Utilization management: Overview, definition, and example
What is utilization management?
Utilization management (UM) refers to a process used by healthcare organizations, insurance companies, and other entities to assess the necessity, appropriateness, and efficiency of healthcare services provided to patients. The goal of utilization management is to ensure that healthcare resources are used appropriately, cost-effectively, and in line with clinical guidelines, while still meeting the needs of patients. It typically involves reviewing medical treatments, procedures, and services before, during, or after care to determine if they are medically necessary and if the most efficient treatment plan is being followed.
For example, utilization management might involve reviewing a request for an MRI to determine if it is medically necessary based on the patient's symptoms and medical history, or if other, less expensive treatments would be more appropriate.
Why is utilization management important?
Utilization management is important because it helps ensure that healthcare resources are used efficiently and that patients receive appropriate care at the right time. By managing the utilization of services, healthcare providers and insurers can control costs, improve care quality, and reduce unnecessary medical procedures or overuse of healthcare resources. For patients, effective utilization management can help avoid unnecessary treatments, reduce wait times for necessary care, and improve overall outcomes by ensuring the care they receive is appropriate.
For healthcare organizations and insurers, it provides a structured approach to controlling costs while ensuring compliance with medical guidelines and improving the overall efficiency of the healthcare system.
Understanding utilization management through an example
Imagine a health insurance company that reviews medical treatment requests through a utilization management process. A doctor might request approval for an expensive surgery for a patient. The insurance company uses UM to review the patient’s medical history, the necessity of the surgery, and whether less invasive treatments would be effective. If the surgery is deemed medically necessary, it will be approved. If the insurance company determines that there are more cost-effective treatments available, they may suggest alternatives, such as physical therapy or medication.
In another example, a hospital might use utilization management to assess the length of stay for a patient recovering from surgery. The hospital may use UM protocols to determine whether the patient still requires hospitalization or if they are ready for discharge, thus ensuring that the patient does not stay longer than necessary and reducing overall healthcare costs.
An example of a utilization management clause
Here’s how a clause like this might appear in a healthcare insurance policy or contract:
“The Insurer will review all requests for medical procedures, treatments, and services through its utilization management program to determine medical necessity. Only services deemed medically necessary and consistent with applicable clinical guidelines will be covered under this policy.”
Conclusion
Utilization management is a critical process in healthcare that helps ensure the efficient and appropriate use of medical resources. It benefits both healthcare providers and patients by controlling costs, improving care quality, and ensuring that patients receive the right care at the right time. For insurance companies, it is a tool for managing claims and ensuring that only necessary and effective treatments are provided. For patients, it ensures that they are receiving care that is aligned with best practices and clinical guidelines.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.