How Utilization Review Works

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Utilization review is the process of making sure healthcare services are being used appropriately and efficiently, which is a key component of a value-based approach to paying for health care.

This article will explain how utilization review works, where it's used, and how it affects your medical care and insurance coverage.

The goal of utilization review is to make sure patients get the care they need, that it’s administered via proven methods, provided by an appropriate healthcare provider, and delivered in an appropriate setting. The process should result in high-quality care administered as economically as possible and in accordance with current evidence-based care guidelines.

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Who Does Utilization Review?

UR is done by health insurance companies, but also by hospitals, home health companies, and myriad other types of healthcare providers.

The government requires hospitals to have an effective utilization review program in order to participate in Medicare and Medicaid. And there are also drug utilization review protocols in place for both Medicare and Medicaid, in an effort to reduce abuse and misuse of certain medications, particularly opioids.

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 before a test or treatment can be performed.

UR is frequently, but not always, done by nurses. UR nurses have protocols that define 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 some types of health insurance cover the hospital stay.

UR nurses at hospitals and home health companies work closely with their UR 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.

Sometimes, 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.

An Example of Utilization Review

Sam is admitted to the ICU through the emergency room in the middle of the night after a car accident. The next morning, the hospital’s UR nurse looks at Sam’s medical record and notes all of his medical problems and treatments.

She consults her protocols to make sure that the ICU is the best place for Sam to be treated. For example, it could be that Sam would benefit from being transferred to a specialty trauma ICU at the regional trauma center. Alternatively, it could be that Sam’s injuries aren’t so severe and his treatments not so complex as to warrant being in the ICU; he might be more efficiently and economically cared for in the ICU step-down unit or on a surgical floor.

Most of the time, she’ll find that patients are being cared for at the correct level of service, and that Sam should be in the ICU right where he is. However, if her protocols suggest a different level of care would be more appropriate, she would discuss this with the doctors and nurses who are providing Sam's medical care.

Those doctors and nurses may provide additional information which makes it clear that Sam is right where he needs to be. But it might also become clear that Sam would be cared for more appropriately in a different setting, like the ICU step-down unit or the regional trauma center’s trauma ICU. If this is the case, the UR nurse works with the physician and the nursing staff to get Sam where he can receive the best and most efficient care to meet his medical needs.

The hospital UR nurse communicates with the UR nurse at Sam’s health insurance company. The health plan UR nurse compares Sam’s clinical findings and treatments with the health plan’s protocols. She then communicates back to the hospital UR nurse something to the effect that the health plan approves Sam’s admission and treatment and is authorizing four days of hospitalization. She might add instructions to contact her if it becomes apparent Sam will need more than four days of hospitalization.

The hospital UR nurse follows along with Sam’s progress every day or two. If it becomes clear to her that Sam won’t be healthy enough to be discharged before the four days approved by the health plan’s UR nurse are up, she’ll contact the health plan’s UR nurse with an update on Sam’s condition and treatments.

If the hospital notifies the health plan’s UR nurse that Sam won’t be ready to go home when anticipated, the health plan’s UR nurse will consult her protocols and either approve more days of hospitalization or suggest a more appropriate alternative care setting.

For example, if Sam needs intensive physical therapy but not the other medical services that acute-care hospitals provide, the health plan’s UR nurse might suggest transferring Sam to an inpatient rehabilitation facility where he can get the physical therapy and nursing care he needs more economically.

Utilization Review in Your Health Plan

UR done by your health plan is similar to UR done in a hospital but with a few differences. For example, if a hospital admission doesn't pass UR at the health plan, the health plan will likely deny the claim when the hospital sends the bill. Your health plan won't pay for care it doesn't believe is medically necessary or care not delivered in an appropriate setting.

Part of the reason hospitals tend to have such robust internal utilization review protocols—and a line of communication with the UR teams at the health plans that contract with the hospital—is to avoid claim denials in the first place. Hospital protocols are designed to ensure that the care they're providing is appropriate, efficient, and linked to improved patient outcomes.

That said, there are appeals processes in place that you and your healthcare provider or hospital can use if your health plan denies a claim.

States can and do regulate how health insurance companies conduct utilization review, for health plans that are regulated at the state level (ie, health plans that aren't self-insured). The National Association of Insurance Commissioners has a utilization review model act that states can use as-is or modify as necessary to meet state laws and regulations.

State insurance commissioners are responsible for overseeing the insurance companies that offer coverage within the state, and you can reach out to your state's insurance commissioner if you have a question or comment about your health plan's utilization review process.


Utilization review is a process designed to ensure that medical care is effective, efficient, and in line with evidence-based standards of care. Utilization review specialists are often nurses. They work for health insurance companies, hospitals, and various other medical providers. Utilization review teams at hospitals tend to work in tandem with their counterparts at health insurance companies, to ensure that everyone is on the same page in terms of the care that each patient needs. This helps to expedite prior authorization from health plans and ensure that patients' claims are covered.

A Word From Verywell

Utilization review is done to ensure that your medical care is as effective and efficient as possible. Your health plan doesn't want to pay for care that's not necessary or that's overly expensive, but both the health plan and the medical providers want you to recover as quickly as possible. If you're worried that utilization review might be compromising your access to certain types of care, you can reach out to the team that's reviewing your case to discuss it with them. And in most cases, you can appeal a decision that your health plan makes regarding the care they'll authorize.

10 Sources
Verywell Health uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Centers for Medicare and Medicaid Services. CMS manual system pub.100-07 state operations provider certification.

  2. Improving Drug Utilization Review Controls in Part D

    Centers for Medicare and Medicaid Services. Improving Drug Utilization Review Controls in Part D.

  3. Drug Utilization Review Guidance.

  4. MCG Health. The utilization review process and the origins of medical necessity.

  5. American Medical Association. Inpatient versus observation care.

  6. What is discharge planning and utilization review?

  7. Healthcare IT News. Reinventing utilization management.

    • Jacqueline LaPointe

    LaPointe, Jacqueline. RevCycle Intelligence. Hospital Utilization Management Can Reduce Denials, Improve Care.

  8. How to appeal an insurance company decision.

  9. National Association of Insurance Commissioners. Utilization Review and Benefit Determination Model Act.

Additional Reading

By Elizabeth Davis, RN
Elizabeth Davis, RN, is a health insurance expert and patient liaison. She's held board certifications in emergency nursing and infusion nursing.