The Burden of Prior Authorizations

Prior authorizations are one of the myriad of examples of inefficiency, bureaucracy and red-tape that bogs down our healthcare system. Unfortunately, prior authorizations are not going away. This post will explain why prior authorizations exist, the problem with the current prior authorization model and how we can fix some of the problems.

Why Prior Authorizations Exist

Insurance companies require a prior authorization for certain medications and treatments. The insurers use prior authorizations as means to contain costs by having expensive medications and treatments pre-approved to ensure that they are medically necessary. Prior authorizations are designed to prevent physicians from prescribing unnecessary medications, tests or treatments. Preventing unnecessary treatments is helpful in the long run, assuming we can find a way to reduce the negative externalities — the physician administrative burden — associated with prior authorizations. Of course, there is the question of whether the insurance company should even have a say in treatment decisions, but that is a topic for another blog post.

Insurers won’t pay for procedures if the prior authorization is not filed in advance. For the physician, not completing the prior authorization prior to conducting the procedure means not receiving any revenue. Incomplete prior authorization forms can create significant delays in treatment, not to mention additional administrative burden.

The Problem With The Current Prior Authorization Model

The biggest issue with the prior authorization model is the administrative burden required for the provider (or his or her staff) to obtain a prior authorization. Each health plan has different rules and requirements for prior authorizations. As such, the process for obtaining a prior authorization often involves securing the correct form, filling it out with the required information, submitting the form to the plan, calling a service representative at the health plan, answering follow up questions, etc. Prior authorizations take two days to process, on average.

A Health Affairs study found that physicians and practice staff spend 20 hours per week per physician interacting with prior authorization requirements. Securing a prior authorization can take up to 45 minutes per patient. When that time is converted to dollars, physicians spend an average of $55,000 interacting with health plans, which, nationally, equates to $31 billion in lost productivity annually.[1] Similarly, a Council for Affordable Quality Healthcare study found that it costs healthcare providers $49.49 per authorization transaction.

Not only are prior authorizations expensive, they are frustrating for both providers and patients. A Surecripts survey found that 91 percent of physicians are frustrated with the current prior authorization process.[2] Moreover, 86 percent of physicians believe that the burden of prior authorizations has increased over the past five years.[3] Patients suffer as well with delays in treatment and limited knowledge of the process.

How We Can Fix the Prior Authorization Process

One way to reduce the prior authorization burden is to outsource the prior authorization as part of a referral. It should be noted that this solution only applies to prior authorizations for treatments, not for medications. When making an electronic referral, all the elements to needed to obtain a prior authorization are already included: patient demographic information, insurance information, clinical notes explaining/justifying the treatment, proper CPT codes (how you search for the referral), etc. As such, a third party company would have all of the necessary information to contact the insurance company on behalf of the provider. As an example, ReferWell has partnerships with companies that provide prior authorization services. ReferWell charges $5 for each prior authorization. This is a dramatic reduction from the $49.49 prior authorization average cost that exists today.

To obtain a prior authorization, the PCP simply needs to check the prior authorization box when making a referral. ReferWell’s partners will call the insurance company on behalf of the provider and handle all required follow-up. ReferWell will then alert the PCP if the prior authorization has been approved or denied and the PCP can then cancel the referral, if necessary.  The entire process is fully HIPAA-compliant and saves the provider office tens of hours per week, allowing them to focus on patient care, instead of navigating bureaucratic red tape.

Outsourcing prior authorizations is only effective when it is easy to pass the relevant information to the third party. Combining the prior authorization with the referral kills two birds with one stone, by reducing the administrative burden for both referrals and prior authorizations, which take 11 minutes and 30 minutes of administrative time on average, respectively, per patient.[4] A complete prior authorization solution encompasses both technology and servicing to deliver authorization results on 100% of referrals that require it — this eliminates the ability of an EMR to handle prior authorizations (for reasons detailed in this blog post). It’s 2019; prior authorizations no longer have to be a burden.





Written by ReferWell

ReferWell is a New York-area digital health company that leverages the referable moment — the point in time when a person is most ready to take action to improve their health — to improve access to care, increase health plans’ quality performance and reduce the total cost of care while improving the members’ experience and outcomes. ReferWell’s intuitive technology platform and skilled service team helps health plans and providers manage value and help more people get on, and stay on, their healthcare journey by providing an optimized provider search, making it easy to schedule appointments at the point of care to increase patient compliance, and providing a service component to ensure providers close the loop regardless of the EMR they use.

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