An Exploratory Cost Analysis of Performing Hospital-based Concurrent Utilization Review

Objective: To determine the costs associated with conducting concurrent utilization review, a utilization management strategy widely used by the managed care industry.

Study Design: A production process model focusing on resource utilization.

Subjects: The 29 clinical services of a 500-bed academic health center were aggregated into 9 clinical groups. A random sample of at least 15 reviews per group was studied.

Methods: Time sampling and cost analysis methods were used to determine the cost to the hospital of conducting utilization review. Component activities of the process were identified and analyzed to determine differences among clinical services and among the component tasks of the utilization review process.

Results: In 12 months, 13 126 reviews were completed in an average of 15 minutes 41 seconds. Across clinical groups, the average total time of each review ranged from 11 minutes 18 seconds (medical group) to 19 minutes 4 seconds (pediatrics group). Significant differences existed among clinical service groups for the activity of preparing for conducting the review, with the pediatrics group spending more time than the cardiology and oncology groups. The total cost of the process was nearly dollar 166 000 annually. The average cost per review was dollar 11, the average cost per patient-day denied was dollar 478, and the average cost per patient denial was dollar 1592.

Conclusions: These figures are conservative in that they do not include the payer component of the costs, which could be as high as the hospital provider cost. Given a denial rate of < 2% and the high cost of the process, it may be beneficial to investigate alternative processes for conducting utilization review.