Prior authorization is a requirement that health insurers use to exercise more control over enrollees’ medical treatments. If a health plan requires prior authorization for a specific service and providers fail to obtain approval, the treatment is not reimbursed. Prior authorization is controversial because doctors and patients often see it as an unnecessary interference between the doctor and patient relationship. Doctors hate the hassle of seeking permission prior to treating their patients. They also dislike so-called bean counters second guessing their treatment choices. According to Kaiser Heath News (KHN):
Few things about the American health care system infuriate patients and doctors more than prior authorization, a common tool whose use by insurers has exploded in recent years.
Prior authorization, or pre-certification, was designed decades ago to prevent doctors from ordering expensive tests or procedures that are not indicated or needed, with the aim of delivering cost-effective care.
Years ago, prior authorization was only required for expensive medical procedures. Prior authorization was often required for costly MRI diagnostic scans that were nice to have but not required. Prior authorization was often used for hyper-expensive drugs when cheaper substitutes were available. Prior authorization was often used to police areas prone to abuse. Critics argue that those excuses no longer apply. Prior authorization is now common and used for the pettiest of reasons they claim.
So today, instead of providing a guardrail against useless, expensive treatment, pre-authorization prevents patients from getting the vital care they need, researchers and doctors say.
“The prior authorization system should be completely done away with in physicians’ offices,” said Dr. Shikha Jain, a Chicago hematologist-oncologist. “It’s really devastating, these unnecessary delays.”
Back in December the Centers for Medicare and Medicaid Services proposed new rules requiring health plans to render decisions on prior authorization requests much faster and provide specific reasons for denials. The new standard would require a decision within 72 hours for urgent requests and within a week for typical requests. AHIP, the trade association for health plans, isn’t opposing the provision and the AMA is supportive, although some doctors don’t think it goes far enough.
Absent federal regulations, states began to act. For example, Texas created a standard form with standard rules. The Texas Gold Card law also sped up the process for physicians and patients.
Meanwhile, some states have passed their own laws governing the process. In Oregon, for example, health insurers must respond to nonemergency prior authorization requests within two business days. In Michigan, insurers must report annual prior authorization data, including the number of requests denied and appeals received. Other states have adopted or are considering similar legislation, while in many places insurers regularly take four to six weeks for non-urgent appeals.
Critics of prior authorization claim that some beneficial care is never received due to the hassle of seeking authorization and appealing denials. The process sometimes requires patients or patients’ family members to spend hours on the phone submitting requests, filling out duplicate forms online and appealing decisions when denied. According to KHN:
Many of the denied claims are reversed if a patient appeals, according to the federal government. New data specific to Medicare Advantage plans found 82% of appeals resulted in fully or partially overturning the initial prior authorization denial, according to KFF.
A year or two ago I posted a comment about prior authorization on Twitter. The response from physicians was that prior authorization requirements were often for common, uncontroversial treatments, which were usually granted. It was just an unnecessary burden to provide patient care both doctor and health plan agreed was customary.
Let me play Devil’s advocate for a moment and explore why insurers may use prior authorization. If a member has a health plan that requires 20% cost sharing, that means members are only about 20% as price sensitive as if they were paying the entire bill. That means it’s five times easier to convince them to accept a certain medical treatment than if they were paying the bill themselves. Prior authorization is a roundabout way to substitute for the patient saying “why do I need that?” Granted, it’s a blunt instrument, which most physicians feel is abused.
That brings me to an anecdote I’ve used on may occasions. A few years ago my wife’s doctor ordered a CT scan for her. My wife had no idea where to have it done. With the help of the physician’s office manager my wife selected a hospital not far from our house that could perform the test. When my wife called the hospital they assured her that her health insurer would cover the scan but they needed to seek prior authorization. A day or so later the hospital called to say Blue Cross Blue Shield had approved the CT scan and be prepared to pay $2,700 for her share of the cost. When would she like to schedule? The cost took my wife by surprise. That evening during dinner she told me about the $2,700 in cost sharing. I asked her why did she even consider getting a CT at a hospital? She had no idea she was choosing the most expensive place for a diagnostic procedure. About 10 minutes later I found a free-standing imaging center right next to her doctor’s office, which offered the same test for $403. That was Blue Cross Blue Shield’s negotiated price. She got her CT scan at that location and was elated by the savings. Far from being an inconvenience, it was prior authorization that prevented her from spending $2,300 unnecessarily.
Several years back I needed to see a specialist. I found a doctor and on his website it said “we may have to seek prior authorization for your treatment. That is also a way for you to know your share of the cost.” That was certainly true in my wife’s case. Perhaps a good compromise would be for medical providers to input a physician order request to your health plan’s website. Your health plan would send an email with approval and a list of all the places to receive care and their respective costs. I even met a group years ago that helped employees in employer-sponsored health plans with second opinions and cost estimates for alternative locations for care. After her ordeal was over my wife asked me how are other people, not married to a health economist, supposed to know that?
5 thoughts on “CMS to Make Prior Authorization Quicker, Easier”
Some of the bitterest conflicts about authorization involve post-acute care for elderly Medicare patients.
The issue is not high-tech diagnostics….the issue is an extra 20 days of nursing home care after a surgery.
My strong impression is that controlling post-acute care expenses is a huge breakpoint item in the profitability of Medicare Advantage plans. There is a recent article in Stat News that gives details on this.
“controlling post-acute care expenses is a huge breakpoint item in the profitability of Medicare Advantage plans”
‘sfunny. I’ve thought failure to apply effective pre-payment practices is a major reason Medicare is annually an enormous loss leader for the federales. The Medicare Advantage plans call it low-hanging fruit.
Your comment made me realize that over the past several years I’ve read numerous articles on post-acute care fraud in Medicare. The last hospital I worked at was a PPS exempt long-term acute care hospital. We took the stable but very sick patients from our parent company’s ICU/CCU where they were DRGed out. We were cost-reimbursed based on a TEFRA limit. They would stay with us a month or more. We began the discharge planning process before they were admitted. Those we didn’t think we could get rid of were not admitted. Nobody left our hospital under their own steam. They were wheeled out either to a hearse or taken to a nursing home. From there it was usually home with home care or long-term care paid privately or by Medicaid.
Devon, I also have anecdotes that I like to tell.
This one happened when I was head of benefits for a major company whose employee benefits are self-funded. The teenage son of one of our employees had been seriously injured in an auto accident. On the very morning of his discharge from the hospital, the step-down facility decided it would not accept him because the insurance company would not pay what it wanted to charge. Having been a VP at that insurance company I called its regional medical director and thanked him for protecting my budget. I then “asked” him to settle this before he went home that night. I also called the director of the step-down facility, explained that we, and not the insurance company paid all our plan’s benefits directly – and “advised” him that my company expected a better deal. It was settled.
I think this story illustrates that many of these things are negotiable in advance (not so much, after the fact). I think it also illustrates that negotiating things before the expense is incurred, is a good way to keep costs down. You can’t expect to keep costs down if you if you never negotiate in the first place.
Yes, I often tell people there are (at least) two cash prices. The first is the list price you’re expected to pay after the fact and the second is the negotiated price generally agreed upon prior to care.