Insurance companies use utilization reviews to figure out if a treatment is medically necessary for you.

Photographer: Visualfield | Agency: Dreamstime

Utliziation Review

Utilization review is a health insurance company's opportunity to review a request for medical treatment. The purpose of the review is to confirm that the plan provides coverage for your medical services. It also helps the company minimize costs and determine if the recommended treatment is appropriate. A utilization review also gives you the opportunity to confirm that your health plan provides adequate coverage for your particular condition. If the company denies coverage as a result of a utilization review, you can always appeal the decision.

The term "utilization management" is often used interchangeably with utilization review. Although they both involve the review of care based on medical necessity, utilization management usually refers to requests for approval of future medical needs, while utilization review refers to reviews of past medical treatment. So, utilization management is the process of preauthorization for medical service. You can also use it for approval for additional treatments while you're undergoing medical care (a concurrent review). Reviews of appeals also fall under utilization management.

The term "utilization review" refers to a retrospective review -- the review of treatments or services that have already been administered, and review of medical files in comparison with treatment guidelines. In the latter case, information retrieved during a utilization review can be used as part of a system that creates the insurance company's guidelines for a given condition. When creating these documents, insurance companies not only use patient experiences but also review how physicians, labs and hospitals handle the care of their patients.

In this article, we'll dig deeper into the types of utilization reviews and management and find out what to do if your review is denied. Let's start with precertification reviews.

Precertification Review

Precertification is the preapproval process for treatments found on your insurance policy's precertification list. The length of the list varies by plan type, but most lists include nonemergency hospitalizations, outpatient surgery, skilled nursing and rehabilitation services, home care services and some home medical equipment. The review and approval involves determining whether the requested service is medically necessary.

Most insurance plans have predetermined criteria or clinical guidelines of care for a given condition. So, once you submit a precertification request to an insurance company, a committee reviews these guidelines and determines if you have met the criteria for precertification coverage. If necessary, the committee may contact your health care provider. The general process for precertification is similar in most health care plans.

The process begins with the collection of information, including the symptoms, diagnosis, results of any lab tests and list of required services. The committee then reviews the criteria for your condition. It may compare your medical information to the health plan's medical necessity criteria. If the committee denies your request, you can start the appeals process.

­Next we'll go over concurrent and retroactive reviews.

A health insurance company, hospital or independent organization can conduct a retrospective review.

Photographer: Endostock | Agency: Dreamstime

Types of Utilization Reviews

Much like precertification reviews, concurrent reviews are used for approval of medically necessary treatments or services. However, concurrent reviews happen during active management of a condition, be it inpatient or ongoing outpatient care. The focus of concurrent review is to ensure that the patient is getting the right care in a timely and cost-effective way.

This process is much like that of precertification. After you begin a medical treatment, any new treatments found on the insurance company's preapproval list are submitted to the insurance company for approval. Information on the care you've received, along with your current clinical status and any progress you've experienced, is collected. Once the insurance company or an independent review organization reviews the information, the physician and other providers are notified with the decision.

An important part of concurrent review is the assessment of the patient's needs after a hospitalization. Because concurrent review is used to decrease the amount of time you spend in the hospital, the first concurrent review often determines a discharge plan. This plan can include transfers to rehabilitation, hospice or nursing facilities. While discharge plans often change due to complications or abnormal test results, establishing an early time frame for hospitalization is key to keeping health insurance costs down.

So what happens if you didn't get preapproval but got the medical care anyway? That's where retrospective reviews come in.

The retrospective review involves the review of medical records after your medical treatment. The insurance company can use the results to approve or deny coverage you have already received, and the information can also be used in a review of the insurance company's coverage guidelines and criteria for a particular condition. The insurance company looks through your records for evidence of appropriate low-cost health care. It then compares your records to those of other patients with the same condition. It will then review, and possibly revise, its treatment guidelines and criteria to ensure that the provided care is adequate, and medically current, for the condition. This first type of retrospective review can be conducted by the health insurance company, an independent review organization or the hospital involved in the treatment.

The other function of retrospective review is the approval of treatments that normally require precertification but were done without approval. This can happen if a patient is unresponsive and has not been able to obtain precertification. Emergency services like surgery also may be eligible for this type of review. The review takes place before any payment is made to the provider or hospital. Therefore, most hospitals or providers are actively involved in the review process by providing clinical documentation that supports their treatment decisions.

What happens when a utilization review is denied? We'll explain the appeals process in the next section.

Doctors who are registered utilization review agents can make a decision on your appeal.

Photographer: Gelpi | Agency: Dreamstime

The Appeals Process

The appeals process begins after your insurance company gives you an "adverse determination" letter. This letter must come within three days of the initial utilization review and must include the reasons your request was denied, information on how this denial can be appealed and information on how to obtain the company's clinical review criteria. Once you've received this letter, you have the option to file an appeal.

The first step may be obvious -- call your insurance company to say you want to file an appeal. If you leave a message with this information, the insurance company is required to return your call within one business day. At this point you can choose an expedited or standard review of the appeal. Normally, you'd want an expedited review when the denied medical coverage is needed immediately. Pick the standard review if you don't need the coverage immediately or if an expedited review is denied.

Once the appeal begins, you or your provider may have to provide the insurance company with additional medical information. This information should be reviewed by the insurance company or outsourced to a utilization review organization. Licensed and registered utilization review agents (usually physicians or other health care providers) who know about your particular condition must make this decision.

After you've handed over all the requested information, the insurance company must respond to your appeal within a set time frame. For expedited appeals, you should receive a decision within two business days. With a standard appeal, the decision should be issued within 60 days. These time frames can prove extremely important -- if your plan does not respond within the set time line, the initial denial of coverage is automatically reversed and your insurance company must pay for the services. So be sure to keep track of what you sent and when you sent it.

If your appeal is denied, your insurance company is required to send you a "final adverse determination" letter. This document should include the specific reasons for the denial, along with any necessary medical explanations. It should also provide information on how you can receive a copy of the insurance company's clinical review criteria. Finally, depending on your state's laws, the letter may include information on how to make an external appeal that involves a third-party decision-maker, usually an independent review organization.

For more information about utilization reviews, take a look at the links on the next page.

Lots More Information

Related HowStuffWorks ArticlesMore Great LinksSources
  • URAC. http://www.urac.org/about/
  • Medical Management: Utilization Management. http://www.mcres.com/mcrmm02.htm
  • Managed Health Care Executive. http://www.managedhealthcareexecutive.com/mhe/Hospitals+&+Providers/Understand-the-nuances-of-utilization-review-and-u/ArticleStandard/Article/detail/282713
  • NY Consumer Guide to HMOs: Utilization Review. http://www.nyshmoguide.org/PerfUtilizationReview.asp
  • Utilization Review of Appeals Process. http://www.oag.state.ny.us/health/flowchart/flowchart.html