denials more frequently than Texas Medical Foundation (TMF) in our sample. Envoy and IR overturned 54 cases each, about a 62 percent overturn rate. TMF overturned only 36 of its 89 cases, an overturn rate of 40 percent. TMF is the oldest review company, but Envoy joined the system in February, 1998. TDI added IR in December, 1999.(6)

Within certain condition categories, Envoy and IR overturned more health plan decisions than TMF. For example, of the 54 reviews dealing with substance abuse issues, Envoy reviewed 17 and overturned 13. IR, which looked at 21 of these, overturned 13. Of the 16 TMF reviewed, only six were overturned. These difference are only suggestive, however, because the number of cases in a specific treatment category is small, and the specific case histories differ. But the variance could reflcet material difference in approach to treatment worthy of additional investigation.

Finally, we find that the number of independent reviews remains low, although the system is now in its sixth year of operation. In 2001, consumers requested only 587 decisions. Since inception in November, 1997, IROs have conducted only 1,864 reviews.(7)
This is consistent with national findings on the use of the available independent review systems around the country. A recent Kaiser study of the 41 states with independent review laws found that only about 4,000 patients appeal HMO treatment decisions each year nationwide.(8)

People may get discouraged. A patient must be denied twice (an initial denial, then an internal review that upholds the first denial) before accessing independent review. Moreover, the independent review process is no longer available for all denials.

70 Percent of Reviews Related to Mental Illness
Resulted in Some Additional Care for the Patient

In early 1999, TDI began sending letters to certain patients requesting independent review that "if the first time your health benefit plan performed a review of medical necessity or appropriateness was after health care was received, the IRO process is not available to you." TDI interpreted the statute to only cover "prospective" or "concurrent" denials and not those done "retrospectively." Since some of the cases cited in this report appear to address care retrospectively (care that has already been provided), it is unclear how TDI determines which requests are appropriate to send on to independent review.(9) Without the benefit of independent review, many people end up having to pay for care they believe should have been covered by their health insurance.

More than half of appeals are fully or partially overturned. Consumers who cannot access or who do not pursue their full appeal rights may not be receiving adequate health care. Without either encouraging more consumers to challenge their HMOs' decisions or making some structural changes within the HMO industry itself, patients may fail to get medically necessary treatment and their frustration with the health care industry will only continue to grow.

Gastric Bypass Surgery

HMOs repeatedly denied surgical treatments for morbid obesity, largely gastric bypass. Of the 263 cases studied by Consumers Union, 17 involved morbid obesity and gastric bypass. When consumers fought through the whole review process, the IROs overturned most of these denials (12 overturned, or 70.5 percent), and they did so for essentially the same reasons.

According to the National Institutes of Health 1991 Consensus Conference on "Gastrointestinal Surgery for Severe Obesity," a man with a Body Mass Index (BMI) 40 kg/m2 and over is "morbidly obese." At this level mortality rates increase. Patients whose BMI exceeds 40 kg/m2 may be surgery candidates if they strongly desire substantial weight loss. The NIH Consensus Conference also determined that patients with a BMI between 35 and 40 kg/m2 may also qualify for the procedure if it looks as though they will greatly benefit and it is apparent that they will face health complications if they do not lower their weight.(10)

The IRO upheld the HMO denial if the patient had not participated in a medically-supervised weight loss program prior to requesting surgery.(11) However, one IRO held that the patient had attempted several weight loss programs and qualified for the gastric bypass despite the fact that the diets had not been medically supervised. The reviewer added that the National Institutes of Health Consensus Conference does specify that patients' prior diets be medically supervised in order to qualify for gastric bypass.(12)
HMOs denied gastric bypass to numerous patients who appeared to meet NIH standards. For example, Aetna denied (and TMF overturned) a gastric bypass for a 34-year-old woman with a BMI of 42.2 kg/m2 who demonstrated commitment to long term after care.(13) Aetna denied (and Independent Review Inc overturned) a gastric bypass to a 450 pound, 5'8" woman with a long history of failed diets. The reviewer found it "extremely unlikely" that the patient could lose any significant weight without the surgery.(14)
HMO Blue had five gastric bypass cases referred to an IRO, and reviewers overturned all of these. In these cases, the reviewers said consumers had met standards necessary to undergo the surgery. For example, three cases in which HMO Blue denied coverage for a gastric bypass involved consumers with a BMI of 40 kg/m2 or more.(15) In yet another case, Envoy concluded that the patient met the "standard criteria for morbid obesity, as well as the insurance guidelines which require gastroplasty first." In this instance, HMO Blue disregarded medically-recognized guidelines for gastric bypass as well as the consumer's compliance with its own additional requirements.(16)

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Footnotes:

1 Texas Insurance Code, Art. 21.58A, Section 6A, effective Jan. 1, 1998.

2 H.R. 2563, Sec. 104, Ganske, introduced 7/19/2001 and S. 1052, Sec. 104, McCain, introduced 6/14/2001.

3 Title 28, Texas Administrative Code, Chapter 12; Texas Insurance Code, Article 21.58A, Sec. 6A(3).

4 Texas Department of Insurance, "IRO Monthly Report," February, 2002. Albert, Tanya, "Few Patients Opt to Appeal HMO Denials," AM News, April 8, 2002.

5 U.S. Department of Health and Human Services, Office of the Surgeon General, "Mental Health, A Report of the Surgeon General," 1999, p. 412.

6 Texas Department of Insurance, "IRO 2001 Report," "IRO 2000 Report," "IRO 1999 Report," "IRO 1998 Report."

7 Texas Department of Insurance, "IRO 2001 Report," 2001.

8 Albert, p. 2.

9 Texas Department of Insurance, "Sample Letter Regarding No Right to IRO if Only a Retrospective Review Was Performed," April 20, 1999.

10 Consensus Development Conference Panel, "Gastrointestinal Surgery for Severe Obesity," Annals of Internal Medicine, Vol. 115, No. 12, December 15, 1991, pp. 197-202.

11 Texas Medical Foundation, IRO Decision Letters, Aetna, 9/17/2001 and 6/16/2001. Envoy, IRO Decision Letter, Aetna, 5/24/2001. Independent Review Inc., IRO Decision Letter, Prudential, 4/4/2001.

12 Independent Review Inc., IRO Decision Letter, Blue Cross Blue Shield, 6/19/2001, overturned.

13 Texas Medical Foundation, IRO Decision Letter, Aetna U.S. Healthcare, 5/10/2001.

14 Independent Review Inc., IRO Decision Letter, Aetna U.S. Healthcare, 9/17/2001.

15 Independent Review Inc., IRO Decision Letter, HMO Blue, 5/29/2001 and 6/7/2001. Texas Medical Foundation, IRO Decision Letter, HMO Blue, 5/23/2001.

16 Envoy, IRO Decision Letter, HMO Blue, 5/15/2001.