Utilization management
Utilization management is the set of review processes a health plan uses to decide whether it will cover a service — prior authorization is the best known of them, but it is one member of a family that also includes concurrent and retrospective review, step therapy, and referral requirements.
Updated
Utilization management, usually shortened to UM, is the umbrella term for the review processes a health plan applies to decide whether a service will be covered. The processes differ mainly in when they happen relative to the care: before it, during it, or after it.
Prior authorization is the most visible member of the family and is often treated as a synonym for the whole of it, which is misleading. A plan can apply utilization management to a service that requires no prior authorization at all — through concurrent review while an admission is running, through retrospective review after the claim arrives, through a step-therapy sequence that requires one treatment to be tried before another, or through a referral requirement that gates access to a specialist.
In practice
The practical consequence is that the absence of a prior-authorization requirement is not the absence of review. A service can be furnished with no advance approval needed and still be refused on retrospective review, which is why an eligibility check that answers only the prior-authorization question leaves part of the risk unmeasured.
Which processes a plan applies, and to what, is set by that plan and changes. The durable places to read the current answer are the plan's own published utilization-management or medical policies, the provider manual the participation agreement incorporates, and — where the plan is a Medicare Advantage plan — the federal floor that constrains what its policies may say.
Commonly confused with
- Prior authorization: Prior authorization is one utilization-management process: advance approval obtained before the service is furnished. Utilization management is the category it belongs to. Treating the two as identical is what leads a practice to assume that a service needing no authorization carries no coverage risk.
- Medical necessity: Medical necessity is the standard a service is judged against. Utilization management is the machinery that applies the standard — the review process, its timing, and who conducts it. A denial can turn on either: the standard itself, or how the process was run.
- Case management: Case management coordinates a patient's care across settings and providers. It is a service offered to the enrollee rather than a gate on coverage, even though both are often run by the same department at a plan.