It is hard to dispute the fact that prior authorization requirements place a heavy burden on both patients and providers. Yet the number of services and medications requiring auths continues to increase. “Overall, the authorization list is growing,” says Kevin Thilborger, managing director of value-based care, strategy, and transformation at Chicago-based Huron Consulting Group. There are some trends worth noting:
Payers are more frequently asking for documentation of care plans before approving surgery or complex imaging. The goal of payers, says Thilborger, is to ensure lower-cost treatments were tried first.
The number of services allowed in a hospital setting is declining. “Place of service is a current focus area for payers,” Thilborger reports. This increases the complexity of the authorization process. “There is the added nuance of authorizing the where in addition to the what,” Thilborger adds.
However, some large employers are pushing back against this. They argue quality of care is more important than a cheaper site of service. “These employers are demanding that the service be performed in the best-quality location— the hospital,” Thilborger observes.
Payers are adding more medications and services to the list of those that require authorization. “Payers, vendors, and especially providers report that prior authorization is increasing,” says Ani Turner, codirector of sustainable health spending strategies at Altarum Center for Value in Healthcare in Ann Arbor, MI.1,2
“Hospitals are seeing prior authorizations expand to cheaper, generic drugs,” adds Tom Lytle, senior vice president of operations, digital transformation, and patient experience at Chicago-based R1 RCM Physician Advisory Solutions. The number of prior authorizations continues to increase at the beginning of each year. “This is due to changes in prescription coverage, formula modifications, and renewal requirements,” Lytle explains.
Prior authorizations are cropping up even in traditional Medicare coverage. The Centers for Medicare & Medicaid Services (CMS) started testing limited prior auth requirements for nonemergent services back in 2012. These included certain power mobility devices, nonemergent hyperbaric oxygen, and repetitive, scheduled nonemergent ambulance transport.³
“CMS is now going a step further,” says Lytle, noting auths will be required for five hospital outpatient services often considered costmetic.⁴⁵ CMS Administrator Seema Verma said in a February speech, “While prior authorization is an important utilization management tool, we believe we can use automation to make the process more efficient.”⁶
It is clear more changes are coming. “It’s unclear what those changes will look like,” Lytle adds. Hospitals struggle to manage the sheer volume of authorization requests. There are costs to payers, too. “But payers appear to believe that the benefits are worth the administrative costs,” Turner observes. “They continue to invest in the staff and technical infrastructure to implement prior authorization.”
On the other hand, there are some encouraging signs that the tide is turning
when it comes to prior auths:
While traditional Medicare covers most services without authorizations, Medicare
Advantage plans do require prior authorization for inpatient hospital stays and certain procedures, labs, and tests. Yet more than half of audited Medicare
Advantage organizations inappropriately denied requests for prior authorization of
services, according to a 2018 report.⁹ The Improving Seniors’ Timely
Access to Care Act of 2019 (HR 3107) would limit prior auth requirements by Medicare Advantage plans and mandate that health plans report on how often they approve or deny prior auth requests.¹°
Private insurance companies claim prior authorization prevents excessive
testing and treatment. Still, a legislative solution is likely to limit prior auths in Medicare Advantage, Lytle predicts. “There is widespread agreement among healthcare providers and private insurance companies that changes are necessary,” he says.
Payers are questioning the amount of resources expended on responding to authorization requests. “The question becomes: How effective are these authorization requirements?” Thilborger asks.
Some payers are conducting a cost/benefit analysis on certain types of care
that require prior authorizations. “If they are always approved, or they
create more barriers than protections, they may remove the requirement,”
For example, some payers are removing prior auth requirements for medications used to treat opioid use disorder.¹¹¯¹²
The money spent on authorizations is coming up during contract negotiations between hospitals and payers. “Providers are increasingly taking the opportunity to calculate and present the administrative cost of their revenue cycle operations,” Thilborger says.
Facing increasingly tighter margins, some hospitals are bringing up the financial burden of prior authorizations when negotiating. “It can prevent future demands that seem unreasonable or can detract from your bottom line,” Lytle says.
1. American Medical Association. 2018 prior authorization (PA) physician survey. Available at: http://bit.ly/2uPILek.
2. Workgroup for Electronic Data Interchange (WEDI). WEDI prior authorization survey highlights. Available at: http://bit.ly/3ajTc92.
3. 80 FR 81673. Medicare program; prior authorization process for certain durable medical equipment, prosthetics, orthotics, and supplies.
4. 85 FR 7666. Medicare program; update to the required prior authorization list of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) items that require prior authorization as a condition of payment.
5. 84 FR 61142. Medicare program: Changes to hospital outpatient prospective payment and ambulatory
surgical center payment systems and quality reporting programs.
6. CMS.gov. Remarks by CMS Administrator Seema Verma at the American Medical Association National Advocacy Conference, Feb. 11, 2020. Available at: https://go.cms.gov/3clr1Z8.
7. eHealth Initiative. Prior authorization: Current state, challenges, and potential solutions. February 2019. Available at: http://bit.ly/3amVlAU.
8. Robeznieks A. Insurers are a roadblock to proven reforms on surprise medical bills. American Medical Association, July 24, 2019. Available at: http://bit.ly/2uMaNqZ.
9. U.S. Department of Health and Human Services, Office of Inspector General. Medicare Advantage appeal outcomes and audit findings raise concerns about service and payment denials. September 2018. Available at: http://bit.ly/2uKB8FR.
10. Congress.gov. H.R.3107 - Improving Seniors’ Timely Access to Care Act of 2019. Available at: http://bit.ly/2Vzf0cJ.
11. Michigan.gov. Starting today, Michigan eliminates prior authorization for medications used to treat opioid use disorders, Dec. 2, 2019. Available at: http://bit.ly/2PDW0Wy.
12. Beetham T. Buprenorphine prior authorization removal: Low hanging fruit in the opioid epidemic fight. Harvard Public Health Review