An exploratory cost analysis of performing hospital-based concurrent utilization review

Area of Science:

• Healthcare Management
• Health Economics
• Hospital Administration

Background:

• Concurrent utilization review is a key utilization management strategy in the managed care industry.
• Understanding the associated costs is crucial for optimizing healthcare resource allocation.

Purpose of the Study:

• To determine the financial costs incurred by hospitals for conducting concurrent utilization review.
• To analyze the resource utilization and cost-effectiveness of this process across different clinical services.

Main Methods:

• A production process model was employed to analyze resource utilization.
• Time sampling and cost analysis were used to calculate the hospital's cost of utilization review.
• 29 clinical services were aggregated into 9 groups, with a random sample of reviews analyzed.

Main Results:

• Over 13,000 reviews were completed in a year, averaging approximately 16 minutes each.
• The total annual cost for utilization review was nearly $166,000.
• Average costs per review, per patient-day denied, and per patient denial were $11, $478, and $1592, respectively.

Conclusions:

• The calculated costs are conservative and exclude payer-side expenses.
• The high cost of concurrent utilization review, coupled with a low denial rate (<2%), suggests a need to investigate alternative utilization management processes.