Prior authorization explained

Prior authorization is a utilization management process used by some health insurance companies in the United States to determine if they will cover a prescribed procedure, service, or medication.

Overview

Prior authorization is a check run by some insurance companies or third-party payers in the United States before they will agree to cover certain prescribed medications or medical procedures.[1] There are a number of reasons that insurance providers require prior authorization, including age, medical necessity, the availability of a generic alternative, or checking for drug interactions.[1] A failed authorization can result in a requested service being denied or in an insurance company requiring the patient to go through a separate process known as "step therapy" or "fail first." Step therapy dictates that a patient must first see unsuccessful results from a medication or service preferred by the insurance provider, typically considered either more cost effective or safer, before the insurance company will cover a different service.[2] [3]

Process

After a request comes in from a qualified provider, the request will go through the prior authorization process. The process to obtain prior authorization varies from insurer to insurer but typically involves the completion and faxing of a prior authorization form; according to a 2018 report, 88% are either partially or entirely manual.[4]

At this point, the medical service may be approved or rejected, or additional information may be requested. If a service is rejected, the healthcare provider may file an appeal based on the provider's medical review process.[5] [6] In some cases, an insurer may take up to 30 days to approve a request.[7]

Streamlining the prior authorization process includes standardizing processes for different prior authorization workflows, reducing manual touches, and improving efficiency. Providers should also work closely with payers to ensure that they understand the requirements for each prior authorization. This means capturing the necessary information upfront and securing an agreement from the payer to cover the services. Providers should also track the status of prior authorizations to ensure that they are approved in a timely manner so that payments are not delayed[8]

Purpose and costs

Insurers have stated that the purpose of prior authorization checks is to provide cost savings to consumers by preventing unnecessary procedures as well as the prescribing of expensive brand name drugs when an appropriate generic is available.[9] [10] In addition, a prior authorization for a new prescription may help prevent potentially-dangerous drug interactions.[2] A 2009 report from the Medical Board of Georgia showed that as many as 800 medical services require prior authorizations.[11]

According to Medical Economics in 2013, physicians have expressed frustration with the current prior authorization process with regards to time spent interacting with insurance providers and the costs incurred based on that time.[12] A 2009 study published in Health Affairs reported that primary care physicians spent 1.1 hours per week fulfilling prior authorizations, nursing staff spent 13.1 hours per week, and clerical staff spent 5.6 hours.[13] A 2012 study in the Journal of the American Board of Family Medicine found that the annual cost per physician to conduct prior authorizations was between $2,161 and $3,430.[14] The cost to health plans was reported at between $10 and $25 per request by 2013.[1] It was estimated in 2009 that prior authorization practices cost the US healthcare system between $23 and $31 billion annually.

Legislative and technological developments

There have been a number of legislative and technological developments that attempt to make the prior authorization process more efficient.

In 2011, the American Medical Association made recommendations that a uniform prior authorization form should be adopted along with real-time electronic processing. The organization described a next generation prior authorization process which would involve a physician ordering a medical service, their staff completing a standardized request form, and an electronic submission process that would give same-day approval or denial of the request. The reasoning behind a denial would be clearly stated, allowing physicians to easily submit an appeal.[5]

In February 2012, the Maryland Health Care Commission presented a plan to the state legislature, which outlined a standardized, electronic filing system for prior authorization requests.[15] In response to a 2012 bill concerning the e-filing of prescriptions, the Kansas Board of Pharmacies advocated for an electronic prior authorization process, which would generate immediate approval for prescriptions.[1] In 2013, the Arizona House of Representatives formed a committee to research the prior authorization process and make recommendations.[16] [17] Also, by 2013 a Washington State Senate proposal was submitted, which would require the state Insurance Commissioner to develop a standardized prior authorization form.[7]

As of May 2013, the National Council for Prescription Drug Programs had adopted a standardized process for the exchange of electronic prior authorizations.[18] The American Medical Association found that the average annual savings per physician from using an electronic prior authorization process to be approximately $1,742.[19] Additionally, a case study conducted by Prime Therapeutics, a pharmacy benefit manager, demonstrated a 90% reduction in payer response time through electronic prior authorization systems compared with the manual prior authorization process.[20]

In 2019, a consensus statement from several healthcare organizations supported standardizing the process.[21]

Notes and References

  1. David R. Schoech . Dr. Robert Haneke . Chad Ullom . Dr. Jim Garrelts . Michael Lonergan . Dr. John Worden . Nancy Kirk . Debra Billingsley . January 2013 . Study on Electronic Transmission of Prior Authorization and Step Therapy Protocols . Kansas Board of Pharmacies . 15 May 2014 . https://web.archive.org/web/20160811021039/http://www.rxobserver.com/wp-content/uploads/2013/01/2013-epa-Study-Report1.pdf . 11 August 2016 .
  2. News: Prior Authorization for Safety, Not Just for Economy . Thomas Reinke . Managed Care Magazine . December 2012 . 20 May 2014.
  3. News: Parity Rules: Worth the Wait? Delayed Release of Parity Implementation Rules Keeps Everyone . Brian Albright . Behavioral Healthcare . 1 January 2010 . 20 May 2014.
  4. Web site: Council of Affordable Quality Healthcare CORE updates rules for prior authorization. FierceHealthcare. en. 2019-06-05.
  5. American Medical Association . June 2011 . Standardization of prior authorization process for medical services white paper . 15 May 2014 . https://web.archive.org/web/20160910201601/http://www.sppan.aapainmanage.org/assets/standardization-prior-auth-whitepaper.pdf . 10 September 2016 .
  6. News: Manage medical advances with automated prior authorization . Douglas Moeller . https://web.archive.org/web/20160309121809/https://www.highbeam.com/doc/1P3-1852737291.html . 9 March 2016 . Managed Healthcare Executive . 1 August 2009 . 30 May 2014.
  7. News: Proposal seeks to streamline health-insurance paperwork logjam . Valerie Bauman . Puget Sound Business Journal . 8 February 2013 . 30 May 2014.
  8. Web site: Cutting Through Prior Authorization Headaches,Strategies for Providers. AGS Health. en. 2024-05-09.
  9. News: Medicaid to require prior OK for outpatient surgeries . Michelle Saxton . https://web.archive.org/web/20181119172201/https://www.highbeam.com/doc/1P2-13892131.html . 19 November 2018 . The Charleston Gazette . 25 August 2005 . 30 May 2014.
  10. News: Prior Authorization Made Easier . Ken Terry . Medical Economics . 19 October 2007 . 30 May 2014.
  11. Medical Association of Georgia . January 2009 . A Study of Prior Authorization/Precertification of Physician Services . The Exchange Atlanta . 15 May 2014 .
  12. News: Curing the prior authorization headache . Jeffrey Bendix . Medical Economics . 10 October 2013 . 22 May 2014.
  13. Lawrence P. Casalino . Sean Nicholson . David N. Gans . Terry Hammons . Dante Morra . Theodore Karrison . Wendy Levinson . May 2009 . What Does It Cost Physician Practices To Interact With Health Insurance Plans? . Health Affairs . 15 May 2014 .
  14. Christopher P. Morley . David J. Badolato . John Hickner . John W. Epling . 22 August 2012 . The Impact of Prior Authorization Requirements on Primary Care Physicians' Offices: Report of Two Parallel Network Studies . Journal of the American Board of Family Medicine . 15 May 2014 .
  15. News: Insurance 'prior authorization' wastes time, money . Gene Ransom . The Baltimore Sun . 9 February 2012 . 22 May 2014.
  16. Web site: In Arizona, getting patient therapies approved is an out-of-date proposition . Todd Levine . 7 February 2014 . Arizona Capitol Times . The Dolan Company . 22 May 2014.
  17. Web site: Bill Text: AZ HB2400 . Arizona State Legislator . 28 March 2013 . House Bill 2400 . LegiScan . 22 May 2014.
  18. Web site: Real time prior auth standards approved . Jennifer Webb . 1 July 2013 . Managed Healthcare Executive . Advanstar Communications, Inc. . 29 May 2014.
  19. Web site: Electronic Prior Authorization Toolkit . ama-assn.org . American Medical Association . 29 May 2014.
  20. News: 6 January 2014 . Prime Therapeutics Electronic Prior Authorization Program Provides Efficiencies for Health Care Professionals and Their Patients . Clinical Trials Week . 29 May 2014 . https://web.archive.org/web/20160314054937/https://www.highbeam.com/doc/1G1-354779648.html . 14 March 2016.
  21. Web site: Prior Authorization Overhaul Sought. 2018-09-03. Managed Care magazine. en. 2019-04-16.