Outsourcing the Prior Authorization Process: An Approach to Enhancing Patient Care and Optimizing Your Revenue Cycle

What is the definition of prior authorization?

It is a utilization management strategy employed by health insurance companies that necessitates the evaluation of specific operations, tests, and medications ordered by healthcare practitioners for their medical necessity and cost-of-care implications prior to their authorization.

The decision of a health insurance payer to approve or reject a prescribed course of treatment based on the results of a prior authorization review will determine whether a provider or pharmacy is reimbursed for a claim and, if so, whether such reimbursement is for the full or partial amount.

Is prior authorization becoming more common?

Certainly, there has been a significant increase in the number of medical procedures and prescribed medications that require prior authorization. The primary driver of this trend is the pursuit of strategies by insurance companies to control the rapidly increasing costs of healthcare, particularly those associated with the development of new technologies or cutting-edge specialty medications. Despite the fact that certain treatments or services can obviously enhance patient outcomes, they are often associated with exorbitant fees and are still relatively new to have a reputation.

Prior Authorization and Medical Necessity: How Do They Relate?

A legal principle known as medical necessity governs clinical conditions and provides a framework for evaluating the treatment provided to a patient by a physician or other provider. It is implemented in accordance with generally accepted medical standards to assess specific diagnostic and therapeutic recommendations. Insurance companies will not reimburse for prescribed care that does not meet the criteria for being medically necessary.

In order to obtain payer approval for care that necessitates prior authorization, it is typically necessary to demonstrate medical necessity.

Prior authorization has what drawbacks?

The delay in patient access to care that results from prior authorization is the most significant adverse consequence. It impedes the patient’s journey, and certain patients may opt not to receive treatment.

In reality, 75% of physicians who participated in an AMA survey reported that patients frequently forgo the prescribed course of therapy due to issues with the prior authorization process. In the same survey, 28% of physicians reported that preauthorization had resulted in a significant adverse event for a patient under their care. Prior authorization’s administrative burden impedes physicians from delivering patient care and contributes to the increasing prevalence of “physician burnout.”

What methods can be employed to alleviate the administrative burden and physician abrasions?

The prospect of defending a recommended treatment to insurance companies is often met with reluctance by healthcare professionals. This in and of itself generates disputes between payers and providers.

The “paper chase” that ensues subsequent to the submittal of a prior authorization request only serves to exacerbate this conflict, increase the administrative burden on the revenue cycle team, and exacerbate the animosity between providers and payers. Nevertheless, there are methods to modify this situation.

One of the most effective methods for preventing the issue is to automate or outsource the prior authorization process, which will eliminate the administrative burden of faxes, phone tags, and emails. The procedure is less likely to overwhelm physicians.

Approximately 90% of physicians believe that the authorization process delays patient access to care, and they spend 16 hours per week on the task, according to the American Medical Association (AMA). Returning those hours to physicians for patient care could potentially improve relations with payers, reduce administrative burdens, and improve outcomes.

Why do long-term care pharmacies and diagnostic and imaging centers face a disproportionate burden from prior authorization?

Typically, patients are not directly engaged in alternative care settings, such as long-term care pharmacies and diagnostic laboratories. Instead, they must depend on an originating provider, such as a hospital or doctor’s office, to refer them to clients and engage with patients on their behalf. The prior authorization process is further complicated by the fact that the lab/long-term care pharmacy is one step removed from the patient in this business connection.

The diagnostic or imaging center is compelled to utilize the referring provider as an intermediary and depend on them to address any issues with the insurance company in the event that there is even a single error in the prior authorization procedure. Rendering providers recognize that they can only apply a certain amount of pressure to the referring hospitals and physicians before they risk losing future business, as they depend on referrals from the originating providers.

The prior authorization process can be significantly time-consuming, despite the potential benefit of verifying that a patient’s insurance will cover procedures. Many medical professionals and support workers are discovering that pre-authorization is a time-consuming process, which is causing a decrease in their output and delays in the provision of care.

Issues that are frequently encountered include

• Delayed access to vital services or remedies for the patient.
• Practices incur elevated administrative expenses, particularly when they are required to recruit personnel to fulfill preauthorization obligations.
• Unpaid time devoted by physicians or other employees of the practice.
• Workflow inefficiencies and interruptions in practice.

According to the American Medical Association, pre-authorization consumes approximately 1 hour of doctor time, 13.1 hours of nurse time, and 6.3 hours of administrative time per week. This is equivalent to $82,975 in labor costs for each full-time physician or 853 hours of staff time annually.

Outsourcing the Prior Authorization Process

One method to avoid all the hassles is to outsource the pre-authorization process.

A third party, such as insurance companies or Medicaid, facilitates pre-authorizations between your clinic and the payer through an outsourced service.

The third-party organization collects patient information from your practice in order to obtain prior authorization for inpatient and outpatient operations and pre-certifications for hospital admissions.

A benefit of outsourced pre-authorization services is the establishment of a centralized and streamlined procedure that tends to reduce any inaccuracies in patient data. Unlike physicians and nurses, who are attempting to balance this with the rest of their work, they specialize in this type of work and are highly knowledgeable about the procedure and what needs to be done.

Tasks such as the following will be managed by an outsourcing company

• The entire pre-authorization process
• All necessary follow-ups, including the doctor’s requirement to furnish additional information for the pre-authorization
• We entertain appeals against rejections where applicable.

For more insights on optimizing your revenue cycle and improving patient care, visit Velan Information Services or check out our services at Velan Healthcare Services.