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The Institute of Medicine is studying utilization management not only because the field is expanding but also because it has important implications for the delivery of medical care that have not been systematically investigated. On the one hand, utilization management has features that make it an attractive strategy for managing health benefits. When successfully implemented, utilization management takes the clinical circumstances of individual patients into account and gives patients and providers its assessments about whether services are appropriate before rather than after care is provided. It does not involve across-the-board limitations on health plan coverage. On the other hand, utilization management has certain unattractive aspects. It acids to the administrative demands on both patients and providers and employs criteria for decision making that are sometimes vague or even secret.

In this first phase of its work, the committee has examined two major methods of utilization management: (1) prior review of the appropriateness of proposed medical services and (2) high-cost case management. The first category includes several techniques—preadmission review, admission review, continued-stay or concurrent review, discharge planning, and second surgical opinion.

One of the committee's basic findings is that there is limited empirical evidence on which to make authoritative conclusions about the impact of utilization management at this time. Most private sector programs are relatively new, and the field has been changing rapidly. Therefore, the committee has tried initially to frame the important questions, offer reasoned judgments about the state of utilization management, and suggest directions for the future. As stated in the Preface, the committee has based its judgments and projections on reviews of published and unpublished reports on the workings and effects of utilization management, site visits by the committee to several utilization management organizations, and hearings and discussions involving consumers, providers, purchasers, and others. Judgments also reflect the committee members' extensive and diverse experience in health care delivery and financing.

This chapter summarizes the committee's findings about the current status of utilization management and its evolution. It identifies some issues raised by that assessment and recommends what prudent decision makers can do to promote the positive potential of utilization management

Current Status of Utilization Management

Several features of utilization management are important to keep in mind: (1) its great diversity, (2) its limited scope, and (3) its relative lack of regulatory oversight. First, utilization management, as it currently operates in the private sector, is highly variable, which makes generalization about it