The Shocking Truth about Prior Authorization Process in Healthcare

The prior Authorization process has been a hot topic of debate in the healthcare industry for some time. Yet, as with any healthcare process and procedure, there are pros and cons to the payment authorization process. In this blog post, we will discuss how previous authorization works, among other aspects of the prior authorization process.

What is prior Authorization in healthcare?

Prior Authorization (PA) is often required for expensive medications to ensure they are medically necessary. But, it is the process of getting approval from your health insurance company (not your doctor) to obtain a prescription or treatment, as demonstrated below:

Prior Authorization Process Prior Authorization as it exists in The United States

Prior Authorization (PA) is a crucial process that ensures patients receive appropriate medication, reduces errors, and prevents unnecessary costs. It helps to control healthcare expenses, allowing insurance companies to provide costly medicines to those who need them. However, obtaining pre-authorizations can be time-consuming, and some hospitals may fail, causing patient care delays. This article explains the two PA processes – “soft” and “hard” – used to authorize a prescription.

Soft and Hard Prior Authorization process explained in a graph Hard and Soft Prior Authorization Process

Image source: Optum

Most insurance companies require prior Authorization (PA) for certain prescription drugs. The process typically begins with your doctor prescribing the medication to you. If the medication needs PA, the pharmacy will notify the prescribing physician and inform them that the insurance company requires prior Authorization. At this point, the patient can either pay for the prescription out-of-pocket or wait for the insurance company to approve the prior authorization request. The physician will then contact the insurance company and submit a formal request for review. The patient can obtain the medication once the request is reviewed and approved.

Hard PA is a process wherein physicians must provide additional information to the insurance company due to a failed authorization. This can lead to a service being denied or the patient being asked to follow a separate process. The approval of the requested product or completing this process may take a few days. The product or treatment is eventually approved if the prescription meets the eligibility criteria.

To learn more about Prior Authorization with ReferralMD

Can prescriptions get rejected?

Around 66% of prescriptions rejected at the pharmacy require prior Authorization. When a PA requirement is imposed, only 29% of patients end up with the initially prescribed product—and 40% end up abandoning therapy altogether! Not only is this negative for pharmaceutical organizations but most importantly, it causes frustration to patients who don’t get the medication that could best treat their condition or who don’t get any therapy. (ReferralMD has a solution for Prior Auth, which speeds the process and reduces denials.)

typical prescription with horrible penmanship from a doctor Illegible Doctor’s Prescription

What kinds of medications require prior Authorization?

There are many reasons why a medication may require prior Authorization. The criteria where a prescription may need Authorization is if:

  • The brand name of a medication is available as a generic. For example, Drug A (cheaper) and Drug B (expensive) can treat your condition. If the doctor prescribes Drug B, your health plan may want to know why Drug A won’t work just as well.
  • An expensive drug (as with psoriasis and rheumatoid arthritis medications)
  • Medication used for cosmetic reasons (such as hair growth)
  • Higher doses of medication than normal
  • Medication that treats non-life-threatening conditions
  • Medicine is not usually covered by the insurance company but is deemed medically necessary by the physician (who must also inform the insurance company that no other covered medications will be adequate)
  • Drugs that are intended for specific age groups or conditions only
  • Medicines that have dangerous side effects

There is a list of reasons why PA is required. Although prior Authorization is designed to control costs, this requires a lot of administrative time, phone calls, and recurring paperwork by pharmacies and doctors, as shown by the steps involved. Below, we review the process’s problems and why it is so hard to manage.

  1. Consumption of Doctor’s Time. According to Medical Economics, many physicians have long expressed dissatisfaction with the time they and their staff have to spend interacting with health plans. When a prescription needs authorizing, this takes a lot of admin time, including the time a physician spends persuading an insurance company to cover an expensive medication or procedure.

For most prior authorizations, physicians have to follow multiple steps. This can involve securing the correct form, filling the form out with the required information, submitting the form to the plan, etc. In particular, the holding time is extended when trying to reach a customer service representative in the insurance company, with hold times averaging 20 minutes or more. Many physicians will tell you that the overall process can take 30-45 minutes for each PA submission.

Many real-life case studies demonstrate the inefficiencies of PA. Danielle Ofri, an associate professor at New York University School of Medicine, speaks of her experience with PA as “frustrating.” In one example, Dr. Opri had to go through four phone calls and four customer-care representatives to get the request of 90 pills each month for her patient, who suffers from high blood pressure, rather than the 45 that the company recommended. The issue was that 45 pills a month was the maximum allowed for this medication. After submitting a list of information,n including a list of all the blood-pressure medicines the patient had been on in the past, including dates of initiation and relevant lab values, Dr. Ofrigott got approval from the representative after going back and forth countless times. According to Dr. Ofri, the time spent on the phone could have been better used for patient care.

Kevin de Regnier, DO, a solo family practitioner in Winterset, Iowa, also speaks of his negative experience with prior Authorization, which has grown steadily during his 26 years of practice. According to de Regnier, nurses spend about 10% of their time each day on prior Authorization. “It’s an unreimbursed cost of providing care, and unfortunately, we don’t have the financial resources to bring in someone to do prior auth exclusively, even on a part-time basis,” he says.

Unfortunately, they are not alone; a survey found that 84% of responding physicians believe the burden of PAs is high or extremely high. Another 86% of physicians also responded that the burden of PAs has increased over the past five years, taking away the time that physicians can care for their patients.


2. The actual cost of PA

Although PA has been an issue among healthcare providers for many years, little is known about the cost to individual practices or the healthcare system. In 2009, one study estimated that, on average, prior authorization requests consumed about 20 hours a week per medical practice: one hour of the doctor’s time, nearly six hours of clerical time, plus 13 hours of nurses’ time.

A study by Health Affairs further revealed that when the time is converted to dollars, practices spend an average of $68,274 per physician per year interacting with health plans. This equates to $23 billion and $31 billion annually! Prior Authorization ultimately ends up costing the healthcare system more than it saves.

3. Prior authorization predicament

More drugs than ever require PA, and the number of insurance plans is growing,g too—each with its forms and policies. This makes it difficult for providers to keep up as they often change regularly.

Failure to obtain proper authorizations can drastically affect the practice’s income. No authorization means no payment. Insurers won’t pay for procedures if the correct prior Authorization isn’t received, and most contracts restrict you from billing the patient. PA denials result in lost revenue, provider and patient satisfaction declines, and patient care delays.

The chart below demonstrates this and shows how much revenue is lost due to Authorization.

Despite the effort to save costs on the insurer’s side, it is unclear whether insurance companies are saving money in the long run. One study examined the records of more than 4,000 patients with Type 2 diabetes who were prescribed medications requiring prior authorizations. Those denied the drugs had higher overall medical costs the following year; not getting the medicines probably worsened their conditions. Therefore, it costs insurers more in the long term as they seek other treatments and medication.

Revenue lost due to write-offs

Although PA is widely implemented as a cost-containment measure, it is labor-intensive for health care providers, patients, pharmacists, and pharmacy benefit plans. Denied claims create the need for manual intervention; this increases practice costs and administrative transaction costs (just under $14 per transaction).

A common problem with many busy practices is that many claim denials sit unworked since denials are usually the most challenging and time-consuming work for billing staff. PA requires multiple letters with supporting documentation and numerous telephone conversations. Consequently, PA costs are expensive, administratively daunting, and unsustainable for most primary care providers.

4. Patient delay

The real impact of PA is often felt by patients who are delayed getting their medication or treatment. As a patient, PA problems can create a vast interruption; they must figure out whether the doctor, the insurance company, or the pharmacy can stall the process.
Nearly all physicians noted that wait times corresponded with delays in necessary care, which added to the risk of adverse events. According to the release, 78% of respondents said that PAs could result in patients forgoing essential treatments.

Up to 92% of doctors say that prior Authorization harms patient care access, ultimately damaging clinical quality outcomes. While the process brings specific accountability and cost containment, several hours are lost in productivity.

For a submission to get authorized, approximately 64% of physicians waited for at least one business day for a PA decision, and 30% said they waited three or more business days, according to the AMA. During this time, patients are unable to start treatment. These long wait times hurt patient experience and patient care. For many practices, the burden of the PA process causes them to abandon a preferred therapy in favor of a different formulary medication.

5. Management of PA

The management of PA can sometimes be challenging to manage as the requirements can vary widely from one insurer to another, each of which also has a different process for submitting prior authorization requests. This means the process cannot be standardized and must be done manually, which can drain resources and time if this is already limited.

Even when the practice has provided a request in a timely way, the insurer may still end up not paying for the prescribed medication or treatment. Unfortunately, claims with prior authorizations are denied more often than you might think. Insurance companies can deny a request for prior approval for reasons such as:

  • The doctor or pharmacist didn’t complete the steps necessary
  • Filling in the wrong paperwork or missing information such as service code or date of birth
  • The physician’s office neglected to contact the insurance company due to a lack of time
  • The pharmacy didn’t bill the insurance company properly
  • Outdated information – claims can be denied due to outdated insurance information, such as sending the claim to the wrong insurance company
  • The insurer failed to notify the pharmacy
  • The approval expired after a limited time (usually 30 days)

The chart below shows the reason PA was denied:

Graph of Prior Authorization Denial Reasons Graph of Prior Authorization Denial Reasons

Image source: Managed Care

According to the chart, it is evident that most payers deny requests due to physicians’ failure to meet their guidelines. Specifically, 70% of payers report rejecting requests because the submitted information contradicts their listing or guidelines. On the other hand, from the perspective of practice managers, 42% of requests are rejected due to not meeting the policy. This suggests a slight discrepancy between the two parties. However, one significant difference in perception between payers and practices is denying medical necessity. Only 12% of payers deny authorizations based on medical conditions, whereas 51% of practices claim to receive rejections. Therefore, it is clear that payers and physician practice managers have different perceptions of why authorizations are denied.

Improve the Prior Authorization process by doing the following:

  • Electronic systems

Although PA is unavoidable in many practices, the current process is often manual. It involves prescribers, payers, pharmacists, and patients in a cumbersome flow of information that may result in delays in treatment and dissatisfaction for all. As a result, many are implementing electronic prior authorization solutions to address common issues with the approvals process. Electronic Prior Authorization integrates directly with electronic health records (EHRs), enabling healthcare professionals to obtain prior authorizations in real-time at the point of care. This also eliminates time-consuming paper forms, faxes, and phone calls.

This also eliminates the need for time-consuming paper forms, faxes, and phone calls.Electronic Referral Management Software can initiate automated previous authorization processes for hospitals, which in turn helps reduce front-end denials. Healthcare further revealed that prior electronic Authorization could save as much as 416 hours. In 2015, the average cost for a fully electronic prior authorization was $1.89, potentially saving up to 416 hours annually.ReferralMD - Referral Management Solution

ReferralMD can offer a solution for referral workflow, e-consults, decision support, patient-provider matching directory, and previous authorizations within your current EMR system.

  • Be familiar with the insurer’s policy.

Physicians must check prior authorization requirements to reduce patient delay before providing services or sending prescriptions to the pharmacy. How long do Prior Authorizations take? The two most common procedures that insurers require pre-authorization for are imaging procedures such as computerized tomography (CT) scans and magnetic resonance imaging (MRI) and brand-name pharmaceuticals.

Subsequently, Doctors should be familiar with insurers’ requirements and develop a list of drugs they cover for common diseases. For example, if there are multiple choices for medications to treat diabetes, and you know the insurer will cover a generic drug, then get in the habit of prescribing that drug, providing that this is appropriate for the patient. This way, Doctors can avoid the issue of dealing with PA, and patients can gain quick access to their prescriptions.

  • Employ a centralized system.

Practices can often create greater efficiencies by centralizing the prior authorization responsibility. Many methods and health systems currently lack clearly defined roles when dealing with PA or do not have enough time. Putting just one or two individuals or a department in charge of prior authorizations for the whole practice will enable those employees to become highly skilled in the process and develop relationships with the payers. A centralized system also addresses the lack of consistency and ensures a more reliable and stable approach.

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After graduating from University in the field of marketing, Victoria enjoys all things digital marketing and is currently working as a digital marketing executive at Nexon Healthcare expanding her skills and learning new things every day.

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