The Delegation Dilemma: Why It’s Time for Health Plans to Rethink Vendor-Managed Utilization Management

For years, delegating utilization management (UM) functions to third-party vendors was seen as a practical response to rising medical costs, regulatory complexity, and distributed networks. Vendors promised operational relief, clinical efficiency, and scalable expertise. But what once looked like a smart outsourcing strategy is now revealing cracks and, in many cases, exposing health plans to new risks.

Recent federal regulation, particularly CMS’s Interoperability and Prior Authorization Final Rule (CMS-0057), has made it clear that responsibility for timeliness, transparency, and documentation of prior authorization decisions cannot be offloaded. Meanwhile, the pledge created by AHIP and the Blue Cross Blue Shield Association, adopted by most major commercial plans, has committed the industry to improving the speed, fairness, and visibility of the UM process.

As an industry, we need to ask hard questions. Are delegated vendors delivering on the promise of better, faster, more transparent decisions? Or are they simply moving the pain to another part of the system?

Delegation is not a strategy

Many health plans have cobbled together a network of delegated UM vendors across lines of business or specialty areas. Each vendor may use its own rules engine, data intake method, and appeals workflow. By principle, delegated vendors operate outside the health plan’s core infrastructure, which leads to a loss of visibility and control into rationale behind authorization decisions, program effectiveness, and impact to their networks. 

This patchwork model introduces five major risks:

1. Lack of transparency – Providers and even internal teams often have limited visibility into the rationale behind prior authorization decisions made by vendors, especially when criteria are inconsistently applied or not codified.
2. Poor communication and misalignment – Clinical and operational workflows break down when health plans, vendors, and providers don’t operate from a common infrastructure or language.
3. Regulatory exposure – With CMS deadlines looming, payers remain on the hook for vendor performance and integration into the mandated workflow standards. If a delegated partner can’t meet timeliness standards or return structured denial reasons, the audit trail ends with the health plan.
4. Operational complexity – Vendor sprawl doesn’t reduce friction; it just reshuffles it. Providers must navigate multiple portals, phone trees, and formats —each with different expectations.
5. Erosion of trust – Delegation, done poorly, further fractures payer-provider relationships that are already strained with prior authorization programs as a whole. When providers can’t get timely, explainable decisions or face high denial from opaque systems, the frustration isn’t aimed at the vendor. It’s aimed at the health plan.

For providers, delegated UM doesn’t feel like simplification — it feels like fragmentation. A single patient’s authorization might pass through multiple portals, forms, and response timelines, depending on which vendor is handling the request. Clinical staff often don’t know who is making the decision, what guidelines are being applied, or how to challenge an inappropriate denial. The lack of transparency fuels delays, rework, and frustration.

Finally, the traditional vendor payment model — charging a per-member, per-month fee regardless of outcome — creates misaligned incentives. Health plans bear the brunt of delays, abrasion, and audit risk, but reap none of the efficiency gains from improved processes. This arrangement fails to reward performance and disincentivizes innovation. 

A new mandate for decision-making

A built-for-better framework for modernizing healthcare operations begins with a fundamental shift in how decisions are made. Health plans need to move from fragmented processes toward a model that is based on codified medical policies; explainable to both providers and internal stakeholders; auditable across the entire authorization process; and provides recommendations in real-time.

• Codified – Medical policies and criteria should be structured and transparent, not hidden in PDFs or left to interpretation.
• Explainable – Both providers and internal stakeholders should understand why a decision was made and what information was used to support it.
• Auditable – Every approval, denial, or pended request should be traceable to a defined policy, not just a vendor note or spreadsheet.
• Real-time – Speed is essential, but not at the expense of trust or oversight.

Modern UM platforms, supported by AI and policy-driven automation, are making this vision possible. And they’re not theoretical. In production environments, health plans are already seeing prior authorization approvals returned in under 90 seconds, with real-time determinations made for more than 75% of cases, without sacrificing clinical accuracy or compliance standards.

Some health plans may feel that fully internalizing UM decisions across all service lines and specialties is unrealistic, particularly given staffing challenges and operational constraints. But this isn’t a call for full insourcing. It’s a call for intelligent orchestration, and for reimagining how and where decisions are made. A modern UM infrastructure ensures partnerships operate on your terms, with your policies, and with complete visibility. Automation and AI can handle routine decisions at scale, allowing clinical staff to focus on exceptions, not escalations.

Not every scenario requires full insourcing. A growing number of health plans are exploring hybrid models — where routine decisions are handled in-house by modern platforms, and niche areas like genetics or emerging specialties may still leverage delegated partners with specific expertise. The key is that all partners, whether internal or external, operate within a unified infrastructure, with shared policies, audit trails, and real-time reporting. Delegation should be selective, strategic, and under the health plan’s terms.

Built for better

Health plans should critically reevaluate whether delegated utilization management is still serving their strategic, regulatory, and clinical goals.

Instead of asking, “How can we better oversee our vendors?”, the better question is, “Do we still need vendors to manage this process at all?”

If vendor-managed UM can’t deliver transparent, codified, and real-time decisions under your control, it’s time to reframe the model and not just bring it back into view. Consolidating UM operations onto a unified infrastructure allows plans to retain control of policy, accelerate care decisions, and ensure audit-ready compliance across all lines of business.

Delegation might have been a necessary stopgap in the past. But today, it’s often a barrier to the transformation health plans are trying to lead. The future of utilization management won’t be defined by outsourcing vs. insourcing. It will be defined by ownership, integration, and accountability. Health plans must take back control of the decision infrastructure, even if some components remain delegated.

Imagine a UM experience where providers receive real-time decisions they can trust, patients avoid unnecessary delays, and plans can report performance confidently to regulators and stakeholders. This isn’t a future-state concept. It’s an achievable reality if we’re willing to move beyond delegation and take ownership of the decisions that define care access.

Photo: MirageC, Getty Images

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