What is pre authorization and why is it so important to get it right?
According to the group that monitors electronic adoption in healthcare (CAQH), while electronic claims are at 94%, electronic eligibility is 70%, and e-prescribing is at 92%, electronic prior authorization (ePA) is only at 8% usage––costing physicians on average $46,000 a year in labor. Some specialties such as radiologist, surgeons, and laboratories can be even more.
What Is Preauthorization
Pre authorization is the process by which most health insurers determine whether or not to cover a medication, service, or procedure. Although the process is intended as a cost-saving measure and a way to improve patient safety, it has received criticism from physicians who say they are forced to spend hours each day obtaining approvals and are highly frustrated with the lack of visibility into the predetermination of benefits and the excessive repetitiveness of the system.  
Before insurance companies will agree to pay for some medications, medical procedures, and medical equipment, they require advance notice from physicians. Physicians must wait for approval before prescribing or performing the procedure to ensure they will be paid (or that the insurer will pay at least a portion of the medication or equipment cost).
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In some cases, insurers want to check that the procedure is medically necessary or that the patient is healthy enough to perform it safely. In the case of prescriptions, prior approval is usually intended to ensure an expensive medication is necessary, as opposed to a less expensive medication or generic version of a costly drug.
A failed authorization stops the prescribing or treatment process temporarily. Sometimes, supplying missing information or fuller medical documentation is all that’s required to turn a denial into an approval. In other cases, the physician must get personally involved, usually in the form of a peer-to-peer phone call with the insurer’s medical expert to explain the need for a certain prescription, procedure, or piece of medical equipment.
In some cases, the insurer requires the patient to go through a process known as step therapy, which opponents refer to this as “fail-first”. This process involves a patient seeing unsuccessful results from a service or medication preferred by the insurer before the company will cover the originally requested service.
Process and time spent
Usually, the prior approval process begins with a form being completed by the physician and faxed to the insurer. The insurer may then request additional information or medical documentation, and either approve the request, or reject the request. If rejected, the provider can file an appeal based on the insurer’s utilization management review process.
In June 2011, the American Medical Association (AMA) published a white paper calling for the standardization of the preauthorization process for medical services. The paper said the current system is too manual and should be replaced by a system that’s more streamlined, standardized, and automated.
In the white paper, AMA quoted a 2006 survey that found the average physician practice devoted 1 hour of physician time, 13.1 hours of nursing time, and 6.3 hours of clerical time to the preauthorization process each week. A more recent survey by the AMA found that an average of 14.6 hours is spent each week by physicians and/or staff to complete the prior review workload.  It also discovered that 51% of physicians found that the burden associated with obtaining prior approval had increased significantly over the past five years and that 35% said it had increased to some degree.
Purpose and costs
Insurers have said the purpose of prior authorization is to lower the cost of healthcare overall by preventing unnecessary procedures and the prescribing of brand-name drugs when an equivalent generic is available. Some have said that prior review can help prevent harmful drug interactions.
The cost burden of precertification lies mainly in the time spent by clerical workers, medical staff, and physicians to complete the task and obtain authorization. A 2009 report from Health Affairs estimated that the national time cost to practices of interacting with health plans was between $23 billion and $31 billion, a portion of which comprises work on preauthorizations and puts the mean average cost to a primary care physician at $47,707 per year, consuming roughly 814 man-hours.
There are patient care-related costs associated with preauthorization, however. AMA’s 2017 survey found significant care delays associated with prior review. Of the physicians surveyed, 15% said the process always delays access to necessary care, 39% said it does often, and 38% said it sometimes does.
The survey found that 57% of physicians believe issues related to the prior approval process sometimes lead to patients abandoning their recommended course of treatment, with an additional 19% saying this is often the case. Additionally, 61% of physicians said the overall impact of the process on patient’s clinical outcomes is significant. The AMA reports that 92% of patient care delays are attributed to requirements of care approval.
Legislative and advocacy-group developments
In January, H.R. 4841 was introduced to promote electronic usage in Medicare Part D nationally; it is titled “Standardizing Electronic Prior Authorization for Safe Prescribing Act of 2018.” The Senate Health Committee also held a hearing in July to consider possible legislation regulating how health insurers handle prior approval.
The majority of legislative efforts are taking place at the state level and can be tracked via AMA’s 2018 Prior Authorization State Law Chart. AMA has created a template bill called “Ensuring Transparency in Prior Authorization” designed to ensure that all preauthorization programs include (1) the use of written clinical criteria and (2) reviews by appropriate physicians to ensure clinical validity and a fair process for patients.
The model bill mandates that all current prior review requirements and restrictions must be readily accessible on the insurer’s website, that written notice of changes must be sent no less than 60 days before implementation, and that authorizations or denials must be issued within two working days of obtaining all necessary information.
The bill also takes steps to regulate the use of step therapy, saying insurers should not require participation if the provider deems the protocol is not in the patient’s best interests. It contains a provision requiring electronic authorization be implemented using accepted industry standards and that faxes, proprietary payer portals, and electronic forms are not considered standardized electronic transmission.
Another major effort takes the form of a pledge signed by The American Hospital Association, America’s Health Insurance Plans, the American Medical Association, the American Pharmacists Association, the BlueCross BlueShield Association, and the Medical Group Management Association.
The pledge identifies five opportunities for improvement in the prior approval process with the goal of achieving
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“meaningful reform,” including selective application of authorizations, authorization program review and volume adjustment, transparency and communication regarding preauthorization, continuity of patient care, and automation to improve transparency and efficiency.Last year, the American Academy of Family Physicians (AAFP) adopted an official policy regarding prior authorizations, saying prior review creates significant barriers for family physicians to deliver timely and evidence-based care by delaying the start or continuation of necessary treatment.
The AAFP believes family physicians using appropriate clinical knowledge, training, and experience should be able to prescribe and/or order without being subjected to approval. The policy states that in rare circumstances when prior reviews are clinically relevant, they should be evidenced-based, transparent, and efficient to ensure timely access to care and positive patient outcomes. And that family physicians who contract with health plans and participate in a financial risk-sharing agreements should be exempt from obtaining authorizations.
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Also last year, a coalition including AMA, AAFP, and 15 other health care organizations called for prior authorization reform. The coalition said that given the potential barriers that preauthorization poses to patient-centered care, it urged an industry-wide reassessment of these programs to align with a set of 21 principles.
This group said it strongly urges health plans, benefit managers and any other party conducting utilization management, as well as accreditation organizations, to apply the principles to utilization management programs for both medical and pharmacy benefits.
Fully automating the preauthorization process involves integrating EHRs with practice billing software, a complex task currently being undertaken by a number of software developers.
Ideally, such software should (1) determine if a medication or treatment requires preauthorization, (2) aid clinicians with the submission process, and (3) track the status of all pending prior approvals.Determining the robustness of such preauthorization systems is likely to involve asking a series of questions of the software vendor about the presence of a dashboard displaying request status, the customizability of the database of payer rules, the frequency of payer-rules database updates, the technology used to exchange data with payers, and the customizability of the system overall.
What is medical Preauthorization?
Definition. Healthcare.gov defines medical preauthorization as a decision by your health insurer or plan that a health care service, treatment plan, prescription drug or durable medical equipment is medically necessary. Sometimes called prior authorization, prior approval or precertification.
Here are eight facts impacting physicians right now.
When it comes to business technology, physicians are rarely early adopters, but today’s medical practices would nevertheless be loath to give up the electronic tools that help them cut costs and speed up their revenue cycle and ease the eligibility process. A significant problem remains, however: Preauthorizations.
Just how serious a problem is prior authorization? Let’s look at the numbers.
- In a poll conducted in May of last year by the Medical Group Management Association, 86% of practices said prior authorization requests had increased in the last year. That was 4% increase from a similar poll a year earlier.
- The 2017 American Medical Association Prior Authorization Physician Survey found that 23% of practices waited an average of three to five business days for a prior authorization decision from health plans. Another 18% waited 2 days, 16% waited one day, and 7% waited more than five days.
- The AMA survey found that 84% of practices say the burden associated with prior authorization is high or extremely high.
- A whopping 51% of respondents to the AMA survey said the burden of prior authorization has increased significantly over the last five years.
- Physicians and staff told AMA they spend an average of 14.6 hours each week obtaining precertifications.
- Just over 30% of physicians have staff who work exclusively on prior authorization, according to the AMA survey.
- Practices in the survey average 29.1 prior authorizations per physician per week (that includes prescriptions and medical services).
- 79% of survey respondents said they’re sometimes, often, or always required to repeat prior authorizations for prescription medications.
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Of course, numbers only go partway in demonstrating the enormity of the prior authorization problem. AMA’s Dr. Jack Resneck, Jr. told Healthcare Dive that payers often require too much prior authorization. The processes are “a lengthy administrative nightmare of recurring paperwork, multiple phone calls, and bureaucratic battles that can delay or disrupt a patient’s access to vital care,” he said.
“In my own practice, I now get insurer rejections or prior authorization demands for a majority of the prescriptions I write each day—even for many generic medications that have existed for decades,” Dr. Resneck told AMA Wire. “For many conditions I see, even when there are several treatment options, I increasingly run into plans where every single one of those choices requires a prior authorization.”
Indeed, an analysis of the sources of physician satisfaction and dissatisfaction conducted by AMA found that payers were the second largest source after poor EHR usability.
“Insurance companies will tell us ‘we don’t cover that medication’ but then never give us alternatives. So we have to guess on prescriptions and turns out they don’t cover that one, either. Then…we pick a different one and again they don’t cover it. It creates a ton of work for the providers…it’s just many people having to look up the same information over and over,” said one physician who was interviewed.
Another physician put it even more bluntly: “I’d say prior authorization kills us. Ugh, the amount of time we spend on prior authorizations,” they said.
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State and Federal Efforts Stress Transparency to Ease Prior Authorization Pain
A number of healthcare organizations are working to ease the pain of prior authorization through group pledges and coalitions aimed at bringing together insurers and providers.
Lawmakers are also looking at ways to improve this broken system. For the most part, these efforts are at the state level. The American Medical Association has created a template for such legislation: “Ensuring Transparency in Prior Authorization Act.” It declares that prior authorization programs can place attempted cost saving in front of optimal care, that these programs should not be permitted to intrude on the practice of medicine, and that the programs must include (1) the use of written clinical criteria and (2) reviews by appropriate physicians to ensure a fair process for patients.
The model bill goes on to mandate that all current prior authorization requirements and restrictions must be readily accessible on the insurer’s website, that written notice of changes must be sent no less than 60 days before implementation, and that authorizations or denials must be issued within two working days of obtaining all necessary information.
There are two other key elements to the bill. First, it takes steps to regulate the use of step therapy, saying insurers should not require participation if the provider deems the protocol is not in the patient’s best interests. Second, it contains a provision requiring that electronic prior authorization must be implemented using accepted industry standards and that faxes, proprietary payer portals, and electronic forms are not considered electronic transmission.
At least one state has already used the model bill to draft legislation. Ohio Medical Association’s senior director of government relations told AMA Wire in May: “We wanted to get our of the realm of faxes and phone calls and move into a web-based electronic system to process PA requests.”
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More information on state laws in effect or in process is available on the AMA website’s 2018 Prior Authorization State Law Chart.
Other organizations are focused on prohibiting insurers from instituting step therapy policies. For example, Fail First Hurts is gathering stories of chronically ill patients who have been hurt by step therapy requirement. It is also tracking legislation that’s been introduced to prohibit step therapy. The organization notes that Louisiana was the first state to pass step therapy legislation, in 2011, and that 14 other states have followed suit since then.
The indefinite time period allowed for step therapy is a major focus for Fair First Hurts in its legislative advocacy. “Many insurance companies want patients with serious medical conditions to prove that cheaper and often less effective treatments have failed to adequately manage their condition,” the organization notes. “This can go on for an indefinite period of time before the drug initially prescribed by the physician is approved.”
Leveraging Technology to Streamline Pre Authorization
The good news is that technology can significantly speed up the prior authorization process, freeing up physicians to spend more time with patients and staff to focus on more important tasks. The difficulty is that prior authorization systems must work in lockstep with both EHRs and billing software to truly automate the process—no easy feat.
The 3 must-have features of prior authorization software
- Determine if a medication or treatment requires approval. The software system must be able to access the patient’s insurance status and reach out to the payer to determine if pre authorization is required. If it is, the system alerts the clinician and/or staff that it’s initiating this process.
- Aid clinicians with the submission process. The system should be able to auto-fill the patient’s information and the physician’s basic information. It should also prompt the physician to add the information necessary for a successful prior review.
- Track status of all pending authorizations. The system should track all in-progress authorizations and prompt an administrator when authorizations are delayed or stalled.
Five questions to ask when evaluating prior authorization software
In addition to those essential features, there are a number of questions to help determine the robustness of a preauthorization system.
- Does the software provide a dashboard that clearly displays the status of all current prior auths, with alerts sent when an authorization needs attention from an administrator?
- How customizable is the database of payer rules? Ideally, in addition to keeping an updated repository of rules for the major payers, the system should allow the practice to easily capture local payer rules and either contribute them to the main database or use them locally.
- How often is the payer-rules database updated? Since an out-of-date rule can lead to a preauthorization denial, it’s essential that the rules database be constantly updated.
- What technology is used to exchange data with payers? Many systems use EDI 278 transactions; others use HL7 application program interfaces (APIs). It’s essential that all the payers you work with can interface with the technology within the system you plan to use.
- How customizable is the system overall? As healthcare administrators learned with EMR implementations, clinicians are willing to accept changes to their workflow to accommodate a new system—but only to a point. The more a system can be customized to fit your practice’s workflow, the easier it will be to get staff and providers up and running on it.
With the right system in place, your practice can experience the benefits of automated prior authorization. In other words, staff spends less time on authorization paperwork, providers spend less time answering questions and providing documentation, and the practice sees fewer authorization denials and a decrease in outstanding patient balances due to missing authorizations. A win win all around.
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What is the difference between preauthorization and precertification?
Learn more about precertification.
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- “2017 AMA Physician Survey,” //www.ama-assn.org/sites/default/files/media-browser/public/arc/prior-auth-2017.pdf
- “Sources of physician satisfaction and dissatisfaction and review of administrative tasks in ambulatory practice: A qualitative analysis of physician and staff interviews,” //www.ama-assn.org/sites/default/files/media-browser/public/ps2/ps2-dartmouth-study-111016.pdf
- “Standardization of preauthorization process for medical services white paper,” June 2011, //www.stepsforward.org/Static/images/modules/20/downloadable/standardization-prior-auth-whitepaper.pdf
- “2017 AMA Physician Survey,” //www.ama-assn.org/sites/default/files/media-browser/public/arc/prior-auth-2017.pdf
- “Insurance companies use prior review to keep health care costs in check,” //www.verywellhealth.com/prior-authorization-1738770
- “What Does It Cost Physician Practices To Interact With Health Insurance Plans?” //www.healthaffairs.org/doi/full/10.1377/hlthaff.28.4.w533
- “Senate Panel Eyes Regulating Insurance Preauthorizations,” //www.modernhealthcare.com/article/20180731/NEWS/180739979/senate-panel-eyes-regulating-insurance-prior-authorizations
- “Health Care Coalition Calls for Insurance Authorization Reform,” //www.ama-assn.org/health-care-coalition-calls-prior-authorization-reform
- “Utilization Management Reform Principles,” //www.ama-assn.org/sites/default/files/media-browser/principles-with-signatory-page-for-slsc.pdf
- “3 Key Areas An Automated Prior Authorization Solution Must Address,” //hitconsultant.net/2017/12/18/avality-automated-prior-authorizations/
- “A review of electronic prior authorization technology,” //searchhealthit.techtarget.com/feature/A-review-of-electronic-prior-authorization-technology