Utilization Management KPIs: Metrics That Matter for Healthcare Revenue Performance

Last year, Medicare Advantage plans denied over 3.2 million prior authorization requests—6.4% of all submissions, according to KFF. For patients, these denials meant delayed or missed care. On the other hand, for providers, they represented significant revenue challenges and administrative headaches.

Utilization management sits at the crossroads of clinical care and financial health. While most healthcare organizations track some basic metrics, many miss the connection between these numbers and their bottom line. 

The result? Missed opportunities to prevent denials, streamline operations, and improve both patient care and financial performance.

After working with healthcare providers, we've identified which utilization management metrics actually move the needle. This guide focuses on the KPIs that will strengthen your revenue cycle and enhance patient care.

Why Utilization Management KPIs Are Core to Financial Health

The American Hospital Association notes that healthcare organizations spent $19.7 billion managing claim denials in 2022. This massive expense stems largely from utilization management breakdowns—failed authorization processes, contested medical necessity determinations, and incomplete documentation.

As healthcare shifts toward value-based care, effective utilization management becomes even more crucial. Strong KPIs do more than measure performance, as they can:

• Catch revenue leakage early, when intervention is still possible
• Bridge the gap between clinical and financial teams
• Help predict and prevent denials instead of just reporting them
• Strengthen your position in payer negotiations
• Transform utilization management from a cost center into a revenue driver

The best-performing healthcare organizations use these metrics strategically.

The 7 Most Impactful Utilization Management KPIs

Here are the seven KPIs that consistently drive better performance for healthcare organizations:

1. Prior Authorization Denial Rate

Each denied authorization represents potential lost revenue and disrupted patient care. You can quickly spot trouble areas by tracking the percentage of your requests that are rejected. High denial rates usually signal specific problems:

• Documentation gaps that don't meet payer requirements
• Outdated understanding of payer policies
• Submission process errors that can be corrected

When you dig deeper into this metric, the insights become even more valuable. Breaking down denial rates by payer, service type, and provider often reveals patterns that would otherwise remain hidden. 

2. Medical Necessity Denial Rate

"Medical necessity not demonstrated" remains one of the most common—and frustrating—reasons for denial across healthcare settings. These denials highlight a critical gap: what clinicians document and what payers require are often misaligned.

Key challenges this KPI addresses:

• Documentation that's technically accurate but lacks payer-required language
• Clinical determination processes that don't align with current payer guidelines
• Disconnect between clinical intent and coding precision

The most effective way to tackle this metric is through collaboration. 

• Many leading organizations form small teams with members from clinical, coding, and billing departments. 
• These cross-functional groups meet weekly to review denied cases and identify the specific documentation patterns that consistently satisfy—or fail to satisfy—payer requirements.

When organizations improve this metric, they see multiple benefits: stronger alignment between clinical and financial documentation and fewer unnecessary appeals.

3. Appeal Success Rate

Did you know that, according to the American Medical Association, 83.2% of appealed prior authorization denials are eventually overturned. This extraordinarily high reversal rate reveals a fundamental dysfunction in healthcare administration.

When you track how often your appeals successfully reverse initial denials, you gain valuable insights. A consistently high success rate suggests your initial claims are being inappropriately denied—highlighting an opportunity to address root causes. 

Conversely, a low appeal rate might indicate your team has given up fighting winnable battles.

What successful organizations learn from this metric:

• Which denials are most likely to be overturned when appealed
• Which documentation elements make the difference in appeal outcomes
• Where staff training can improve first-pass authorization success

The key to improving this KPI lies in learning from each successful appeal. What changed between the initial submission and the appeal? Was additional documentation provided? Was a peer-to-peer review conducted? 

These patterns create a roadmap for improving first-pass approvals.

4. Concurrent Review Compliance

The most expensive denial is often the one that arrives on discharge day, when it's too late to make corrections. Organizations that perform real-time clinical reviews during patient stays (not just at admission or discharge) typically experience fewer discharge-day denials.

This operational KPI measures the percentage of inpatient cases that receive these ongoing reviews. High-performing organizations use concurrent reviews to identify potential issues while there's still time to address them, preventing costly last-minute denials.

The challenge, of course, is resource allocation. 

• Rather than attempting to review every case with equal intensity, successful organizations develop risk models that prioritize high-dollar, complex cases where utilization management interventions make the biggest difference. 
• They also implement structured communication processes for these priority cases between case managers, utilization reviewers, and the clinical team.

5. UM Cost per Case

With healthcare organizations collectively spending $19.7 billion on denial management, the efficiency of utilization processes directly impacts the bottom line. Yet many organizations don't know how much they spend on utilization management activities per case.

This efficiency metric divides your total utilization management costs (staff, technology, outsourcing) by the cases reviewed. The result reveals operational insights that volume metrics alone can't provide.

What this metric reveals:

• Process inefficiencies that drive up costs
• Opportunities for automation and workflow improvement
• Appropriate staffing levels for different case types
• ROI on technology investments in utilization management

The real value comes from comparisons. How does your cost per case compare to industry standards? How does it vary across different service lines or case types? Most importantly, where could technology reduce manual workloads without sacrificing quality?

Organizations that optimize this metric achieve better resource allocation.

6. Patient Throughput Impact / Avoided LOS

Utilization management isn't just about paperwork—it directly affects patient flow and clinical results. This outcome-focused metric links utilization activities to patient throughput and length of stay results. 

How leading organizations leverage this KPI:

• Create dashboards that display the daily length of stay against specialty benchmarks
• Set up alerts for cases approaching or exceeding the target LOS
• Develop intervention protocols when utilization indicators predict extended stays
• Track the financial impact of reduced LOS through direct cost savings calculations

7. UM Automation Rate

If your team still manages authorizations primarily through faxes, phone calls, and portal logins, you're not alone. According to MGMA data from 2023, only 17% of medical groups have automated more than 60% of their revenue cycle operations.

This technology adoption metric measures the percentage of utilization management activities that flow through automated systems versus manual processes. 

Automation opportunities with high ROI:

• Routine imaging authorizations for high-volume payers
• Eligibility verification prior to authorization submission
• Status checks and follow-ups on pending authorizations
• Data extraction from authorization responses into clinical systems

Interpreting Utilization Management KPIs for Actionable Change

The true value of metrics comes from what you do with them. When examining your utilization management KPIs:

• Dig deeper into anomalies: A spike in authorization denials from one payer signals something has changed in their policies or your submission approach
• Find connections between metrics: Low automation rates alongside high cost-per-case metrics point to opportunities for technology investment
• Break down data silos: Integrate data across utilization, revenue cycle, clinical outcomes, and patient experience for the most valuable insights
• Set specific improvement targets: Don't just track metrics—establish clear goals with timeframes and accountability

Takeaway

Tight margins and evolving regulations are part and parcel of modern healthcare. Therefore, a strategic utilization management has become a priority. Organizations mastering these KPIs consistently achieve:

• Cleaner claims that avoid the denial cycle
• Fewer write-offs from preventable denials
• Shorter revenue cycle timelines
• More collaborative payer relationships

At HOM, we've spent nearly eight years helping healthcare organizations transform utilization management from a necessary burden into a competitive advantage. Our approach combines targeted KPI tracking with practical denial prevention, thoughtful automation, and compliance-focused strategies.

Ready to see what your utilization management metrics reveal about your revenue opportunities? 

Contact us now!