The controversy surrounding prior authorization processes and decisions continue to populate the headlines resulting in scrutiny, uncertainty, regulation, and controversy. Prior authorization is a method by which a health plan requires approval prior to a patient receiving a health service or medication (Health Insurance Market Place, 2024). This approval is required for reimbursement. The original intent of prior authorization aims to ensure that the healthcare service is necessary and appropriate as well as to control cost, particularly for services that are expensive, controversial, or have potential risk concerns, including adverse effects or abuse. Standards for prior authorization are unique to the health plan and require an understanding of current medical guidelines, cost, and utilization among other factors (KFF, 2024).
The prior authorization process can be complicated and depends on multiple factors including the urgency of the clinical situation and whether the health plan is state regulated. Prior authorization rules differ between states. The general process, however, requires submission of administrative and clinical data by the treating physician, and occasionally the patient, a review of the submission by the health plan or appointed third party, and a determination as to whether the service is considered medically necessary (KFF, 2024).
Many insurers turn to third-party vendors to assist in the medical reviews for prior authorization. A recent investigative piece found that third party vendors may strive to meet promises made to their payer customers around return on investment by denying coverage, with some vendors even using a promise to increase denials as a selling tactic (Miller, Rucker, and Armstrong, 2024).
In addition, many in the medical industry challenge how algorithms are used to determine medical necessity. Investigators intimate that the algorithm can be adjusted so that if a request does not score high enough to be approved for medical necessity, it is then sent for medical review. Opponents suggest that increases in medical reviews lead to increased denials and therefore help to achieve contractual promises of denials made by the third party to the health insurance provider and ultimately of financial benefit to the third-party vendor.
In addition, Medicare Advantage plans have recently come under scrutiny. In 2022, the Office of Inspector General of the U.S. Department of Health and Human Services performed an investigation of Medicare Advantage organizations’ denials of reimbursements (OIG, 2022).
From a stratified random sample of 250 prior authorization denials in 2019, a case file review found that 13% of prior authorization requests denied by Medicare Advantage plans would likely have been approved under Medicare fee-for-service. Reversal of decisions occurred in 3% of prior authorization denials that would have otherwise met Medicare coverage; however, this resulted in delayed treatment and additional administrative burden for both the plan, the provider, and the patient (OIG, 2022). The findings and recommendations stemming from this investigation, culminated in the 2024 Final Rule issued by CMS (CMS, 2023).
The crux of physician frustration around unwarranted denials results from the very real clinical implications, the resulting administrative effort to appeal those decisions, or, even worse, the abandonment of effective treatment because of denial of services. Recent surveys conducted by the American Medical Association and Medscape Medical News of practicing physicians about treatments that required prior authorization found that (Henry, 2024; McKenna, 2024):
Physicians also report a substantial financial impact associated with inappropriate prior authorization use (AMA, 2024).
Unnecessary denials lead to a delay in care, increase in administrative costs, and added burden to the clinician and patient while potentially resulting in an appeal to the payer’s original decision. Processes that require time unnecessarily will obviously result in increased burden across the board. We soon start to see why mounting frustration and administrative burnout are at the forefront of the controversy over prior authorization. In the AMA’s survey among physicians, respondents reported that (AMA, 2024):
Inappropriate denials of prior authorization requests add to the burden and frustration expressed by physicians (AMA, 2024). Among surveyed respondents:
Of physicians who do not appeal:
So where does this leave us? What can be done to reduce burden and frustration? Suggestions offered by physicians include that having more uniformity and standardization in prior authorization processes among payers would greatly reduce burden (McKenna, 2024). Consequently, new and potential upcoming regulatory rules are paving the way for more standardization of processes.
Other factors that could help reduce burden include increased automation, a central database of procedures requiring prior authorization, and e-delivery options among payers (McKenna, 2024). A 2018 consensus statement on Improving the Prior Authorization Process highlights other commitments that the AMA feel would help to reduce burden and improve care (Consensus Statement on Improving the Prior Authorization Process, 2018; AMA, 2024). Areas for continued improvement, according to the AMA survey, include:
By utilizing the full capacity of health information technology, the prior authorization process can become more transparent for clinicians and patients. Federal regulation has taken steps to finalize rules that will take effect in 2026 for Medicare Advantage Organizations, Medicaid Managed Care Plans, State Medicaid Agencies, Children’s Health Insurance Program (CHIP) Agencies and CHIP Managed Care Entities, and Issuers of Qualified Health Plans on the federally facilitated exchanges (FFEs) (CMS, 2024). These provisions include:
In addition, a current bipartisan bill, “Improving Seniors’ Timely Access to Care Act”, has been introduced to the House of Representatives (Frieden, 2024; HR 8702). This bill would institute an electronic prior authorization process for Medicare Advantage plans standardizing transactions and clinical attachments, improve transparency around prior authorization requirements, and necessitate the Department of Health and Human Services report to Congress on efforts to improve the prior authorization process. Proponents of such measures claim that standardization and regulation of prior authorization will reduce delays in patient care, ease burden on clinicians, and improve patient outcomes (Frieden, 2024).
There is no denying that prior authorization plays a vital role for payers in utilization management by ensuring safe and effective care, while reducing waste on unnecessary spending for inappropriate services. There is recognition by health insurance providers that traditional processes create unnecessary burden to patients and clinicians.
In the days of machine learning and artificial intelligence, many opportunities exist to employ automation and algorithms to expedite the prior authorization process with great potential to reduce physician burden. Automation must be trustworthy, accurate, and from a source dedicated to the betterment of patient care and reducing burden both for health insurers and clinicians. Decisions regarding healthcare services requires an understanding and thorough evaluation of the evidence including recent and relevant policies and guidelines.
Many health insurers also employ third party vendors who perform robust evidence evaluations through Health Technology Assessment as one piece in the decision-making process regardless of whether they are evaluating a technology for prior authorization, appeal, or new coverage policy.
With the mounting frustration, continued scrutiny, and regulatory changes, we are seeing and will likely continue to see some shifts in prior authorization processes. Intentional partnership between payers and providers permeates many conversations.
The idea that health insurers and providers have “members in common” underlines the need for payer and provider alignment in terms of data integration, relationship building between the two entities, and trust of the provider to make the right care choice for the patient. In addition, insurance providers can build trust by utilizing evidence-based decision tools and resources that aim to improve patient care.
