The prior authorization process in healthcare is a system used by insurance companies to determine whether they will cover a prescribed procedure, service, or medication.

In the current (fax, phone and paper based) prior authorization process, it can take days or weeks to receive authorization. As a result, either the patient goes ahead with the procedure not knowing whether it will get paid by the insurance or they have to wait a long time before having the procedure.

In addition, the current process results in high administrative costs to the doctor and high administrative costs to the payer. Patients frequently delay diagnosis and treatment since they are not sure how much they will have to pay.

How Prior Authorization Works Today

1. Initiation of Request: The process usually starts when a healthcare provider identifies a need for a particular service, medication, or medical equipment that requires prior authorization. This could be anything from a specialized medication to an advanced imaging service like an MRI.
2. Submission of Request: The healthcare provider then submits a prior authorization request to the patient’s insurance company. This request often includes detailed information about the patient’s medical history, current condition, and the reason why the specific service or medication is necessary.
3. Review by Insurance Company: Once the request is received, it is reviewed by the insurance company. This review process involves assessing the medical necessity of the proposed service or medication. The insurance company may consult clinical guidelines, evidence-based standards, or their own policies to make this determination.
4. Request for Additional Information: Sometimes, the insurance company may ask for more information before making a decision. This might involve getting more detailed medical records or clarifications from the healthcare provider.
5. Approval or Denial: After reviewing the information, the insurance company will either approve or deny the request. If approved, the patient can proceed with the service or receive the medication with coverage from their insurance. If denied, the patient and provider are notified, and there may be an explanation for the denial.
6. Appeals Process: If a prior authorization request is denied, the healthcare provider and patient usually have the option to appeal the decision. This process involves submitting additional documentation or information to support the need for the requested service or medication.
7. Final Decision: After an appeal is reviewed, the insurance company makes a final decision. If the appeal is successful, the service or medication is approved. If not, the denial stands, and the patient may need to consider alternative treatments or pay out of pocket.

The length of this process can vary significantly depending on the complexity of the request, the specific requirements of the insurance company, and the efficiency of communication between the healthcare provider and the insurer. This process is crucial for managing healthcare costs but can sometimes lead to delays in patient care.

Problems with prior authorization process

The process laid out above is currently (typically) done via the fax machine or phone and can take many days or weeks.

There are studies that indicate pre-authorization process is costly to providers and payers and results in worse patient care.

2022 AMA Prior Authorization Physician Survey

94% of patients whose treatment requires prior authorization report care delays.

80% of patients report that issues with PA process can at least sometimes lead to treatment abandonment.

Physicians and their staff spend an average of two business days each week completing PAs.

One-third of physicians (33%) reported that prior authorization led to a serious adverse event for a patient in their care, including hospitalization, permanent impairment, or death.

Nearly nine in 10 physicians (89%) reported that prior authorization had a negative impact on patient clinical outcomes.

Sources:

https://www.ama-assn.org/system/files/prior-authorization-survey.pdf

https://www.ama-assn.org/press-center/press-releases/toll-prior-authorization-exceeds-alleged-benefits-say-physicians

CAQH Index

According to CAQH, the cost to providers for manually generating a single prior authorization request is close to $11, while the cost to generate a request through an electronic portal is less than half as much. This can cost the average medical practice over $70,000 a year in actual expenses and opportunity costs.

Source: https://www.appliedpolicy.com/prior-authorizations-an-introduction/

Office of the Inspector General, U.S. Department of Health and Human Services

Our case file reviews determined that MAOs sometimes delayed or denied Medicare Advantage beneficiaries’ access to services, even though the requests met Medicare coverage rules. MAOs also denied payments to providers for some services that met both Medicare coverage rules and MAO billing rules. Denied requests that meet Medicare coverage rules may prevent or delay beneficiaries from receiving medically necessary care and can burden providers.

Source: https://oig.hhs.gov/oei/reports/OEI-09-18-00260.asp?hero=mao-report-04-28-2022

Why Everyone Hates Prior Authorization

Prior Authorization is one part of the healthcare process that is universally hated.

Providers hate it because it adds administrative cost and delays care. Physicians and their staff spend an average of two business days each week completing PAs.

Payors hate the fact that PA adds administrative cost. However, read the section below about why they still want to continue PA.

Patients hate it because they don’t how much their insurance will cover. Their only choice is to proceed without this knowledge or delay care for days or weeks until the prior authorization process is completed.

So Why Does Prior Authorization Exist

While insurance providers complain about the administrative cost of prior authorization, they believe that it is an effective way to improve quality/promote evidence based care, protect patient safety, address areas prone to misuse and reduce unnecessary spending.

AHIP Survey on Prior Authorization (2019)

AHIP is an industry organization that serves health insurance providers.

In their 2019 survey of health insurance providers, the primary goals of health plans’ prior authorization programs were to improve quality and promote evidence-based care (98%), protect patient safety (91%), and address areas prone to misuse (84%).

In addition, the vast majority of health insurance providers reported that their prior authorization programs have had an overall positive impact on quality of care (91%), affordability (91%) and patient safety (84%).

Sources:

https://www.ahip.org/news/press-releases/ahip-survey-prior-authorization-grounded-in-clinical-evidence-and-selectively-used

https://www.ahip.org/documents/Prior-Authorization-Survey-Results.pdf

There is a Better Way

While providers, payors and patients all complain about prior authorization, it seems clear from the health insurance providers that prior authorization is here to stay. There may be some tweaks but the possibility of prior authorization going away completely is remote.

A better path is to move to electronic prior authorization to speed up the process and provide greater transparency to the criteria used by payors in PA.

CMS recently passed a rule that requires all payors covered by CMS to provide electronic Prior Authorization APIs by January 1, 2027.

Learn more about how Electronic Prior Authorization will work and how providers can get ready for them today.