Understanding Prior Authorization Management in Healthcare

Prior authorization management is a critical process in healthcare that ensures patients receive necessary treatments while managing costs for payers.

Prior authorization is a requirement for certain medications and services, which can be time-consuming and delay treatment.

In 2020, an estimated 25% of healthcare claims required prior authorization, resulting in significant administrative burdens for providers.

Providers can experience delays in treating patients due to prior authorization, which can lead to poor health outcomes and increased costs in the long run.

Prior authorization management is a critical process in healthcare that ensures patients receive necessary treatments and medications.

It involves a review of medical records, diagnoses, and treatment plans to determine if a treatment or medication is medically necessary.

This process typically involves a team of healthcare professionals, including pharmacists, doctors, and nurses.

Prior authorization management aims to reduce unnecessary healthcare costs and prevent overutilization of resources.

It can also help prevent medication errors and adverse reactions by ensuring patients receive the right treatment at the right time.

In many healthcare systems, prior authorization management is a mandatory step before a patient can receive certain treatments or medications.

Medical necessity is a crucial factor in determining eligibility for prior authorization. It's what insurers use to decide if the treatment or medication is truly needed.

Insurers check for factors like research-backed evidence and whether the treatment is being duplicated. For example, if you've already had a chest CT scan for lung cancer, your insurer won't pre-authorize a second one unless your provider can confirm that it's still necessary.

Prior authorization is generally not required for emergency services, but it's common for non-emergency care. Your insurance plan wants to ensure that the care is necessary and the most cost-efficient option.

Certain types of medication are more likely to require prior authorization, such as those with serious risks, high costs, or a high risk of misuse or addiction.

Here's a breakdown of the types of medication that may require prior authorization:

To demonstrate medical necessity, healthcare professionals must provide identifying information for the member/patient, the referring provider, and the servicing provider. They must also provide clinical information specific to the treatment requested, such as:

Medical policies determine what procedures, medication, and equipment are eligible for reimbursement. These payer rules govern when prior authorization is required, and they vary from health plan to health plan.

In order to receive payer approval of care requiring prior authorization, medical necessity must be demonstrated. This means that the care must meet the threshold of being medically necessary, according to generally accepted medical standards.

If prescribed care does not meet this threshold, it will not be reimbursed by insurance carriers.

Insurance companies carefully review requests for ongoing services to ensure they're providing actual benefits. They want to see measurable progress or improvement in your condition.

For example, if you've been having physical therapy for three months, your insurance plan might wonder if it's actually helping you. If you're making slow but measurable progress, the additional three months might be pre-authorized.

Your insurance provider may require step therapy, where they'll only agree to pay for a more expensive treatment after you've tried a cheaper option and it hasn't helped. This ensures that the most economical treatment option is being used first.

Prior authorization rules are designed to ensure that medical services are necessary and cost-effective, but they can also be burdensome for medical providers and hinder patients' access to care.

Insurance companies use prior authorization to make sure that a specific medical service is necessary and being provided cost-effectively.

The process helps prevent too much spending on unnecessary medical care, which is a key goal of health plans.

Your health plan might require prior authorization for physical therapy (PT) sessions, for example, if you've been receiving PT for three months and your provider is requesting authorization for another three months.

The additional three months might be pre-authorized if you're making slow but measurable progress, but not if you're not making any progress or the PT is making you feel worse.

Insurance companies will make sure certain criteria are met before authorizing medical services, ensuring that healthcare is cost-effective, safe, necessary, and appropriate for each patient.

Cost is a crucial factor in determining the best course of treatment for your condition. Insurers want to ensure that the procedure or treatment you're prescribed is the most economical option.

They may require you to try a cheaper alternative before approving a more expensive treatment. For example, if Drug C is cheaper than Drug E, your provider needs to show that the more expensive drug is a better option for you.

Step therapy is a common practice in these situations. This means that your insurance provider will only agree to pay for the more expensive treatment after you've tried the cheaper alternative and it hasn't helped.

Your provider needs to prove that ongoing or recurrent service is actually helping you. This ensures that you're getting the most out of your treatment and that your insurance plan is getting the best value for its money.

The prior authorization process can be lengthy, taking anywhere from one day to a month to process, depending on the complexity of the request and the requirements of the payer.

You can expect a non-urgent prior authorization request to be processed within seven days, starting in 2026, as per the new federal rule. Urgent requests must be responded to within 72 hours.

Keep track of due dates to avoid delays, and make sure all paperwork is accurate and complete. Your provider's office will help keep you updated, but it's also a good idea to set reminders for yourself.

Incomplete or incorrect information submitted to the health plan can trigger a denial and a lot of manual rework on the provider side. This can be avoided by double-checking the prior authorization form for any errors.

Automating the prior authorization process can reduce errors and accelerate patient care. However, lengthy medical reviews can still delay care and introduce uncertainty into the process.

You can submit a prior authorization request through various channels. Traditional channels have been phone, fax, or a web portal.

Phone is still a viable option, but it can be time-consuming to wait on hold.

Faxing is another option, but it requires a physical copy of the request and can be prone to errors.

Some plans also offer a web portal for submitting requests online, which can be more efficient and convenient.

If you need to submit a prior authorization request, you have several channels to choose from.

The traditional channels for submitting prior authorization requests have been by phone, fax, or a web portal.

Myndshft is a leading provider of real-time benefit check and prior authorization software.

Their software automates and simplifies time-consuming healthcare administrative tasks.

Myndshft's software is specifically designed for diagnostics and genomics labs, specialty pharmacies, and infusion therapy providers.

This software frees providers and payers to concentrate more fully on patient care.

It automates tasks associated with prior authorization, eligibility and benefits verification, and patient financial responsibility.

Myndshft's software is a service, meaning it's delivered over the internet and doesn't require any installation or maintenance.

The outcome of a prior authorization request is decided by a clinician who works for the health plan, and the final decision is usually a denial, redirection, or withdrawal of the request.

If the requested treatment is not deemed medically necessary, the health plan will deny the request. This can also happen if the reason for the denial is due to incomplete member benefit or clinical information, resulting in an administrative denial.

The different outcomes of a prior authorization request can be summarized as follows:

In some cases, a denied decision can be reconsidered without going through the appeals process, especially if the reason for the denial was administrative in nature.

Some providers are exempt from prior authorization, earning them "gold card" status due to their high prior authorization approval rates.

Hospitals and healthcare systems with marquee brand names are also exempt, as health plans covet them for their networks. Emergency rooms and other trauma-based care are exempt from prior authorization since the stakes are too high to wait for payer approval.

In cases where a prior auth request is approved but the patient forgoes the procedure or medication, the payer doesn't need to reimburse the provider.

Prior authorization cases that have been closed can be reopened if the reason for the denial was administrative in nature, such as missing or inaccurate information. This allows a new form with corrected information to be submitted for reconsideration.

A prior authorization decision can be overturned through a formal appeals process, which can be a multi-step process involving a medical director and a neutral party for review.

The outcome of a prior authorization request can be one of three things: a denial, a redirection, or a withdrawal. A clinician at the insurance carrier makes the final decision on these requests.

A denial occurs when the requested treatment is not considered medically necessary. This is a common reason for denial, and it's often due to the health plan's assessment of the treatment's effectiveness.

A redirection, on the other hand, happens when a treatment is denied for one site of care, but approved for a lower acuity outpatient site. This can be a more favorable outcome for patients.

A withdrawal of the prior authorization from the ordering provider can also occur. This usually happens when the clinician decides that the treatment is no longer necessary.

Here are the possible outcomes of a prior authorization request:

If a request is denied due to administrative reasons, such as missing or inaccurate information, it can be reopened and resubmitted with corrected information. This might lead to a different outcome.

Electronic prior authorization (ePA) is a game-changer in the world of prior authorization management. Electronic prior authorizations refer to those instances where some or all of a prior auth determination is processed electronically. This can be achieved through manual keystroke entries to a payer portal or an eFax, or more sophisticated computer-to-computer information exchange using electronic data interchange (EDI) or clearinghouse transmissions.

To more legitimately lay claim to offering an electronic prior authorization solution, you'll need EDI capabilities, particularly the capability to send a 278 transaction. This is the standard protocol to electronically transmit patient data pertaining to authorizations and referrals between providers and payers.

There are several key components that make up an ePA solution, including integration with EHRs, LIMS, and other clinical and financial management systems, direct connections with health plans, rule sets that automate the submission and tracking of prior auth requests, and the use of multiple web-based prior authorization applications for each payer/PBM with their own username and password requirements.

Automating prior authorization can be achieved through three levels of revenue cycle automation: digitizing the current prior authorization process, partially automating the prior authorization process, and fully automating and orchestrating electronic prior authorization.

Here are some key benefits of electronic prior authorization and automation:

By automating prior authorization, healthcare providers can free themselves from tedious, time-consuming manual tasks, reduce denied claims, and improve patient care.

Prior authorization management can be a complex and time-consuming process, but understanding the common issues and challenges can help you navigate it more efficiently. High-price drugs or services often require prior authorization, and payers may ask if the suggested service or drug is needed for the patient.

Administrative staff errors, such as misspelling or incorrect coding, can lead to denied pre-authorization requests. This highlights the importance of double-checking and triple-checking requests before submitting them to payers. Payers also demand prior authorization for non-emergency tests, and failing to follow this process can result in rejected claims.

Payers often require patients to try less expensive alternatives before approving more expensive treatments. This approach can lead to prior authorization denials if not followed correctly.

If you're a healthcare provider, you're likely no stranger to the frustration of prior authorization hurdles. In fact, administrative staff can make mistakes in the prior authorization request process, such as clerical errors, misspelling, or using the wrong code, which can lead to denied pre-authorization requests.

One of the most common reasons for prior authorization denials is insufficient information provided by healthcare providers. This can be a major issue, especially if the patient has already undergone a non-emergency test without prior authorization, which can lead to rejection even if the test was medically necessary.

According to the American Medical Association, physicians spend a whopping 16 hours per week on authorizations, which can delay access to care for patients. This is a significant burden that can be alleviated by automating the prior authorization process.

Manual review of prior auth requests and medical charts by clinicians can also introduce delays and errors, making the process even more complex. This is especially true for diagnostics and genomics labs, which often rely on referring providers to communicate with patients and navigate the prior authorization process.

The prior authorization process can be complicated by a combination of factors, including lots of required steps, participation by both payers and providers, lack of standards, fluctuating payer rules, and thousands of payers and health plans.

The Hawthorne Effect is a phenomenon where people change their behavior because they know they're being observed. This is relevant to prior authorization because studies have shown that it modifies provider behavior.

Studies have shown that prior authorization can lead to providers changing their behavior, which can impact patient care. This is a significant issue in the healthcare system.

The Hawthorne Effect is a real phenomenon that has been studied and documented in various fields, including psychology and sociology. It's not just a theory, but a proven concept that can have practical implications in healthcare.

Prior authorization can lead to providers modifying their behavior, which can result in patients not receiving the care they need. This can have serious consequences for patient outcomes.

The Hawthorne Effect highlights the importance of considering the impact of prior authorization on provider behavior and patient care.

Medical policies determine what procedures, medication, and equipment are eligible for reimbursement, and these payer rules govern when prior authorization is required on a health plan by health plan basis.

At least 57 bills have been introduced in 22 states to reform prior authorization requirements for procedures, tests, treatment, and prescriptions so far in 2024.

Some proposals for prior authorization reform include requirements on response time to requests, such as 24 hours for urgent and 48 hours for nonurgent requests.

Mandates that prior authorization requirements must be evidence-based, like being based on peer-reviewed clinical data, are also being considered.

Requirements that denials are made by a physician of the same specialty are another type of provision being proposed.

Allowing authorizations to continue to be valid for medication dose changes or for ongoing management of chronic conditions is also being explored.

Restricting insurers from requiring other administrative burdens or related measures in addition to a prior authorization, such as step therapy protocols, is another area of reform.

Some states have enacted "Gold Card" legislation that would exempt physicians with specific prior authorization approval rates from prior authorization requirements on specified services.

Federal Activity plays a crucial role in shaping regulations and policies.

The Federal Trade Commission (FTC) is a key player in enforcing consumer protection laws. It has the authority to investigate and take action against businesses that engage in unfair or deceptive practices.

The FTC's guidelines for online advertising, for example, require businesses to clearly disclose any material connections between themselves and the endorsers of their products. This is to prevent consumers from being misled by fake or biased reviews.

The Consumer Product Safety Commission (CPSC) is responsible for setting safety standards for consumer products. It works closely with manufacturers, importers, and retailers to ensure that products meet certain safety requirements.

The CPSC's guidelines for product labeling, for instance, require manufacturers to provide clear and accurate information about the potential risks and hazards associated with their products. This includes warnings and instructions for safe use.

In 2024, at least 57 bills have been introduced in 22 states to reform prior authorization requirements for procedures, tests, treatment, and prescriptions.

Many states are taking proactive steps to address the harm caused by prior authorization requirements. This is a welcome development, as it shows that policymakers are listening to the concerns of healthcare providers and patients.

Some proposals for prior authorization reform contain requirements on response time to requests, such as 24 hours for urgent requests or 48 hours for nonurgent requests. This is a sensible approach, as it ensures that patients receive timely access to the care they need.

Mandates that prior authorization requirements must be evidence-based, such as being based on peer-reviewed clinical data, are also being considered. This is a crucial step, as it helps to ensure that prior authorizations are not based on arbitrary or outdated criteria.

Here are some examples of provisions being considered in prior authorization reform bills:

Some states have also considered "Gold Card" legislation, which would exempt physicians with specific prior authorization approval rates from prior authorization requirements on specified services. This is an interesting approach, as it aims to recognize and reward physicians who have a strong track record of getting prior authorizations approved.