A complete guide to Utilization Management in Healthcare

As healthcare costs escalate, healthcare organizations face a significant dilemma: How do you ensure that providers manage resources efficiently without sacrificing employee satisfaction or patient care? 

Outdated processes and policies place businesses at risk for overspend, which puts patients in greater jeopardy of insurance claim denials or even insufficient treatment. Mobile and home healthcare organizations, in particular, are vulnerable to these costly effects, as the added layer of complexity in their work can result in even more operational inefficiency. 

To mitigate these risks, healthcare companies should leverage techniques that support utilization management as part of their broader operational strategy. Here, we’ll discuss utilization management in healthcare, including different types, process flow, benefits, challenges, and why it’s essential to a business’s profitability and viability. 

What Is Utilization Management in Healthcare?

Utilization management is the process that determines the efficiency and necessity of specific medical treatments, procedures, and facilities given to patients. The process impacts the healthcare organization and its providers, patients, and insurers, too. Utilization management programs, though complex, act as an effective cost-containment strategy. 

Utilization management evaluates several processes, including patient admissions, home health visits, ER visits, and outpatient visits. Other metrics might include primary care physician visits, specialty referrals, high-cost imaging, and cost-per-visit. 

While insurance companies run the process most often, healthcare providers can implement techniques to optimize their resources and care delivery for an enhanced process that reduces costs while improving patient outcomes

Utilization management has three different processes to conduct assessments, and depending on the utilization management method that is used, the steps for completion are different. 

Types of Utilization Management

Each type of utilization management review is used for a distinct purpose: 

1. Prospective

Prospective reviews are completed prior to patient treatment and measure the necessity of a procedure. While this review type can be used before or after admission, it must be done prior to treatment. That’s because prospective reviews prevent duplicate or ineffective treatments, which can help you boost your ROI over time. Routine, outpatient, or urgent referrals typically require prospective reviews; sometimes called prior authorization, pre-service reviews, pre-procedure reviews, or pre-admission certification. 

2. Concurrent

A concurrent review begins when treatment is underway, and it tracks resources and patient progress during treatment to reduce denials of coverage. This means that a treatment can be stopped partway through: the insurer might seek alternative treatments to ongoing care, or begin discharging the patient earlier than the doctor would advise. If a healthcare worker receives asynchronous updates from their team, they may accidentally continue care that has been stopped, which can cause a massive headache. That’s why it’s important to consider a solution that allows for real-time field updates.

A concurrent review involves:

  • Care coordination – Syncs a patient’s care when it comes from multiple providers or specialists.
  • Discharge planning – Determines what milestones need to be met for a patient to be able to leave the hospital.
  • Care transition – Moves a patient from one level of care to another (e.g., moving from short- to long-term nursing care).

3. Retrospective

Retrospective reviews take place after a procedure’s completion to evaluate the effectiveness and appropriateness of the selected treatment. Findings from retrospective reviews can help determine if other patients can receive the same type of treatment for similar conditions. 

These types of reviews are most important for insurance claims to check if the reimbursements on the procedure are accurate, or to challenge the denial of claims.  


Utilization Management Process Flow 

The utilization management process flow differs for each type of  review, as each is used at varying times while a patient receives treatment. Some steps of a process may also need to be repeated in the case of denials. 

Prospective review steps might include:

  1. Verify the coverage and eligibility for the proposed treatment.
  2. Evaluate the level of care needed and the appropriateness of the proposed treatment.
  3. Approve the treatment if criteria are met. If those criteria are not met, the proposed treatment is denied.
  4. A physician can appeal, should a denial occur. 

Concurrent review steps might include:

  1. Collect data on a patient’s progress, prognosis, cost, and resource usage while treatment is simultaneously provided.
  2. Insurer reviews the data.
  3. If approved, the treatment underway will continue; if not, there will be a request to change treatment.
  4. The physician can appeal changes to treatment.

Retrospective review steps might include:

  1. Insurer reviews a patient’s treatment records.
  2. The insurer can update their criteria for covered treatments based on the patient’s records.
  3. Coverage can be denied at this point. 
  4. If denied, the physician or patient can appeal.

Benefits of Utilization Management

Implementing a utilization management program is often a time-consuming feat for already-busy healthcare organizations; but the potential benefits of getting it right are hard to ignore. These are:

  • Cost-containing measures – Since each treatment gets reviewed for efficacy, providers only use successful treatments on their patients. This incentivizes doctors to prescribe more affordable procedures, which stops patient referrals for costly services and specialists. In terms of savings, it’s a win for insurers and patients alike.  
  • Reduction of denials – When utilization management reviews are conducted before or with treatment, there are fewer reasons for insurers to deny claims. When insurance providers see suggested treatments and referrals; they play an active part in evaluating different options based on cost, necessity, and potential patient outcomes.  
  • Improved care – With utilization management, the effectiveness of each specific treatment is evaluated, so patients only receive the ones proven to work. Unlike in the fee-for-service healthcare model, patients typically don’t receive unnecessary treatments or get referred to excessively-priced specialists. They see improved care outcomes based on thorough treatment reviews of every option. 


Challenges of Utilization Management 

While effective utilization management offers several promising advantages, getting it right isn’t always a guarantee. An inadequate utilization management program can create some significant roadblocks, such as:

  • Resentment between insurers, patients, and doctors, as reviews sometimes result in set limits on treatments and services. 
  • Patients may feel unfairly burdened with the cost of care, which can drive them to switch healthcare providers or insurers. 
  • Reviews may contradict the wishes of the doctor, who may then become frustrated with and distrustful of the insurance provider conducting the review process. 
  • Some tests may not fully diagnose a patient, but can eliminate potential conditions. Doctors and insurers see the value of these tests differently.
  • A discrepancy between best practices and cost-effective treatment could exist.
  • This process can unfairly burden healthcare providers, who now have even less time to spend with patients.


Why is Utilization Management Important in Healthcare?

Though the potential obstacles can cause hesitation when considering a utilization management program, the correct implementation is absolutely vital. When carried out successfully, utilization management ensures that patients receive high-quality and appropriate care from their providers. It can also halt the delivery of unnecessary or ineffective treatments that may otherwise pose a risk to patient health or incite excessive costs. 

A strong utilization management program can reduce costs for patients and insurers alike,  mitigate the risk for insurance denials, and minimize waste. Every stakeholder should examine the potential impact of a utilization management program on their ability to deliver excellent care while remaining profitable. 

Utilization management is especially crucial for mobile and home healthcare organizations, who must contend with continuously increasing demand, difficulties attracting and retaining talent, and the complexity of providing the right care at the exact right time and place. It’s in their best interest—and in the best interest of home health patients and their insurance providers—to ensure their operations run as efficiently and effectively as possible. This includes implementing workflows, processes, and technologies that best support strong utilization management.

How Skedulo Can Help

Utilization management in healthcare helps the efficacy and necessity of treatments, services, and procedures; and understanding exactly how it can impact healthcare organizations, patients, and insurers is vital. To alleviate costs, reduce denials, and steer clear of its potential challenges, a strong utilization management program—backed by powerful processes and tools—is required.

Skedulo’s Deskless Productivity Cloud offers intelligent healthcare scheduling, patient-to-caregiver matching, real-time field updates, and a fully integrated, HIPAA-compliant platform for a more efficient, effective workforce. Our robust tools offer greater transparency and communication to keep mobile teams on the same page so they can always deliver excellent, cost-effective care.   

Learn more about how operations management in healthcare works, or book a demo today.