Health insurers use prior authorization as a check on the safety, quality, necessity and cost of medical services. However, many healthcare providers view it as a confusing, labor-intensive and costly process that may delay patient care.
How can something that is in the interest of all parties cause so much friction in the healthcare system?
There are many reasons, but three seem to be at the crux of the problem. First, prior authorizations are still overwhelmingly conducted manually. In fact, the 2019 CAQH Index, an annual study of U.S. industry adoption of standard electronic healthcare transactions, found that only 13% of reported transactions were completed fully electronically. The remaining 87% of transactions were conducted through an inefficient process that was partially or entirely manual—often by phone or fax.
This process has not been automated further, in part, due to a lack of uniformity in how entities are exchanging data. The absence of common requirements and expectations for what data is shared and when hinders the development of solutions that could be used broadly and consistently. The consequences of this fragmented system are costly. Each manual prior authorization costs the industry $14.24 on average, whereas when partners use the more efficient standard electronic transaction, the cost falls to $1.93 per transaction. Across the industry, automating the prior authorization process could save over half a billion dollars annually.
Second, because every plan has its own requirements—and even those may vary from contract to contract—providers often find it difficult to track, understand or verify what is subject to prior authorization, what supporting materials must be provided, and how long it may take for a determination.
For their part, plans also face administrative burdens in the prior authorization process, such as varying state laws. Based on a recent review by CAQH Committee on Operating Rules for Information Exchange (or CORE)—a not-for-profit industry alliance designated as the authoring entity for federally mandated operating rules under the Health Insurance Portability and Accountability Act—30 states have prior authorization response time requirements that vary from 24 hours to 15 business days with differences in definitions and applicability from state to state.
The third source of friction lies in communication challenges that result in incomplete information being exchanged between the provider and plan. Many providers that initially submit electronically find it necessary to verify by phone that the request has been received by the health plan. Then, when a request is made pending by the plan, providers often reach out to the health plan via phone, fax, mail and email to understand why. Some even resort to sending unsolicited medical records they hope will complete the request.
CAQH CORE recently released two new operating rules aimed at automating and accelerating the prior authorization process using the HIPAA-mandated prior authorization transaction.
The Prior Authorization Data Content Rule gives health plans a more robust electronic means of communicating with providers about missing clinical information and documentation. The rule can help a provider accurately request member-specific data needed for a prior authorization and enable a health plan to clearly communicate next steps.
Providers should no longer need to pick up the phone to understand why an authorization request is pending and what information they need to send to receive a determination. This will significantly reduce the manual back and forth between the provider and health plan, accelerate adjudication time frames, and minimize denials.
The Prior Authorization Infrastructure Rule establishes a common understanding among trading partners about how to successfully complete the transaction. The rule ensures consistent availability of health plan systems to accept requests and consistent connectivity and security methods between trading partners. It also includes a two-day national response time requirement for health plans to request additional documentation from providers and provide a final determination, all of which could be done electronically.
CAQH CORE will be recommending these rules for national implementation under HIPAA to the National Committee on Vital and Health Statistics and to the HHS secretary at a hearing Aug. 25.
What can providers do to reduce the burden in the meantime? They can start by requiring CORE certification on the prior authorization operating rules by vendors and health plans in their contracts and procurements. These rules give providers a means to automate a larger part of the prior authorization process than ever before, reducing the administrative cost, burden and frustration providers face while improving their ability to provide timely care to their patients.