What is Prior Authorization in Medical Billing?

Many tasks and actions like construction, business operations, and large public gatherings require permission. In medical billing, healthcare providers also need permission to perform certain procedures or services. This extra step is called pre-authorization (PA), or prior authorization in medical billing. But why is authorization so important in medical billing?

Insurance companies use the prior authorization process to control unnecessary medical costs. Although it may feel like an administrative burden, this process is equally beneficial to many healthcare providers. Let’s explore prior authorization in detail before moving on to its significance. Read on to discover all the ins and outs of this process.

Prior Authorization in Medical Billing

Prior authorization, prior approval, or precertification! You might have come across these terms many times while dealing with the medical billing process. They all refer to the same thing – obtaining approval for specific medical services before providing them to a patient. But why is it necessary? The simple answer is that it is essential for verifying insurance coverage of complex treatments.

Insurance providers use the prior authorization process for a couple of reasons. Besides the obvious reason for cost control, many payers include it in their terms and conditions to minimize fraudulent claims. They do that by evaluating the medical necessity of a service or procedure and verifying its coverage under their policies.

Therefore, doctors should obtain prior approval before proceeding with specific diagnoses and treatments. Otherwise, insurance companies will deny their medical claims.

Significance of Prior Authorization in Medical Billing

You can avoid unexpected medical denials by confirming your patient’s insurance coverage before providing any service. Prior authorization (PA) is a significant process in medical billing. It guarantees the efficient use of healthcare resources by preventing unnecessary procedures and costly treatments. So, what benefits does it bring to healthcare providers?

Through PA, healthcare professionals can deliver suitable treatments to patients. While the prior authorization process takes some time and extra work, it also helps healthcare organizations collect appropriate payments for their services. In short, it reduces claim denials.

To summarize, prior authorization in medical billing is important  due to the following reasons:

• It helps healthcare providers offer better care to patients, reducing hospital readmission rates.
• It confirms the coverage of a medically necessary treatment.
• It improves the financial health of an organization by improving its claim approval rate.
• It allows healthcare providers to proficiently manage their expenses by verifying the medical necessity of a service in advance.
• It promotes compliance with federal and payer guidelines.
• It improves coordination and communication between healthcare providers and insurers.
• It promotes the use of cost-effective and appropriate treatments.
• It minimizes conflicts between insurance companies and healthcare providers.
• Last but not least, PA improves customer satisfaction.

Medical Treatments & Medications that Require Pre-Authorization

According to the American Medical Association (AMA)’s ‘what doctors wish patients knew about prior authorization’ series, there is no fixed list of treatments and medications that require prior approval from payers. Everything depends on your patient’s insurance coverage. Therefore, it is not easy to predict the specific services and medications that may require prior approval.

However, we can provide a general idea about these authorized services and medications. The Centers for Medicare & Medicaid Services (CMS) have explained that they regularly verify the services and treatments with high chances of fraud and misuse. In simple terms, most payers don’t require prior approval for emergency treatments. They only provide authorization for high-cost and complex services, including:

Medications

• Advanced medications that have diverse health effects when taken with other medicines.
• High-cost specialty medicines for complex medical conditions such as rheumatoid arthritis or cancer.
• Medications that are only meant for certain age groups.
• High-dose medications with a risk of addiction.
• Newly developed or under investigation drugs.
• Medicines with cost-effective alternatives in the market.

Medical Treatments

• Complex or expensive procedures like surgery, MRI, PET, or more.
• Non-emergency services and procedures like cosmetic surgery.
• Expensive treatments for chronic diseases such as injectable or oral chemotherapy.
• Extensive rehabilitation services like physical or occupational therapy.
• Home health medical services such as nurses.

How Long Does It Take for Pre-Authorization on Medication?

The pre-authorization process for medications is usually shorter than for medical treatments. According to various resources online, payers typically take 1 to 3 days to approve medications after healthcare providers submit a request. However, this timeframe can vary depending on several factors, such as:

• The processing time of an insurance company
• The complexity of medicine
• Additional documentation requirements, and more.

Prior Authorization Process

The process for prior authorization is quite simple if you know what you are doing. After verifying your patient’s coverage, follow these steps to request approval for a specific service/treatment from the insurer.

Identify the Service Requiring Prior Authorization

Check your patient’s insurance plan to verify whether your prescribed treatment or service requires prior authorization.

Evaluate its Medical Necessity & Inform the Patient

Next, identify whether the service is necessary for treating your patient’s condition and that there are no other alternatives. Then, inform the patient about the need for obtaining prior authorization and the potential delay in their treatment.

Gather All the Supporting Documents

This is perhaps the most important step in your pre-authorization process. Proper documentation can support your claim for the necessity of a service or treatment. Collect all the information required for filing a request, including:

• Patient information (demographic details and medical history)
• Treatment/medication details (service and dosage with relevant CPT/HCPCS or ICD-10 codes)
• Medical documentation (detailed clinical notes, test results, and previous treatment history)
• Treatment plan with justification

Keep in mind that the payer can request further documentation like the patient’s consent form or any other relevant information.

Submit Pre-Authorization Request

Fill out the prior authorization form online or on paper. Submit it electronically or manually, depending on the payer’s requirements. Follow the specific guidelines to avoid request denials.

Follow-Up

The insurance company will take some time to review and approve your request (generally 1 to 5 days). Stay in contact with the payer to track the progress of your request. If the insurer approves your request, proceed with the planned treatment or medications. Otherwise, file an appeal or look for other alternatives.

Best Practices to Improve Your Pre-Authorization Process

The pre-authorization process is not difficult. However, according to the latest AMA survey of a thousand physicians, payers often deny 27% of prior authorization requests with little to no explanation. 

But we all know that there is a solution for every problem! You can avoid prior authorization denials by being proactive. Here are some of the best practices to improve the pre-approval process.

Understand Different Insurance Requirements

Every insurance plan is unique. Familiarize yourself with payer-specific pre-authorization requirements. The best way to keep up with different requirements is to develop and use a checklist for common high-cost and complex procedures.

Improve Your Documentation Process

Proper documentation not only improves your PA process but also ensures accurate medical billing and coding. Therefore, you should streamline your documentation process. We recommend using electronic health records (EHRs) and standardized templates for filing complete and accurate prior authorization requests.

Use Technology

Automation tools can help you speed up the entire PA process, from verifying a treatment to submitting and tracking a request. Not only that, but these tools also increase the efficiency and accuracy of your prior authorization process. So, find reliable tools and technology and integrate them with your system to improve your workflow.

Educate & Train Your Staff

Since the pre-authorization requires special knowledge and attention, you should have a separate team to handle these requests. However, a dedicated team is also not sufficient for request approvals. You should provide regular education and training to keep them updated about frequent changes in PA requirements.

Develop A Comprehensive Appeal Strategy

You should also have a clear process for handling PA denials. Develop best practices for appealing denied prior authorization requests and remain in contact with insurance companies to solve these issues.

Outsource Prior Authorization to A Professional

The most efficient solution is to let a professional handle your prior authorization process. Instead of wasting time and money on internal hiring and training, partner with a specialist who can manage the complexities of insurance policies and advance approvals.  

Common Challenges in Obtaining Pre-Authorization

Cost control in the pre-authorization process is one of the biggest challenges for independent practices. It negatively impacts all the areas of an organization, from increasing the administrative burden to straining the practice’s operations.

According to the American Medical Association, PA is an inefficient process as it leads to unnecessary adverse effects on patients. Let’s explore the reasons.

Varying & Complicated Requirements

The pre-authorization requirements are not uniform throughout the country. Each insurance company has different criteria for the PA process. Moreover, they frequently revise their policies and guidelines, making it difficult for healthcare professionals to keep track of all these changes.

Time-Consuming Process

The pre-authorization process is quite time-consuming as it requires detailed paperwork and takes up to 5 days on average to obtain approval from payers. This leads to unnecessary delays in patient care.

Administrative Burden

The AMA’s survey also highlights that the existing prior authorization process leads to a greater administrative burden, making it difficult to coordinate between different departments. Around 86% of surveyed doctors have reported that PA requirements consume significant resources, resulting in financial strain.

Low Patient Satisfaction

Treatment delays are a major cause of high patient dissatisfaction. Additionally, if a payer denies the PA request, patients may have to bear the financial burden.  

Dealing with a Denied Pre-Authorization Request

If an insurance company has denied your pre-authorization request, follow these steps to address the issue.

Understand the Reason for PA Denial

Instead of proceeding with the treatment or filing another request, identify the reason for denial. As we have mentioned before, it is very common for insurance companies to deny pre-authorization requests due to insufficient documentation. They can also reject your request if they feel that the procedure is medically unnecessary.

Contact the Payer

If the insurance company has denied your request without any explanation, contact their representative for clarification.

Gather Supporting Documentation

If your prior approval request was denied due to incomplete documentation, submit all the missing information or medical records to the payer. These documents should justify the medical necessity of your prescribed service.

File An Appeal

If an insurer has denied your PA request without any justifiable reason, submit an appeal. Follow the payer-specific requirements and file your request with all the supporting documents.

Inform the Patient

Don’t forget to notify the patient about PA denial. Keep them involved throughout the process and inform them if there is no other alternative.

Explore Other Treatments

Insurance companies also deny prior approvals if there are other low-cost alternatives. Explore other options or medications that do not require pre-authorization.

Consult A Professional

If the pre-authorization appeal process is beyond your capabilities, hire a professional medical billing specialist. This step will save you from financial implications and unnecessary administrative burdens.

How MediBill MD Can Ensure Pre-Authorization?

Pre-authorization is an important step in medical billing. However, many healthcare organizations face significant financial consequences either due to the absence of prior approvals or payers denying their requests.

Professional medical billing companies like MediBill MD understand the complexities of this process. We know how difficult it is to keep up with the changing pre-authorization requirements. Therefore, we take on the administrative burden of countless healthcare practices, obtaining successful prior authorizations for medically necessary treatments and medications. 

With regular training, our team of PA specialists stays ahead of everyone. Contact us for optimal results!