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Prior Authorization Basics

The healthcare system in the United States typically involves a patient receiving medical care and the medical facility receiving payment from a health insurance plan (and/or the patient) for services rendered. To cut or cap costs, many payors have instituted a prior authorization process in which the healthcare provider submits a medicine or procedure for approval before it is utilized. If the request is denied it can then be appealed, or the physician must find an alternative therapy.

The intent of prior authorization is to reduce costs without negatively affecting patient care. For example, prior authorization may avoid expensive medications by substituting a generic brand, prevent possible adverse medication combinations, or avoid unnecessary prescriptions that could be addictive. Additionally, it may identify members who may be eligible to enroll in specialty health programs including behavioral health. Typically, health plans do not approve procedures and medicines that are deemed experimental and not medically necessary. Prior authorization should be based on evidence-based clinical data and medical society practice guidelines.

Two African females looking at medical paperwork together.

This process, unfortunately, has some unintended consequences for patients and healthcare providers alike. The prior authorization process is not universal among different health insurance companies. Some medical clinics have instituted novel prior authorization procedures to reduce denials and lower turnaround time for approval, which may require additional training and staff.

Prior authorization will likely continue among health insurance companies. Therefore, clinicians, professional medical societies, the private sector, and the Federal government are strategizing how to make it more efficient. Many solutions have been considered including automation, integration into the electronic health record, and utilizing third-party systems.

Third-party companies may streamline the prior authorization process for healthcare clinics and laboratories. Some of these external prior authorization companies may have physician-based and laboratory-based programs that allow the medical and laboratory staff to be more efficient. It can be very time consuming for the medical and/or laboratory staff to determine if a patient’s health plan will cover a test, what is the patient cost of a test, among other factors. Prior authorization companies may have proprietary portals that automate the process, thus improving patient access to medically-necessary testing.

White middle-aged doctor reading diagnosis or paperwork of senior woman in hospital sitting on exam bed.

One organization that is impacting the future of prior authorization is the American Hospital Association (AHA). It was founded in 1898 and represents almost 5000 hospitals including rural hospitals, hospital systems, and healthcare networks. AHA recently wrote a letter to the U.S. Department of Health and Human Services (HHS) regarding potential rulemaking to improve the electronic prior authorization process. The AHA recognizes the need for novel solutions to improve efficiency and patient care. End-to-end automation of prior authorization that is integrated into EHRs for real-time data generation would be ideal. Whatever processes are implemented, they should be standardized, useable, scalable, and efficient. Executed solutions should be piloted in a real-world environment which may reveal technological and process gaps not accounted for. The AHA recommends a turnaround time of 24 hours for urgent requests, and 72 hours for standard requests, which would be an improvement to the current timeline that may take weeks for an answer. Currently, when additional clinical information is requested, there is no standardized method of attaching to the prior authorization. The AHA recommends a standardized method of attaching clinical data to prior authorization requests to increase efficiency.

The intent of prior authorization is to reduce payor costs without compromising patient care. However, prior authorization has increased the administrative burden to medical facilities and payors. Moreover, patient care can be impinged upon, which can be frustrating to the healthcare provider. The administrative burden is substantial, and new solutions should be considered. Third-party prior authorization companies may have automated portals for the medical clinic and laboratory which may increase efficiency and patient access to testing. However, caution must be taken by organizations who have the power to reform the prior authorization system. It would be unfortunate if newly implemented solutions created more problems than they solve. Prior authorization reform must be tested in a real-world environment before any national rollout. It is critical that all stakeholders work together to modify prior authorization to support healthcare providers and patients.


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About CMT

CMT is a healthcare technology company, whose mission is to support patients and providers in accessing diagnostic testing. We are Automating the Impossible. We are solving the most complex problems in the healthcare industry: prior authorizations and financial transparency. Beginning in 2017, major health plans implemented new or updated prior authorizations programs for laboratory diagnostic tests. CMT has developed a proprietary technology platform that performs prior authorization and financial transparency services, offering a complete solution to our customers (physician offices and laboratories), so they can focus on diagnostic testing and patient care rather than administrative tasks.

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