Revenue cycle 101: prior authorization

Your introduction to the basics behind the healthcare revenue cycle. This week: prior authorization.

Prior authorization. Pre-authorization. Precertification. Prior approval. Prior review. All of these names, though slightly different, refer to the same thing: the process by which healthcare providers must request confirmation that an insurance provider will cover a prescribed medication, service or treatment for a particular patient. For services that require prior authorization, patients cannot move forward with prescribed care until this request is approved.

Prior authorization (PA) came about as a way for insurance providers to control costs, reduce wasted resources and eliminate clerical errors. Ideally, prior auths also help ensure a patient will receive appropriate and necessary care. However, many providers believe the process is far from perfect.

Studies have estimated overall costs for healthcare providers to go through the prior authorization process add up to between $23-$31 billion nationally every year. It’s clear that prior authorizations add up to a fair amount of time and money invested on behalf of the provider, so it’s important to understand how the process works and how that translates to time and money spent.

The prior authorization process

One thing to note about prior authorizations is that there are no nationwide standards dictating how requests should be made and responses delivered, so keep in mind that workflows will vary from state to state and insurance company to insurance company. The process could also be more or less complex than what’s outlined below, depending on whether it’s for a prescription or procedure, or something else entirely.

With that in mind, let’s walk through a simplified version of the steps involved in completing a prior authorization request

When is prior authorization required?

Prior auths come into play after a healthcare provider has identified a potential course of action for a patient, whether that’s a prescription, test or procedure. Usually, the provider will inform the patient one will be needed as soon as it has been flagged—something that can occur when a provider sends a prescription on to the pharmacy or when they review a patient’s coverage, for example.

Staff must then review coverage details and confirm the prior authorization rules as laid out by the insurance provider. Because there is a lot of variance between different payers (and even from plan to plan), this can be a fairly time-consuming process.

Once benefit and PA requirements have been reviewed, provider staff need to contact the insurance company to review any documentation requirements in addition to the paperwork and patient information they’ve already collected.

Submitting the request

Now it’s time to compile the requisite documents and move forward with submission. By this point, most of the necessary items will have been collected, including details of what a provider believes will be the best next course of action for a patient to take, along with an explanation for the rationale behind the prescribed course of care.

In terms of how the request is actually submitted, there is still a lot of variance from provider to provider. Requests might be submitted by fax, email or through a web portal, not to mention the submission requirements can also vary from one insurance company to another. Because it’s an opaque, complex process, often providers will resort to ad-hoc solutions or guidelines for staff (such as post-it note reminders or hastily assembled process docs). Which as you might imagine can often lead to issues with accuracy and productivity.

Approved or denied—what happens next?

It can take up to 10 business days to approve or deny a prior auth. If the request has been completed properly, meets the insurance provider’s criteria and falls under coverage outlined in the patient’s plan, the request will be approved. If more information is needed, the insurance provider will communicate with the doctor’s office or hospital to sort out the details. But if a denial is issued, a patient could be confronted with delays or rescheduled care, or in some cases an outright inability to get the treatment they need.

Considering the variance in coverage from person to person and plan to plan, a denial could happen for any number of reasons. Incorrect paperwork may have been filed. More documentation might have been needed. Coding or billing specific errors can also add up to a rejection. Furthermore, an approval can also expire after a set amount of time, creating delays when a doctor believes another round of treatment is the best course of action for a patient.

The wrap up

In 2018, an AMA survey found that 92% of doctors believed that prior authorizations interfered with access to timely care and negatively impacted patient clinical outcomes. Extensive paperwork, more time spent calling insurance providers, and uncertainty around wait times for approval—it all adds up to a growing burden on healthcare providers’ time and resources.

While this struggle has been a growing concern for providers for some time, new solutions that leverage innovative tech can now offer a simple way to streamline the process. Waystar’s own Prior Authorization solution uses our powerful AI and RPA platform, Hubble, to automate manual tasks and augment billing teams with tools that let them get paid faster, fuller and more effectively.

Want to learn more? Check out how Waystar’s Prior Authorization Suite helps providers streamline the entire process and reduce denials and write-offs.

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Waystar

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