The study examines the potential for savings in the use of hospital resources if utilization review policies succeed in curtailing excessive use of hospital facilities. Excessive use is defined as the utilization of hospital care when ambulatory care is medically feasible and acceptable. A utilization review policy would be expected to counteract the tendency to substitute inpatient for outpatient treatment by assuring that all patients with identical medical problems and demographic traits would be treated in an identical least cost setting regardless of their social and economic circumstances. It might, thus, ascertain that the use of hospital facilities would not be systematically affected by patients' non-medical or socioeconomic characteristics. Specifically, the study distinguishes between two types of utilization control policies, pre-admission certification and concurrent or continuing-stay review of hospital episodes, and asks how each can contain excessive utilization. It concludes that continuing-stay review is not likely to have any appreciable effect on shortening hospital episodes because the effects of nonmedical factors on extended stays are small and concentrated among patients whose diagnoses might not qualify them for hospitalization under a pre-admission screen. However, pre-admission certification has a considerable potential for containment of hospital utilization through the reduction in the number of admissions. Also, as a corollary, the study shows that utilization review policies should not be evaluated, as they often are, in terms of their effect on length-of-stay, but rather in terms of their effects on hospital admissions and case mix.