Prior Authorization: Two words physicians love to hate

Posted by: Larry Sobal on Thursday, March 2, 2017
Prior Authorization: Two words physicians love to hate

Last year I did a tongue-in-cheek blog about some of health care’s dirty words including attribution, allocation, interface and interoperability. In later conversations about things that frustrate physicians the most, such as the two midnight rule, prior authorization was high on the list! 

In case you are not fully familiar with prior authorization, it is a requirement that a physician obtain approval from a health insurance plan before they will agree to cover certain prescribed medications or medical procedures.

After a health care provider orders a health care service for a patient, the provider's staff will contact the patient's insurer to determine if they require a prior authorization check to be run. The process to obtain prior authorization varies from insurer to insurer, but typically involves the completion and faxing of a prior authorization form. At this point, the medical service may be approved, rejected, or additional information may be requested. If a service is rejected, the health care provider may file an appeal based on the provider's medical review process. In some cases, an insurer may take up to 30 days to approve a request.

Insurers have stated that the purpose of prior authorization checks is to provide cost savings to consumers by preventing unnecessary procedures and the prescribing of expensive brand name drugs when an appropriate generic is available.

The American Medical Association (AMA) recently surveyed its members on the issue and found that, on average, physician practices reported submitting 37 prior authorization requests each week, requiring 16 hours of physician and staff time to complete them. Furthermore, the AMA survey showed that 75% of respondents found prior authorization to be quite burdensome, and over a third reported having staff that work exclusively on prior authorization.

As one physician put it to me recently, “Prior authorization is the most humiliating form of micro-management. Not only is my judgement being called into question, but oftentimes the person making the determination of whether I can proceed is not a physician, or is a physician who is not trained in my subspecialty. It’s just putting up a roadblock to try and cut costs.” She went on to say, “I’m already wasting a third of my day in non-patient care activity from dysfunctional EMR workflows, so sitting on hold to beg for a fairly routine test to be approved is like death by a thousand little cuts.”

That raw emotional opinion of prior authorization is shared by many physicians.  

But why is it that way? Shouldn’t this be automated or simplified? Of course, many say “yes” and some groups are working toward that.  

A coalition of medical organizations, led by the AMA, has released a 21-point plan to change when health insurers require pre-approval. The group released its key principles a month ago. The association is also partnering with the University of Southern California in Los Angeles on a project to look at the costs associated with prior authorization, as well as how it is impacting patients.

Physician practices reported submitting 37 prior authorization requests each week, requiring 16 hours of physician and staff time to complete them.

Even though prior authorization is intended, for the most part, to reduce potentially unnecessary health care spending, there is also a cost to performing prior authorizations. In 2012, the AMA estimated the annual burden on the U.S. health system to be $728 million.

A different study published in Health Affairs estimated that physicians spend an annual average of nearly $83,000 interacting with insurance plans.

Aside from the work being led by the AMA, there is promising effort being put forth by the California Association for Health Care Quality (CAQH) to simplify and streamline the prior authorization process. Almost a decade ago, CAQH established the Committee on Operating Rules for Information Exchange, also known as CAQH CORE. CAQH CORE is an industry-wide stakeholder collaboration committed to the development and adoption of national operating rules for administrative transactions.

CAQH CORE is governed by a multi-stakeholder, executive-level board to address the interests of more than 140 participating organizations representing health care providers, health plans, government agencies and the organizations setting the standards for health care and data exchange. In fact, the health plans in CAQH CORE alone cover more than 75% of all Americans with commercial insurance, as well as those covered by Medicare and Medicaid.

CAQH CORE has established a six-member prior authorization advisory group. Interestingly, in a 2016 CAQH survey, it was found that the adoption of a standardized prior authorization form (known as Form 278) designed to automate the process and mandated by HIPAA for prior authorizations, only had an 18% adoption rate.

Despite all the costs and hassle, without a prior authorization for an ordered test or medication, the reimbursement can be denied and the patient can get unexpectedly stuck with part of the unapproved (and unreimbursed) cost. That’s clearly a lose-lose scenario that everyone wants to avoid.

What I’m curious to watch is this: as more reimbursement begins to incorporate some form of payment for quality, and shifts some of the risks for the costs of care onto physicians and hospitals, will pre-authorizations begin to fade away? One would hope so as there is less need for third party oversight of care decisions if the physicians and hospitals are taking some (or all if capitated) risk.

Aside from that scenario, all signs seem to be pointing toward more and more medical decisions requiring prior authorization. At least for now, prior authorization will live on. What’s your solution?


Illustration: Lee Sauer


Larry SobalLarry Sobal is Executive Vice President and a Senior Consultant at MedAxiom. He has a 35-year background as a senior executive in medical group leadership, hospital leadership and health insurance. Larry consults, writes and presents on topics relevant to transforming physician practices and health systems. His weekly blog post comes out on Thursdays and can be accessed at



Private comment posted on May 21, 2017

Evelyn, thank you for your comment. I agree that many practices can often overcome the prior authorization barrier to get the test, procedure or medication authorized. However, I think prior authorizations pose enough of a barrier that some practices get tired of the hassle and make a different care decision that offers less resistance. This, along with some % of actual denials, do achieve a cost savings to the insurance company while increasing costs in the practice.
Posted by: Larry Sobal on March 6, 2017 @1:14:53 pm

My question with pre-authorizations is after all that work, how many do the insurance companies deny? My experience has been that most requests are authorized, so what are the real savings here?
Posted by: Evelyn Miller on March 4, 2017 @8:00:22 am

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