Prior Authorization for Medical Services: A Significant Pain Point for Providers and Practices

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Original story posted on: January 27, 2020

Prior authorization is mostly a manual process.

 Prior authorizations are not going anywhere anytime soon, but drastic changes on how they are handled may finally be on the horizon.

An April 2018 study from the Government Accountability Office found that Medicare prior authorization programs saved the program between $1.1 billion and $1.9 billion since 2012, through a reduction in unnecessary utilization and improper payments. However, the American Medical Association (AMA) did some research of its own, estimating in a 2017 report that clinicians and staff spent 14.6 hours per week on prior authorizations. 

Not only does this process take time away from patients, but 78 percent of clinicians reported in the 2017 AMA survey that the delay can result in patients abandoning a particular course of treatment, potentially putting their health or even lives at risk.

AMA, along with the American Hospital Association (AHA), American Pharmacists Association, America's Health Insurance Plans, Medical Group Management Association, and more have petitioned for changes to the prior authorization process, specifically in streamlining and standardizing the process.

That process, which is heavily dependent on manual processes, is a headache for provider organizations. In fact, facilitating gaining health plans’ approval for medical treatment has grown to be one of the biggest frustrations for physicians in group practices, said Robert Tennant, director of health information technology policy for the Medical Group Management Association, at its annual conference in October.

The process not only produces its frustrations with the time it takes to get medical services and medications authorized for payment, but the cost of prior authorization requirements on physician practices has continued to increase – the price was up 60 percent in 2019 to manually generate a request to insurers. This is also time-consuming for practices. On average, a manual prior authorization required 21 minutes of provider staff time, while electronic prior authorization transactions can be completed in four minutes, according to a new 2019 study by the Council for Affordable Quality Healthcare (CAQH) 2019 Index.

The just-released CAQH study, which concluded that the healthcare industry can save $13.3 billion on reducing administrative waste through automation of eight transactions, also said the industry could see potential annual savings of $454 million by transitioning to electronic prior authorizations.

Prior authorizations were just one of the changes the CAHQ report highlighted. The U.S. healthcare industry spends $40.6 billion annually on just eight healthcare administrative transactions related to verifying patient insurance coverage and cost-sharing, obtaining authorization for care, submitting claims and supplemental information, and sending and receiving payments, according to CAQH researchers.

The CAQH Index, put together by the nonprofit alliance, revealed that the cost for providers to manually generate a prior authorization increased from $6.61 in 2018 to $10.92 in 2019. Payer cost for the same transaction decreased, from $3.50 in 2018 to $3.32 in 2019.

At the same time, the cost for providers to generate an electronic prior authorization transaction dropped from $2.80 in 2018 to just $1.88 in 2019, and the cost for payers stayed steady.

One of the biggest issues, as we are now into 2020, is that practices should not be forced to rely on fax machines to complete manual prior authorizations when health plans could modernize the process and become digital, and more automated in the approach.

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Insurers, however, are pledging to do more, and just last month several insurers launched a new initiative aimed at expanding the use of electronic prior authorization, hoping to address an issue most providers say is the most burdensome they face.

America’s Health Insurance Plans (AHIP) and several member insurers, including Anthem, Cigna, and WellCare, have said they will have physicians' offices volunteer to work with insurers to incorporate the new processes into existing technology in the coming months.

The approach will lean on information exchange technology to accelerate the often-ponderous process by which providers obtain permission and payment authorizations for prescribing care to patients.

Although a greater percentage of business transactions are now conducted electronically, the U.S. continues to spend more on healthcare administration than any other nation. Standards and operating rules must be updated more quickly to support changing technology, payment models, and patient care delivery strategies.

Electronic approaches to gaining prior authorization are becoming increasingly available to physicians, but most still use manual processes to request prior authorizations, despite the common availability of online submission portals. AHIP data suggests that 46 percent of prior authorization requests are submitted by fax, and 60 percent require a telephone call. Proposals from new vendors in this market aim to employ technology in the physician’s office to improve connections between insurers, physician offices, and other care settings.

With the initiative, when a doctor prescribes a medication through an electronic health record (EHR), they can immediately access the patient’s pharmacy benefits, determine whether the specific medication requires prior authorization, and access the information to choose an alternative treatment that is clinically equivalent, but more cost-effective, and does not require prior authorization.

Also, through the EHR, the doctor will also have access to the patient’s out-of-pocket costs for each drug, so the patient will know what to expect to pay when picking up the medication at their pharmacy.

Other services these physician/patient portal vendors are offering, if prior authorization is required, include a provision that the provider can submit the necessary information through the portal to fulfill the request, avoiding time-consuming phone calls and interruptions to patient care. The health insurance provider then can review the information, make a determination based on the patient’s coverage and treatment evidence, and send a response through the portal.

The goal is to offer a voluntary approach that is scalable and can be highly integrated with existing electronic health records systems. Remember, prior authorizations are not going away or being eliminated. Prior authorization remains important for health insurers, says Kate Berry, senior vice president of clinical affairs for AHIP. “A lot of studies that show that there are variations in treatment and potential misuses of care,” she said. “The opioid crisis is an example of that. Medical management (through prior authorization) is one way to do that and is an important tool for patients. It can be improved, but it must be used to protect patients and promote evidence-based care.”

As health insurers roll out initiatives to test ways to speed prior authorization, the goal is to do so through standards-based solutions that will be widely accessible, and include the participation of providers and the technology they’re currently using. This is a step in the right direction.

Programming Note:

Listen to Terry Fletcher report this story live today during Talk Ten Tuesdays, 10-10:30 a.m. EST.

Terry Fletcher, BS, CPC, CCC, CEMC, CCS, CCS-P, CMC, CMSCS, CMCS,  ACS-CA, SCP-CA, QMGC, QMCRC

Terry Fletcher, BS, CPC, CCC, CEMC, CCS, CCS-P, CMC, CMSCS, CMCS, ACS-CA, SCP-CA, QMGC, QMCRC, is a healthcare coding consultant, educator, and auditor with more than 30 years of experience. Terry is a past member of the national advisory board for AAPC, past chair of the AAPCCA, and an AAPC national and regional conference educator. Terry is the author of several coding and reimbursement publications, as well as a practice auditor for multiple specialty practices around the country. Her coding and reimbursement specialties include cardiology, peripheral cardiology, gastroenterology, E&M auditing, orthopedics, general surgery, neurology, interventional radiology, and telehealth/telemedicine. Terry is a member of the ICD10monitor editorial board and a popular panelist on Talk Ten Tuesdays.

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