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What Is Utilization Management? 2020-01-24T13:06:48+00:00

Utilization Management

tools for utilization managementUtilization management (UM) in the healthcare field is the use of managed care techniques that allow parties financially responsible (i.e. health insurance companies) to manage and control the cost of health care benefits provided. An example of utilization management is the need for a prior authorization, decided by and awarded by the insurance company’s notion of the medical offerings (i.e. procedure, medication, hospitalization…etc.) appropriateness and necessity. Utilization management can also be an integral part of a provider’s organization’s revenue cycle and can greatly assist in minimizing unnecessary costs and claim denials. 

Utilization Review

A utilization review is one of the components that make up a utilization management program, commonly used in hospital settings. Utilization management should include all three types of utilization review to ensure the appropriateness for all medical care being delivered. The three types of assessment include: 

  • Prospective Review: the assessment of need for a healthcare service prior to it being preformed (i.e. prior authorization)
  • Concurrent Review: the review of services during one’s hospitalization
  • Retrospective Review: evaluating the appropriateness of various aspects (i.e. settings, procedures, timings, medications…etc.) of a health care service after it has been rendered 

Retrospective reviews are also used to ensure health insurance claim submissions are completed accurately, so as to allow for correct reimbursement payments.

Utilization Management Programs

Utilization management has become fundamental in health plans. The reason being twofold: to assure a patient is obtaining the proper treatment and to help make treatment more affordable. With regard to medications, for example, there are several different UM programs health care plans may implement, which can include the following:

  • Step Therapy: this type of utilization management requires an individual to use a “step” approach when it comes to medications for certain conditions. This means that a patient may have to try a lower cost medication before “stepping up” to a different medication, should that be necessary. 
  • Prior Authorization: sometimes referred to as pre-approval, requires a prescribed medication to be approved by the member’s health insurance plan before it will be covered. 
  • Quantity Limits: this controls the amount of medication an individual can fill at once. Additionally, there can be a minimum timeframe before an individual’s health insurance plan will cover the cost of refilling a prescribed medication. 

The purpose of utilization management is to prevent claim denials and deliver improved care to patients. Health plan companies, health care facilities, doctors, medical professionals as well as pharmacists share information and work as a united front to help improve the health care field. Utilization management can help improve the safety of patients, catch mistakes, reduce waste, and keep medical needs affordable by lowering costs.


Obtaining accreditation for utilization management is possible. The most commonly recognized health utilization management standards at both the state and federal level are that of the URAC. URAC, Utilization Review Accreditation Commission, was established in 1990 and began accrediting organizations such as pharmacies, provider organizations and health plans in 1996. There is a URAC accreditation program designed specifically for UM purposes called Health Utilization Management. The URAC accreditation ensures that organizations conducting utilization management processes meet the URAC standards. They must follow a specifically outlined process that is clinically sound and respects both the patients and providers rights. The process for earning the URAC Health Utilization Management Accreditation is extensive. It is also a clear mark of distinction for organizations to display their commitment to quality and accountability. 

Further Information

As insurance regulations change, it is imperative that companies understand how each change can affect their practice, in all aspects. Insurance companies are notorious for offering excuses and utilizing loopholes to avoid paying providers what they owe. Accreditations such as CARF and JCAHO are now a common requirement for insurance companies to render payment. These certifications alert the public that a company has been adequately inspected and is considered reputable, meeting the accreditations high standards. The accreditation process can be arduous, requiring a significant amount of time and energy. Our staff offers diverse skills that enable Oracle Billing and Services, Inc. to assist in areas ranging from CARF-Accreditation, Verification of Insurance benefits, Insurance Collection Calls, Drug/Alcohol state licensing, JCAHO-Certification and more. Oracle Billing and Services has extensive experience in assisting companies in the health industry, in understanding the ever-changing regulations as well as providing expert consultation for all areas of operations.