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Prior Authorization in Healthcare: What You Need to Know

One term that often elicits mixed reactions from both patients and healthcare providers is "prior authorization." While this process may seem straightforward on the surface, it plays a crucial role in healthcare management.

It holds the power to influence treatment decisions and healthcare outcomes significantly. Prior authorizations serve as a vital tool for insurance companies, aiding in cost management and the assurance of suitable care.

However, they can also be a cause of frustration for those navigating the healthcare system, sparking questions about whether their purpose is to optimize care or restrict and deny it.

In the CareTalk episode, “How Prior Authorization Impacts Healthcare”, hosts, John Driscoll and David Williams discuss prior authorization and its impact on healthcare.

What Is Prior Authorization and Why Does it Exist?

Prior authorization (PA) is a process used by insurance companies to determine if they will cover the cost of a specific medical treatment, procedure, medication, or service before it is provided to a patient. Essentially, it is a permission slip from the insurance company, stating that they will pay for the proposed healthcare service.

The purpose of prior authorization is to ensure that the recommended healthcare services are medically necessary, cost-effective, and in compliance with the insurer's policies and guidelines. This process helps insurance companies control healthcare costs, maintain the quality of care provided to policyholders, prevent fraud and abuse, and coordinate treatment effectively.

“It's all about the money, because we’re talking about managed care. And if we talk about the high price of healthcare, something has to be done, right. And one thing can be say, Hey, before you go ahead and spend 50, 000 or a 100,000 dollars on a drug or a service, let's actually check to see if it's going to be beneficial, if it's cost effective.”- David (CareTalk)

How Does Prior Authorization Work?

The process of prior authorization unfolds through several well-defined stages. It all begins with a healthcare provider's recommendation for a specific treatment or service, which can encompass a wide range of medical interventions, from surgeries to certain medications and diagnostic tests.

Once the recommendation is in place, the healthcare provider takes the next step by submitting a prior authorization request to the patient's insurance company. The PA process will need to provide the insurance company with certain information, such as the patient's diagnosis, the proposed treatment, and the reason why the treatment is necessary

Upon receiving the request, the insurance company steps into the role of scrutineer. They will review the submitted materials, taking into account established medical guidelines, the terms and conditions outlined in their policies, and the patient's comprehensive medical history.

Following this evaluation, the insurance company delivers its verdict. It's a binary outcome: approval or denial. If the insurance company grants prior authorization, it signifies their commitment to cover the financial aspects of the proposed treatment. If the request is denied an appeal to the decision can be requested.

prior authorization form

The Benefits of Prior Authorization

Prior authorization, while often seen as a hurdle, provides tangible advantages in healthcare. Firstly, it effectively manages costs. Scrutinizing the necessity of treatments, ensures insurance resources are used wisely. This cost control stabilizes premiums for policyholders and maintains financial sustainability for insurance companies.

Secondly, it maintains healthcare quality. By enforcing evidence-based medicine and medical guidelines, it assures patients that their care adheres to established standards. This results in a higher quality of healthcare, improving patient outcomes and satisfaction.

Lastly, it prevents fraud and abuse. Prior authorization's rigorous scrutiny identifies and stops potentially fraudulent practices by healthcare providers, protecting both insurance companies and the integrity of the healthcare system. It assures patients that their care is grounded in ethical standards.

Challenges with Prior Authorization

While prior authorization undeniably fulfills an essential role in healthcare, it presents a range of challenges that impact both patients and healthcare providers. One prominent issue is the time it consumes, with healthcare providers and staff spending approximately two workdays per week on completing prior authorizations. This prolonged process often leads to delays in patients receiving necessary medical care, causing increased anxiety and frustration.

Additionally, the administrative burden of prior authorization falls heavily on healthcare providers, diverting precious time and resources from direct patient care. The paperwork and associated administrative tasks can be overwhelming, hindering the overall efficiency of healthcare delivery. Moreover, the complexity of navigating the prior authorization process can lead to billing complications for providers, further exacerbating the administrative challenge.

Denials of prior authorization requests are a common occurrence in healthcare, and these denials can be distressing for both patients and providers. When faced with a denial, healthcare providers must guide patients through the appeals process, which, unfortunately, further extends the time before essential care can be administered. These appeals can be intricate and require a substantial investment of time and effort.

Another challenge is the potential for patient confusion. The intricacies of the prior authorization process may not be readily apparent to patients. Consequently, when their recommended treatment is denied or delayed, patients may find themselves grappling with uncertainty and misunderstanding.

“There are hundreds of drugs that could be covered by prior authorization. They're different from one health insurer to the other. It could even differ depending on the patient. And so sometimes the way you find out a prior authorization is needed is you check on it in advance. And sometimes you just write the prescription and see if it gets rejected.”- David (CareTalk)

statistic about prior authorization denial

Changes on the Horizon

Prior authorization serves a crucial function in healthcare, enabling insurance companies to assess and authorize specific medical treatments, procedures, medications, or services before they are administered to patients. This process aims to strike a balance between ensuring quality care and controlling costs within the healthcare industry. Nevertheless, it is not without its challenges, including time-consuming procedures, administrative complexities, appeals, and patient confusion.

As discontent among patients and healthcare providers grows, and movements advocating for changes gain momentum, there is a rising question: Could we be moving toward a reduction in the prevalence of prior authorization in healthcare?



CareTalk is the only healthcare podcast that tells it like it is. Join hosts John Driscoll (President U.S. Healthcare and EVP, Walgreens Boots Alliance) and David Williams (President, Health Business Group) as they provide an incisive, no B.S. view of the US healthcare industry.



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