Until recently, Utilization Management was all about how health plans determine preauthorization. But that definition is fast becoming outdated.
Authored by Debbie Hill, MSN, RN
The term “Utilization Management” was first heard in healthcare roughly three decades ago. The Institute of Medicine came up with a formal definition in 1989 that discusses “…techniques used by or on behalf of purchasers of health care benefits to manage health care costs…”. In plain English: It’s how health plans determine preauthorization.
Until very recently, with health plans the sole bearers of risk, Utilization Management couldn’t extend any further. It was about saving them money.
But not anymore. That definition is fast becoming outdated; we need a broader one.
Utilization Management’s Benefits for Risk-bearing Organizations
Today, providers are increasingly sharing risk with health plans in value-based arrangements. As providers become invested in controlling care costs, Utilization Management is no longer a just matter of preauthorizations. Instead, it’s a matter of developing provider-plan partnerships that enable more strategic management of overall care resources.
The new definition of Utilization Management must center on shared responsibility for eliminating inefficiency. It’s about better directing resources to improve outcomes across entire patient populations.
Success in value-based care will ultimately depend on payers and providers together maintaining the highest quality of necessary care while reducing or eliminating care that is inefficient, redundant or unnecessary. That includes getting rid of excessive care steps unintentionally fostered by fee-for-service care models.
Putting Utilization Management Into Action
Going forward, sharing risk will require both providers and plans to embrace Utilization Management and drive a more financially and clinically responsible care system.