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  1. Lerner, Jeffrey C. PhD
  2. Gesek, Janine RN, MSN
  3. Adams, Suzanne RN, MPH


Abstract: In theory, evidence-based medical necessity policy in health care utilization review may make resource allocation more equitable. Costs can be managed through the consistent application of standards for approval of only those services deemed medically necessary and by controlling denials and appeals litigation. Additional cost savings may be realized with more efficient utilization review processes and concentration on review standards for the specific items or services that have the greatest financial impact on overall utilization dollars. This article describes a five-step process for evidence-based medical necessity standards development and includes illustrative examples from a state Medicaid agency project. While early results are promising, data are scarce. The authors, nevertheless, believe the approach may prove to be useful on promoting the application of evidence-based decision making.


STATE MEDICAID PROGRAMS are increasingly turning to the tools of evidence-based policy making, such as technology assessment, to underpin decision making. In the 1990s some states, such as Tennessee and Oregon, incorporated technology assessments (also called "evidence reviews" or "systematic reviews") into their coverage decision making for medical devices, drug therapies, and clinical procedures. At the turn of the millennium, with the economy in recession, systematic reviews-comprehensive quantitative and qualitative assessments of the clinical research literature and data-also began to be incorporated into state prescription-drug coverage programs. Experiments in which these evidence-based techniques were brought to bear on utilization standards development programs were also being launched.


This article draws on the experience of ECRI, a nonprofit health services research organization that serves as one of the evidence-based practice centers designated by the Agency for Healthcare Research and Quality (AHRQ), in incorporating this approach into a de-identified state Medicaid program. The approach described combines formal evidence reviews with expert-panel meetings aimed at creating optimal coverage criteria for a range of technologies and practices.


Like much of evidence-based policy making, the concept is to minimize clinical and arbitrary decision making. The promise of this approach is a more rational distribution of resources, which is especially valuable during periods in which financial resources are hard pressed. Whether the approach will prove to be utopian (i.e., rational but unachievable in the real world of Medicaid management) remains to be seen. The effort described in this article has run for only three years and must be characterized as nascent. Longer-term success will rest on good practice, good will, and skillful navigation of political waterways. The danger, as always, is that rational techniques can be rejected or, if accepted, misapplied. In the 1990s private-sector managed care programs often fell victim to the perception or reality of being considered wanton cost-control schemes rather than care-improvement efforts, and this provides caution for current state-based initiatives. While the route may prove challenging, bringing evidence-based decision making to the benefit of vulnerable populations and a vulnerable medical system is an experiment worth pursuing. This article reports on the authors' practical experience rather than presenting an abstract theoretical approach or a description of political processes. Whether the approach described will move beyond sounding promising to proving to be a fruitful model that can be used in many states remains unknown.


Health care spending in the United States is approaching $1.4 trillion annually; costs continue to rise, and the laser-like focus on dollar expenditures is back. Medical cost inflation and population demographics are critical factors that bring pressure on the way health care resources are allocated. One significant challenge in health care coverage today is the need for payer organizations to make unbiased, timely, and consistent decisions based on the best available clinical evidence and best practices. Gaps in the decision-making process can lead to underuse, overuse, or delays in treatment and may result in high-cost appeals, litigation, and noncompliance with regulatory standards. Inconsistency in the decision-making process also leads to a decrease in consumer confidence, as recipients of care or their advocates lose faith in the health care system and believe that they have been denied care based on a partial decision-making process. Federal, state, and private third-party payers seek guidance on how to produce benefit, recognizing the need to ensure equity across regions while improving efficiency in practices.


Given the proliferation of health care technologies, including pharmaceuticals, medical devices, and clinical procedures, rising unit costs for these technologies and the ever-increasing demand for health care services due to aging and chronically ill populations, an evidence-based approach can play a key role in health-policy development. Objective and credible evidence about health care services and delivery-an analytic approach recognized by the Agency for Healthcare Research and Quality, the Institute of Medicine, and the Centers for Medicare and Medicaid Services-is believed to add value for policy makers seeking to develop sound approaches to the optimal management of access, quality, and cost of care, and service delivery.


This article provides background information on how medical necessity policy is used for utilization review determinations. A five-step process used by a state Medicaid agency for demonstration project for evidence-based medical necessity standards development is then described.