RCM Enterprise Services® Blog

March 26, 2020
Understanding Pre Authorizations

Pre-authorization requests are becoming more prevalent in healthcare. What is driving this process? How long has it been around? And why is it so challenging?

As the trend in genetic testing continues to increase, insurers are being challenged in processing an enormous amount of coverage and reimbursement claims as it relates to these genomic tests. In order to properly manage and process these claims for accurate and timely reimbursement, payers have implemented prior authorizations policies. These policies and procedures are established to standardize patient medical necessity coverage and reimbursements practices.

In 1996, HIPPA created a standard called the ANSI 278 services authorization form, commonly referred to as ePA, to streamline the cumbersome request process. Today, physicians experience an average wait time from 1 to 3 days for prior authorization decisions according to the AMA. The underlying reason is quite simple; the adoption of the ePA standard is optional and is left to the discretion of the insurance company how to collect the required information. The steps to obtain prior authorization vary from insurer to insurer. Eighty eight percent of the time the process typically involves the manual completion and faxing of a prior authorization form. Physicians have historically been responsive to market changes by upgrading their technology to improve workflow, according to the Council for Affordable Quality Healthcare.

Percentage of physicians who have adapted to market change:

  • 95% adopted electronic claim submission
  • 87% of physicians have adopted EHR
  • 70% adopted e-prescribing
  • 8% adopted prior authorization ePA

As the demand for manual and electronic PA increases, decisions need to be made based on the cost of doing business in a pre-authorization environment as the current workflow is not sustainable.

Options to deploy electronic pre-authorizations:

  • Continue to develop an in-house process with dedicated staff that specializes in this process?
  • Outsource this process to vendors who specialize in the handling of ePA?
  • Deploy a software solution to handle the ePA demands that integrate seamlessly within the physician’s practice management/EHR system through API’s or an HL7 interface?

Why is the process of migrating from a cumbersome manual process to ePA so slow considering the standard has been around for years? The reason for this technology gap is due to the challenges of software vendors to reconcile the variables of over 2000 insurance companies, each with their own prior authorization request form and procedures. Unlike electronic claims, e-prescribing and eligibility checking, individual states have not forced insurance companies at the local level to adhere to long-established standards, delaying the ePA adaption.

Moving beyond the basic information requirements such as requesting physician, patient, insurance, demographics, CPT, and ICD-10 codes, the insurance companies are looking for justification why the testing was necessary. Often this requires supporting documentation such as previous treatments, medical records, and lab results to support the request. 

Pre-authorization for outpatient services is reasonably managed; however, in a physician office setting if, for example, a molecular test is ordered the pre-authorization process for laboratory testing is not well defined. Physician practice management vendors are slowly sorting out the pre-authorization puzzle; however, laboratories could seize this as an opportunity to provide a better experience for their physician clients by championing change in the current process. Laboratories could build a decision support engine to determine if prior authorizations are needed or not needed based on predefined criteria such as type of procedure, CPT, ICD-10, and insurance could be a good start. Laboratories are the experts tracking turn-around-times (TAT) for tests; perhaps they can bring their expertise to create TAT for PA requests. 

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