Written by The Latitude Team
What Is Utilization Management?
If you've ever wondered how health insurance companies decide which medical services get approved, you're thinking about Utilization Management (UM). UM is the process health plans use to ensure patients receive the right care at the right time—while also keeping healthcare costs in check. It includes three key steps: prior authorization (reviewing care before it's provided), concurrent review (monitoring ongoing treatments), and retrospective review (evaluating care after it's given). Together, these help balance patient needs with responsible healthcare spending.
Real-World Example: How UM Works
Imagine a patient with severe knee pain from osteoarthritis. They see an orthopedic specialist who recommends total knee replacement surgery. But before the surgery can be scheduled, the health insurer requires prior authorization to be submitted by the provider—a key part of UM.
Here’s what happens at the insurer:
Reviewing the Case: The UM team starts by checking the member’s eligibility and benefits to ensure the procedure is covered. The clinical reviewer, in most cases a nurse, then looks at the patient’s medical history, previous treatments (like physical therapy or injections), and clinical guidelines to decide if the surgery is medically necessary.
Exploring Other Options: If non-surgical treatments haven’t been fully explored, the UM team may suggest trying those first, for example conservative treatments like physical therapy or NSAIDs.
Decision Time: If the request meets clinical guidelines, the surgery is approved. If not, the case will be escalated to a Medical Director at the health plan for further review. The Medical Director will make the final determination, diving into the clinical literature and potentially having a peer-to-peer conversation with the requesting doctor. The medical director will make the final determination to approve or deny the requested service.
Communication: The health plan will then send written communication to both the member and provider explaining the final decision, why the decision was made, and information on how to appeal the decision if there is disagreement.
Why Utilization Management Matters
Why do we do UM in the first place? While today’s UM processes can be frustrating for both patients and providers, it helps to:
Ensure clinically appropriate care – UM helps confirm that patients receive treatments, procedures, and medications that are evidence-based and medically necessary, reducing exposure to ineffective or potentially harmful interventions.
Keep healthcare costs manageable for everyone – By preventing unnecessary procedures and avoidable medical expenses, UM helps control overall healthcare spending, which in turn keeps premiums and out-of-pocket costs more affordable for members.
Improve care coordination and outcomes – UM facilitates smarter care transitions, ensuring that patients get the right follow-up services—such as rehab, home health, or specialist referrals—reducing hospital readmissions and enhancing long-term health outcomes
The Key Components of UM
UM isn’t just about approving or denying services—it’s about actively managing a patient’s care journey. The process includes several key steps, each playing a role in ensuring care is appropriate, efficient, and high-quality. Here’s how it works:
1. Prior Authorization: Before certain services, procedures, or medications are provided, doctors must get approval from the insurance company. This ensures care aligns with clinical best practices and is appropriate for the member. Learn how Latitude Health automates prior authorization.
2. Concurrent Review: This happens in real-time while a patient is receiving care, like during a hospital stay or when in a Skilled Nursing Facility. The UM team monitors whether continued care is needed and ensures patients aren’t staying in the hospital longer than necessary.
3. Retrospective Review: After treatment, UM teams review medical records and claims to assess whether the care met medical guidelines. This helps identify trends in overuse or underuse of healthcare services.
4. Case Management & Care Coordination: UM teams often work with case managers to ensure patients get the right follow-up care after leaving the hospital, reducing readmissions and improving recovery.
The Challenges of Traditional UM
For health plans, outdated UM processes are manual, inefficient, and costly, leading to operational strain and member dissatisfaction. Key challenges include:
Slow turnaround times – Delays in prior authorization and case reviews make it harder to meet compliance requirements and can lead to escalated costs or member abrasion, including members abandoning important care.
Inconsistent decision-making – Disparate systems and manual workflows result in variability in approvals, increasing appeals and administrative burden.
High administrative costs – Nurses and UM teams spend excessive time on manual case entry, policy lookups, and documentation, limiting their ability to focus on clinical decision-making.
How AI is Changing Utilization Management
AI-driven UM solutions are reshaping how health plans process and manage care decisions—reducing administrative burdens while improving accuracy and compliance.
Here’s how:
Streamlining prior authorizations – AI automates the time-consuming steps, such as extracting clinical data, applying policy guidelines, and structuring case information—so nurses can focus on clinical decision-making instead of administrative tasks.
Enhancing decision support – AI analyzes medical records in real-time, surfacing relevant policies and clinical criteria to help UM teams make faster, more consistent determinations.
Boosting efficiency and compliance – AI-powered workflows enable UM teams to process more cases in less time, meeting tight turnaround time (TAT) requirements while maintaining quality.
See how Latitude Health is using AI to transform UM.
How Latitude Health is Leading the Way
At Latitude Health, we believe in making UM smarter, not harder. Our AI-powered platform:
✅ Reduces administrative burden by automating manual tasks.
✅ Enhances decision-making with real-time AI-driven insights.
✅ Improves efficiency, helping health plans and providers process more cases while maintaining high-quality care.
Built in collaboration with over 50 UM professionals, Latitude Health’s AI-powered platform is designed for real-world healthcare challenges. Meet our team of UM experts.
About Latitude Health
Latitude Health is transforming Utilization Management (UM) with AI-native technology that drives better outcomes for organizations. Our platform empowers UM teams to work smarter and faster - reducing costs, increasing review volume, and improving decision quality. By equipping teams with tools and insights, Latitude supercharges your greatest asset—your people—while delivering impact across all UM operations.
Want to see Latitude Health in action? Reach out to our team here for a Demo!
