PHM Glossary: U


URAC, an independent, non-profit organization, is well known as a leader in promoting health care through its accreditation, measurement, and education programs.  URAC offers a wide range of quality benchmarking programs and services that are leading the way through the rapid changes in the health care and wellness landscapes worldwide, and provides a symbol of excellence for organizations to validate their commitment to quality and accountability.  Through its broad-based governance structure and an inclusive standards development process, URAC ensures that all stakeholders are represented in establishing meaningful quality measures for the entire health care and wellness industries.


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Utilization (Resource Utilization)

Consumption of health care resources can be measured in two ways: units of expenditure (or cost, for example, as dollars per member per month) and as utilization. Utilization refers to non-monetary resource consumption or units of health care services consumed.


Health care resource utilization is a three-part concept. First, health care broadly encompasses care that affects states of health from birth to death and wellness to illness. More specifically, it involves items and services that are used in the delivery of preventive interventions and medical treatments.

Resources are those factors that go into producing a health outcome, such as services (encounters, processes), treatments that directly affect health and well-being, medical supplies, pharmaceuticals, and other components of service provision (administration, information systems, facilities). As an example, health care resources for magnetic resonance imaging (MRI) include services of service providers (prescribing physician, radiologist, nurses, technicians), facilities (hospital in which the MRI equipment is located), and in some cases medical supplies (with MRI, supplies are included in the facility code, but in some cases supplies may be separately charged and therefore show up as additional codes).

Once diagnosis is made, follow-up encounters could include prescriptions for (utilization of) pharmaceuticals. Use of the factors (i.e., utilization) and the items that are used to make health care is important because they are scarce. How they are used and paid for is therefore of considerable interest. In our example, utilization is translated into codes used for billing when the service itself is billed as an encounter (the physician CPT code) and the facility component (imaging CPT code).

In economics, utilization refers to the actual quantity traded (i.e., used and paid for) in the market. Health care resources are typically allocated across the population according to their price, but they may also be rationed according to need and/or specially earmarked for a specific group of individuals according to specific criteria. There are other issues that also affect utilization—perceived need, patient health belief system, access, media coverage of the resource (e.g., pharmaceuticals), and culture. These factors are important to consider when designing and delivering population health management programs.

Health care utilization refers to specific measures of resource consumption including:

  • Inpatient hospital admissions;
  • Inpatient hospital bed-days;
  • Length of inpatient stay (days);
  • Emergency room visits;
  • Outpatient surgeries;
  • Intermediate hospital (rehab, skilled nursing facility, etc.) admissions and days;
  • Professional visits;
  • Outpatient office visits;
  • Professional office visits;
  • X-ray/lab services;
  • Prescription drugs (non-inpatient) scripts; and
  • Other medical services.

Each of these utilization measures is usually reported as a rate per 1,000 members. In health care financial applications, it is possible to decompose a per member per month (PMPM) net paid claims cost to a series of calculations of utilization rates, unit costs, and member cost-sharing rates per member per month, as follows:

      N   k
Cost PMPM = 1   Σ Ut ∗ Gt - 1/k Σ Sj
  12 ∗ 1,000   t=1   j=1


Ut is utilization (units per 1,000 members per year)

Ct is allowed cost per utilization unit

Sj is cost-sharing on the individual member level (required to move from an allowed charge basis to a net paid basis).

The following example shows how utilization may be built up to a PMPM cost. For simplicity, cost sharing is not shown.

Chronic Population Units 1,000/Month Utilization
Unit Cost
Impatient Hospital (Incul. ICU, SNF, etc) Admissions 35 $8,000.00 $280.00
Emergency Room Visits 110 $150.00 $16.50
Outpatient Surgery Surgeries 15 $2,500.00 $37.50
Professional Charges Professional Svcs. 25 $1,000.00 $25.00
Outpatient Office Visits O/P Office Visits 15 $40.00 $6.00
Rehabilitiation Facility Admissions 10 $2,000.00 $20.00
Professional Office Visits Office Visits 15 $40.00 $0.60
X-ray/Lab Services 20 $40.00 $0.80
Prescription Drugs (non-impatient) Prescriptions 150 $15.00 $2.25
Other Medical Units 100 $10.00 $1.00
Total       $389.65

Utilization is important in chronic care management for multiple reasons. Chronic care management relies on information technology systems to monitor health care resource utilization among populations. In this way, individuals with specific utilization patterns can be identified for potential inclusion in chronic care management programs. Changes in health care resource utilization are one means of evaluating the effectiveness of chronic care management (and other) programs that are designed to increase the quality and effectiveness of health care delivery.

Because chronic care management changes the intensity of some services (for example, substituting outpatient visits for inpatient admissions, or prescription drug utilization for inpatient admissions), it is important to measure not just the reduction in direct utilization but also the substitution effects. Substitution of services or treatments is important for both cost and quality. Sometimes quality is best served by something being utilized more.

In the context of chronic care management, monitoring utilization can tell us: a) that an individual has a condition of interest, or b) that some significant event such as a hospitalization has occurred in the course of a disease (a so-called trigger event). Through their prior or concurrent authorization requirements, utilization management systems can provide an early warning of trigger events as well as new incidence of a disease.

In addition, utilization statistics are important in chronic care management outcome measurement because, unlike dollar values, utilization statistics measure resource consumption directly and are less likely to be affected by factors such as regional differences in medical sector income that affect dollar values per member per month, such as contract changes, plan design, and change in mix of providers or services.

There are a number of tricky issues to be resolved in practice around utilization measurement. For example, how is an inpatient admission measured? Does an individual need to be an inpatient for more than 24 hours to be considered admitted, or does she simply need to be in the hospital bed at midnight to be considered admitted? How is a discharge from a higher-intensity institution, followed by a readmission to a less-intensive facility handled? Bed-day is another term subject to ambiguous definition (e.g., as a calendar day, versus number of midnights or middays the patient is in-hospital). Despite these issues, there is reasonable agreement about how the inpatient measures should be defined and compared (although the resulting statistics will look very different, depending on the applicable population). In the outpatient field there is much less consistency, particularly when issues of contracting (capitation, for example) are introduced. 


Measure of chronic care management program effectiveness: The purchaser of a program for management of asthma in children is evaluating its effectiveness. The program provider could provide information on changes in health care utilization to the purchaser. Common measures of asthma management program effectiveness are a downward change in the rate of emergency room visits with the principal diagnosis of asthma, coupled with an increase in utilization of medications that control asthma. If the changes are significant, these measures are indicators of the financial and quality impact of the asthma management program.


Selection of participants for a study: A health plan is participating in the chronic care management demonstration for diabetes that is being conducted by the Centers for Medicare and Medicaid Services (CMS). Health care utilization is used as a means of identifying Medicare individuals for participation in a disease management study: Medicare beneficiaries who are members of the health plan who have two separate claims with a diagnosis (ICD-9-CM code) of diabetes (e.g., from a doctor visit) and a claim with a prescription for insulin or an oral hypoglycemic agent in a one-year period will be selected to be invited to participate in the disease management program. These individuals comprise the intervention group in the CMS study.


Predictive modeling: An organization develops a predictive model that uses medical claims data to identify 20% of diabetics at a health plan who it predicts would be the highest utilizers next year. For this effort, the organization selects emergency room (ER) or hospital admissions for diabetes (and related conditions) as the target variable that it intends to forecast for 6 months into the future. The predictive model then incorporates this variable into its statistical evaluation of the claims that were incurred over a prior period (e.g., 12 months). The model predicts which patients are likely to experience high cost or high utilization next year based on the ER utilization. These individuals are then enrolled in a chronic care management program.


Todd, W., and Nash, D. Disease Management, A Systems Approach to Improving Patient Outcomes. San Francisco: Jossey-Bass (2001).