Exploring the Key Components of the Prior Authorization Process

In healthcare administration, prior authorizations exist as a crucial tool utilized by payers to manage costs and ensure the appropriateness of medical services. Analogous to a "permission slip," prior authorizations require meticulous documentation of essential data elements, often entailing manual processes that can be intricate and time-consuming. In this article, I delve into the fundamental components of the prior authorization process, clarifying the complexities surrounding each element.

?

The Who: Patient, Rendering Provider, and Requesting Provider

?

There are a few key "whos" to be identified in any prior authorization. First is the patient (or member), followed by who will be providing the service (rendering provider or rendering medical group) and who is requesting the service (requesting provider – which can frequently be the rendering provider or a primary care provider). Each individual "who" has its own set of complexities when it comes to prior authorization processes.

?

First and foremost is the patient, typically identified by a member ID, whose eligibility for services must be established. Challenges may arise in situations where health payer responsibility shifts, such as during annual enrollment or within managed Medicaid models. Additionally, determining whether a specific service is a covered benefit per plan contract further complicates the process.

?

Next, the rendering provider, or the physician or medical group delivering the service, must be contracted or "in-network" for the specified health plan product offering. Depending on the type of health plan (PPO or HMO ), a particular physician may not get approval due to not having a contract with a specific network. Contracted providers are typically identified by payers by the National Provider Identifier (NPI) number and by additional office information. One of the challenges with rendering providers is that information may be incorrect and/or inconsistently identified within various IT systems, causing errors. Increasingly, payers are redirecting or restricting care to only rendering providers who are in-network and more commonly "preferred" providers who may be lower cost options and/or higher quality providers (ideally both within value-based constructs).

?

Similarly, the requesting provider, typically the same as the rendering provider, may encounter hurdles in accurately identifying primary care providers (PCPs) in certain HMO-managed care arrangements. Insufficient or incorrect information regarding the PCP can impede the acceptance and review of authorization requests by payers.

?

The What: Service(s) Requested and Diagnoses

?

The "what" component pertains to the specific service(s) requested and the corresponding diagnoses. Standardized coding systems such as ICD-10 (International Classification of Diseases, Tenth Revision) for diagnoses and CPT (Current Procedural Terminology), HCPCS (Healthcare Common Procedure Coding System), or NDC (National Drug Code) for services facilitate this process.

Each standard code set provides a mapping of diagnostic codes with service codes to create the basis for determining the most challenging and contentious area of prior authorizations – the medical necessity of why a service is required. These codes serve as the basis for many of the algorithmic decision-making tools employed by payers by automated denials of services based on requested ICD-10 and CPT/HCPCS/NDC codes.?

Recently, it has come to light that these codes have been utilized to automate bulk claims denials, which has raised questions about inappropriateness and lack of compliance related to medical review. These code sets are also the basis for many of the current attempts to reduce prior authorization burden with automated approvals and indications of "no authorizations required" by payers and vendors.????

?

The Why: Medical Necessity and Guidelines

?

Arguably the most challenging aspect of prior authorizations is establishing medical necessity , which requires justification supported by evidence-based literature. Perspectives on what constitutes relevant medical justification can vary widely within the U.S. healthcare system, leading to disagreements on best practices. Most payers rely on a few sources of evidence-based clinical guidelines. For Medicare plans, the Centers for Medicare and Medicaid Services (CMS) provides guidance on what are known as national coverage determinations (NCD) and local coverage determinations (LCD) that apply to all Medicare plans. Beyond NCD/LCDs, many payers will utilize third-party proprietary clinical guidelines provided by Milliman or InterQual, but many payers also develop and manage their own internal clinical guidelines crafted by their medical directors and leadership.

?

The absence of comprehensive national standards, coupled with the rapid pace of medical innovations, intensifies the complexity of prior authorizations.

?

The When: Valid Dates and Authorization Expiration

?

Practically relevant dates, including approved dates of service or authorization expiration dates, determine the window of time for authorized services. Timing discrepancies can impact scheduling and lead to delays or denials of care, particularly concerning services with extended authorization periods, such as organ transplants.

????????????????????????????????????????????????

The Where: Site of Service

?

The "where" aspect is increasingly influential in prior authorizations, as it determines the location type of service and is integral to contracted in-network relationships with facilities. At a more superficial level, a place of service (POS ) determines the location type of service, ranging from acute inpatient, outpatient, behavioral health, DME, etc. Underlying the importance of POS is the contracted in-network relationships payers have with facilities. Areas where prior authorizations may be utilized to steer services include approving where a service will be performed. Payers may steer services towards specific facilities to optimize costs, exemplified by redirecting procedures to lower-cost ambulatory surgery centers. However, complexities arise in coordinating workflows between ambulatory clinics and affiliated facilities, potentially resulting in delays or denials.

?

In the ever-evolving landscape of healthcare administration, understanding the intricate components of prior authorizations is paramount for stakeholders seeking to navigate this essential but challenging aspect of healthcare delivery.

?

Stay tuned for Article 3, where we'll explore the specific challenges (beyond cost) of today's manual prior authorization workflows.

?