For years, utilization management (UM) was quietly delegated away for scale, speed, and supposed efficiency. But today, health plans are hitting the breaking point.
Prior authorizations, a core function of UM, have become synonymous with administrative gridlock. Providers are overwhelmed. Members are frustrated. Regulators, including the Centers for Medicare & Medicaid Services (CMS) through the Final Rule CMS-0057-F, are intervening. Even the industry’s own trade group, AHIP, has acknowledged the problem with a collective pledge to modernize prior authorization.
What’s emerging isn’t just a call for reform; it’s a clear shift in strategy: reclaim control, intelligently.
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Delegation solved yesterday’s problems but introduced today’s
Delegating UM to vendors once made sense. Health plans needed to scale. Vendors offered niche expertise and infrastructure. But that efficiency came at a cost: clinical opacity, siloed workflows, inconsistent decisions, and rising provider abrasion.
Long-term contracts locked in legacy systems, leaving many health plans unable to respond to evolving regulations or internal priorities. In the process, health plans forfeited visibility into one of the most consequential functions of care delivery, prior authorizations.
Strategic insourcing isn’t a reversion, it’s a redesign
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Leading health plans are beginning to embrace modular, hybrid insourcing models that retain strategic control of core UM functions while still leveraging external expertise where it counts. They’re not doing it all in-house, they’re doing it smarter.
Insourcing means bringing some or all UM functions back under the health plan’s control, especially the decision-making logic, technology stack, and provider experience. A fully insourced model gives the health plan end-to-end control but requires greater investment in infrastructure and staffing.
A hybrid model, by contrast, combines internal oversight with selective vendor support for high-complexity or low-volume specialties. The key difference is ownership: in a hybrid model, the plan owns the strategy and infrastructure, even if some decisions are still made externally.
Insourcing doesn’t mean going backward or going manual. It means rebuilding UM with transparency, technology, and trust at the core.
Modern insourcing includes:
- Transparent clinical logic that aligns with internal policies
- AI-powered automation that accelerates approvals safely and audibly
- Seamless provider workflows embedded in EHRs or portals
This isn’t about doing more work. It’s about doing the right work, and doing it with the right infrastructure.
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Automation alone isn’t the answer. Health plans need automation that’s explainable and policy-aligned, not ‘black-box’ AI models that generate outputs without revealing the decision-making process.
That visibility is critical. It earns the trust of clinical staff and providers. It reduces unnecessary appeals. And it ensures every automated decision can withstand clinical and regulatory scrutiny.
Regulation is the floor, not the ceiling
It’s tempting to treat CMS-0057-F as a box-checking exercise. Implement fast healthcare interoperability APIs. Publish your metrics. Move on.
But the most forward-thinking health plans are doing more. They’re treating compliance as the starting line, not the finish line. They’re using this regulatory moment to modernize infrastructure, improve provider experience, increase member satisfaction, and create a strategic advantage. In other words, they’re transforming a mandate into momentum.
Three imperatives for reclaiming utilization management
1. Segment the workload by volume and value. All prior auth isn’t created equal. Plans are applying a “volume/value” matrix to decide what to bring in-house and what to delegate. For example, high-volume, low-complexity services, like imaging or physical therapy, are prime candidates for automation. Complex specialties, like oncology, where evidence changes frequently, may still benefit from external support.
2. Build the right infrastructure. Strategic insourcing demands more than new headcount. Plans must codify medical policy for automation, integrate AI that evaluates clinical data in real time, and ensure that both systems and staff are ready for concurrent and retrospective reviews. These are enterprise decisions, not departmental ones.
3. Measure what matters. cost savings alone can’t define success. Leading health plans are tracking first-time-right decisions, provider satisfaction, appeal rates, and clinical quality. Fast, accurate, and transparent decisions don’t just reduce abrasion; they improve outcomes.
The end of ‘either/or’ thinking
This isn’t a binary choice between fully insourced or fully delegated. The most effective plans are building hybrid ecosystems that retain control over strategy and infrastructure while partnering selectively for scale or specialization.
UM must evolve from a blunt cost-control tool into an intelligent, member-centered function. That evolution requires trust, transparency, and tech, not trade-offs.
From compliance to confidence
Yes, CMS and AHIP are raising the floor. But forward-thinking plans are aiming higher. They’re designing utilization management systems that are clinically sound, operationally efficient, and aligned with enterprise goals.
This is the moment to stop letting someone else define your UM strategy and start building one that works for everyone.
Photo: Hollygraphic, Getty Images
Matt Cunningham, EVP of Product at Availity, spent nine years in the Army in light and mechanized infantry units, including the 2nd Ranger Battalion. He brought his Army operations experience to the healthcare industry and has been focused on solving the problem of prior authorizations and utilization management for the past 15+ years. He helped scale a services company from $20M to the largest healthcare benefit services company. Matt has served as Head of Call Center Operations, Director of Product Operations, Chief Information Officer, and lead integration efforts for mergers and acquisitions.
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