Skip to Content

What is the Difference Between Utilization Review and Utilization Management?

Healthcare institutions generally implement process improvement procedures to help reduce operating costs and improve the quality of patient care. Utilization review and management procedures play a very crucial role in medical process improvement activities.

Although the two terms are often used in the same way and to mean more or less the same thing in healthcare, the two concepts of Utilization Review and Utilization Management are clearly different. Understanding how they differ can help to improve communication around the subject.

It is true that the evaluation process for utilization review and utilization management is similar or the same and both assess medical care for appropriateness. It is also true that the aim for both is to control the cost of healthcare services. However, the difference is that utilization management is a prospective process that occurs before and during the admission, procedure or treatment, while utilization review is retrospective.

In the United States, as private payers explore ways to reduce healthcare costs and manage utilization, they are increasing their use of contracts with third – party administrators (TPAs) to perform utilization management (UM) and utilization review (UR) of the physical therapy services.

Note that the most frequently encountered hurdle faced by physical therapists and physical therapist assistants is prior authorization policies that tend to be very burdensome and restrict medically necessary access to care.

However, the steady increasing use of UM/UR services is due in part to growth in physical therapy expenditures, but it also as a result of a provision of the Affordable Care Act called the medical loss ratio (MLR).

According to reports, the MLR was formulated to limit insurer profit by mandating that payers spend a minimum percentage of dollars from insurance premiums on medical care, as opposed to administrative costs.

For instance, Midsized insurers (individual insurers and businesses with 1 to 100 employees) are mandated to maintain an 80/20 ratio—meaning that at least 80% of premium dollars is spent on medical care, and no more than 20% is spent on administrative costs.

While Large – group plans (employers with more than 100 employees) are expected to maintain an 85/15 ratio. If an insurer does not achieve the ratio, it must pay a penalty in the form of customer rebates.

Although rebates to consumers may be seen as beneficial, the MLR also has produced unforeseen consequences, such as the outsourcing of UM/UR and the implementation of restrictive prior authorization policies.

IROs also serve as a very important liaison between providers and the payers. They abide by strict federal and local standards when they review services for medical necessity and appropriateness.

IROs also help to provide a clear view along many different parts of the healthcare continuum, and have a certain level of expertise that allows them to make solid, unclouded judgements.

Note that partnering with an IRO can help cut down on internal administrative costs and expedite day – to – day activities. IROs increase accuracy and make solid unbiased judgments which can help lower the risk of fraud and reduce liability.

Key Difference between Utilization Review and Utilization Management

Just like it was stated above, knowing the difference between Utilization Review and Utilization Management is very imperative in the healthcare continuum. While the two terms often feel interchangeable, in reality their processes and meanings actually are very different. Their differences make all the difference for improving care.

Utilization review

This is more or less the process of ensuring that healthcare services are being used appropriately. The sole aim of utilization review is to make sure patients get the care they need, that it’s administered using proven methods, offered by an appropriate healthcare provider, and delivered in an appropriate setting. Note that this should result in high – quality care administered as economically as possible and in accordance with current evidence – based care guidelines.

Utilization Review is always done by health insurance companies, but also by hospitals, home health companies, and myriad other types of healthcare providers. The government also mandates hospitals to have an effective utilization review program in order to participate in Medicare and Medicaid.

According to reports, Utilization review can be done while the care is being given, known as concurrent UR, or after the care has been completed, known as retrospective UR. Utilization reviews can also be done prospectively, as part of the prior authorization process, when a patient needs approval from their health insurer prior a test or treatment can be performed.

Note that Utilization review is frequently, but not always, done by nurses. Normally the nurses follow protocols that explicitly state what high – quality care is and by whom and in what setting it should be administered (this includes an analysis of whether a patient should be admitted as an inpatient or kept under observation, which changes how health insurance covers the hospital stay).

Also note that Utilization Review nurses at hospitals and home health companies work closely with their Utilization Review nurse counterparts at health insurance companies, as well as with the quality improvement team, the social work team, the discharge planning team, and the clinical staff caring for the patient. In some cases, the hospital UR nurse is also the discharge planner. When UR and discharge planning are combined into one job, it’s known as case management.

Utilization Management

Utilization management rather focuses on the strategies and policies that healthcare organizations—such as hospitals, medical labs and clinics—put into place to help improve operating activities and ensure that patients receive an excellent quality of care.

Utilization Management is also renowned as the process of responding to the utilization review results. Note that through Utilization Management, plans and procedures are established for improving the outcome of reviews. Even though utilization review identifies and addresses service metrics that lie outside the defined scope, utilization management always ensures that healthcare systems continuously improve and deliver appropriate levels of care. The major aim of Utilization Management is to reduce the risk of cases that need review for inappropriate or unnecessary care. Other aims include;

  • Ensuring that Facilities and staff resources are being utilized effectively
  • Ensure there is ongoing education and monitoring to ensure advanced levels of patient care
  • Decisions are made on data – based information
  • Medical costs are managed
  • There is improved communication between payers, providers, and insurers


Healthcare professionals normally differentiate utilization review from utilization management, yet both activities often interrelate. Utilization Review colloquially does encompass Utilization Management. When review is been talked about, often it is being discussed in broader terms than just the physical act of reviewing charts. But that is not always immediately clear, and therefore, understanding the difference between the two, especially in conversation, is imperative.