The prior authorization process has evolved in complexity as the healthcare industry transitions from fee-for-service to value-based care. At the same time, payers are expanding the number of services subject to prior authorization to establish medical necessity and appropriateness. It’s a one-two punch that leaves providers and provider organizations struggling under the weight of a prior authorization burden that, left unaddressed, can have long-term revenue cycle impacts.
Today’s prior authorization process involves time-consuming steps, including gathering and submitting medical documents to insurance companies and waiting for approval. It also often involves dealing with denials and appeals – all while guidance around required documentation becomes stricter.
The number of procedures subject to authorization is also expanding, creating new challenges for staff who must understand the clinical documentation and office notes necessary to support the authorization. This also means the addition of new administrative requirements with far-reaching impacts on finances, operations, and patients. Additionally, when establishing a centralized prior authorization team is infeasible, expanded prior authorization needs exacerbate the problem of competing priorities for staff tasked with obtaining authorizations amidst other core responsibilities, including patient care.
Prior Authorization Challenges
The impact of today’s challenging prior authorization environment is felt in three key areas: financial, operational, and the patient experience.
On the financial front, the administrative burden of prior authorization has increased steadily over the years, leading to additional costs and workload. Among the most significant financial impacts are higher administrative costs and reduced or lost revenues due to denials, which can be difficult to overturn. The prior authorization process can also delay cash flow.
By Jeffrey Sullivan, chief technology officer of the cloud fax division, J2 Global, Inc.
Jeffrey Sullivan
Time may heal most wounds, but it has done little to lessen the sting of prior authorization.
Despite decades of streamlining and automating healthcare business transactions, prior authorization remains one of the most burdensome, complex and costly administrative activities in the industry that creates hardship for all stakeholders—providers, payors and patients, contributing an estimated $25 billion per year to healthcare costs in the U.S. This is primarily because it remains a largely manual process and, therefore, prone to error.
With the number of transactions steadily increasing year over year, providers and payors need to collaborate and push for an electronic solution. The effort will involve changes to technologies as well as processes and regulations.
The high cost of business as usual
Prior authorization (PA) is a check run by insurance companies and third-party payors before they agree to cover the cost of certain healthcare services and medications. It was designed to ensure patients received the most appropriate and cost-effective care. However, increased demand for documentation, along with lack of standardization and automation, are undermining its original intent.
By Scott E. Rupp, publisher, Electronic Health Reporter.
Prior authorizations are hurting practices, the American Medical Association contends. According to the organization, prior authorization requirements have increased in the past five years, and 85 percent of physicians say the practice interferes with continuity of care. This is according to a new survey from the organization.
Prior authorization (PA) is a process requiring healthcare providers (physicians, pharmacists, medical groups and hospitals) to obtain advance approval from health plans before a prescription medication or medical service is delivered to the patient. While health plans and benefit managers say that PA programs are important to controlling costs, providers often find these programs to be burdensome and barriers to the delivery of necessary patient care.
The AMA’s report was conducted in partnership with the American Hospital Association, America’s Health Insurance Plans, American Pharmacists Association, Blue Cross Blue Shield Association and Medical Group Management Association, releasing the “Consensus Statement on Improving the Prior Authorization Process.” The statement “reflects agreement between healthcare providers and health plans on key reforms needed to reduce PA hassles and enhance patient-centered care.”
According to the 1,000 physicians interviewed, more than two-thirds of these fine folks said it’s difficult for them to determine whether a prescription or service needs prior authorization.
Alternatively, fewer than 10 percent of the physicians said they contract with a health plan that allows programs that can exempt providers from the requirement. Additionally, prior authorizations are primarily obtained by phone or fax, with just a bit more than 20 percent of physicians saying they are able to complete the requests through their electronic health records — which can be most efficient when that capability is allowed.
In a statement released with the survey findings, AMA charged insurance companies with a “year of foot-dragging and opposition” to prior authorization reforms.
According to the study, the AMA is encouraging the use of programs that selectively implement PA requirements based on stratification of healthcare providers’ performance and adherence to evidence-based medicine, but the results from the study show that only 8 percent of physicians report contracting with health plans that offer programs that exempt providers from PA. Likewise, the AMA wants an overall revision of PA requirements, including the list of services subject to PA, based on data analytics and up-to-date clinical criteria. A majority (88 percent) of physicians report that the number of PAs required for prescription medications and medical services has actually increased over the last five years.
From the payer’s point of view, prior authorizations serve as a cost control that limits unnecessary care, and the practice has supporters in high places. For example, a Government Accountability Office report released in 2017 found that prior authorization in Medicare saved as much as $1.9 billion through March 2017. The Trump administration’s proposed budget also includes expanded prior authorization measures for Medicare. The fight over them doesn’t appear head for anything but an ugly stalemate.
Have you ever faced the dilemma when you visited a hospital or a pharmacy and have been told that the impending treatment or even the prescription will need a prior authorization?
Prior authorization has been a topic of debate in the healthcare industry for quite some time and it is important to understand the process in detail to be able to take the informed decision when required.
What is Prior Authorization in the healthcare sector?
Healthcare industry, in general, is quite complex in nature with a large number of standard rules and procedures to be followed. The concept of prior authorization or pre-authorization as it is commonly called is generally used during the payment from the insurance partner.
Prior authorization in the medical industry is an intermediary step mandated by the insurance partner that requires an approval from the insurance company in order to take a decision on whether they will/will not reimburse the cost of a certain treatment/prescription/medicine. To put in simple words, healthcare prior authorization is a health plan cost-control process that requires obtaining approval before performing a service to qualify for payment.
Important points regarding prior authorization
The concept doesn’t affect the cash transactions for prescriptions/ treatment
Prior authorization is only required by the insurance partner on those prescriptions when the medical billing is done through insurance.
Anyone who is uninsured or is willing to do the cash transactions, there is no need for getting any kind of prior authorization.
In normal circumstances, the prior authorization is required for pharmaceuticals, medical services, and durable medical equipment
Prior authorization predicament
Like any other process, there are pros and cons of the prior authorization process as well. While the process brings a certain accountability and cost containment for the players; fighting over prior authorizations costs several hours in lost productivity and an incredible amount lost in revenues as well, thus putting everyone in a difficult position.
The American Medical Association (AMA) along with the other stakeholders from the healthcare industry believes that prior authorization is actually a burdensome process that hinders the productivity and also timely access to treatment. The process puts a barrier for the patients in immediate need of the medical care by delaying the start of the necessary treatment/medical assistance required by the patient that can significantly impact the health outcomes.
The Current Reality
A recent survey conducted by the American Medical Association (AMA) reveals certain shocking findings:
Approximately 75 percent of the physicians who were the part of the survey described prior authorization burdens as high or extremely high.
Approximately 60 percent of physicians who participated in the survey reported that their practices wait for minimum of one business day to maximum three business days for prior authorization decisions on an average.
Approximately a third of physicians who were part of the survey raised concerns over man power inefficiency with staff who works exclusively on prior authorization requests.
Approximately 90 percent of physicians who participated in the survey reported that the prior authorization process often or always delays access to medical care to the patients
What are the disadvantages of the Prior Authorization process?
The process is time consuming, inefficient and lacks the transparency, which is crucial for the patients.
Disrupts the workflow of the medical facilities and the process of providing the quality care to the patients in need.
The processing of the prior authorization wastes a great deal of physicians’ or medical practitioners’ time that would be better spent with the patients and for the treatment.
The Road Ahead
Considering the inefficiency of the process of prior authorization and the various hurdles the patients seeking medical care faces, the American Medical Association (AMA) along with a group of experts from other medical and healthcare organizations came together in an effort to reform the inefficient prior authorization requirements imposed on the patients during the medical tests, devices, drugs, prescription and etc.
Purpose of the AMA and other medical organization coalition
The main purpose of the coalition represented by the hospitals, patients, medical group, pharmacists and physicians, is to make the process of pre-authorization simpler, faster and smoother.
The joint forum believes that the requirement of the pre-approval by insurers in the form of pre-authorization before patients can get the prescribed drugs or treatments can not only delay or interrupt medical services, but also poses the risk of medical complications due to delays in the process.
Guest post by Robert S. Oscar, R.Ph. CEO and president, RxEOB.
Robert Oscar
Prior authorization exists to reduce drug costs, to manage appropriate brand medication prescribing, and to curb medication abuse. Despite its good intentions, this extra step to determine whether or not a drug is appropriate for a patient’s symptoms has gained a reputation of inconvenience for both physicians and consumers.
In a 2013 study by SUNY Upstate Medical University, it was revealed that U.S. primary care physicians and their office staff have experienced significant increases in time consumption as a result of prior authorization and its associated requirements. For consumers, hours can be wasted waiting to find out whether or not they are allowed a particular prescription under the conditions of their health plan.
Reducing this negative aspect of prior authorization is paramount for the betterment of overall health costs and medication adherence. By streamlining the time spent between medical record lookup and prescription delivery, healthcare organizations and consumers can begin to experience more efficient prior authorization. If efforts made toward better big data advancements, mobile health (mHealth) and health IT are prioritized, doctors can confirm drug eligibility faster to help their patients recover faster.
Below are five reductions that can come from implementing electronic prior authorization (e-PA):
Reduced Labor Costs: When a doctor pulls up a patient’s medical records he must sift through numerous data points to determine which drugs are approved and which drugs are going to require prior authorization. The hours spent processing this data is costly for healthcare staffing, but lost time can be reduced by moving the process online and implementing electronic methods. This can allow physician offices and PBMs the ability to review, submit and determine authorization almost immediately.
Reduced Consumer Delays: A consumer will typically experience the unattractive side of prior authorization at the pharmacy. If a doctor issues a prescription without knowing the patient’s medication history or pushes a popular name brand drug without suggesting a generic, the consumer will likely get sidelined with prior authorization processing at the point of sale. Having an e-PA process that can review and determine which drugs a patient is already approved for before they head to the pharmacy can reduce customer wait times and greatly increase consumer satisfaction.
Prior authorizations are hurting practices, the American Medical Association contends. According to the organization, prior authorization requirements have increased in the past five years, and 85 percent of physicians say the practice interferes with continuity of care. This is according to 
