4/20/2023
Prior authorization is also called preauthorization. If you are a patient or consumer, the most frequent encounter to prior authorization is when you need to see an out-of-network doctor, you file prior authorization form to get pre-approval from your insurance. The financial reason is that insurance companies pay a much higher rate for out-of-network providers than in-network providers. Statistically speaking, consumers have about a 50% chance to get an approval.
For hospitals dealing with managed revenue cycles, prior authorizations come to play when they are dealing with complex treatments, medication or surgery. Physicians typically file prior authorization after prescriptions or right before decision of surgery. Physicians need to justify why the treatment is medically necessary. Insurance company medical team will review paperwork to make a decision: approve or deny.
2 million prior authorizations, about 6% total submission, were rejected in medicare advantage plans in 2021. Data represents 23 million medicare advantage enrollees.
Due to lack of transparency and tedious process, the prior authorization is a tri-factor in preventing value being delivered. Majority of prior authorization are filed at the last stage of patient journey. It is harder for hospital to complete the required paperwork when the filing is initialized at the end. The Rejected prior authorization obviously puts a huge financial burden on hospitals, which most of them are operating in razor thin margin. It becomes a sunk cost to hospitals for care that has been delivered but with rejected payments. Up to 5% operation margin can be eaten by rejected insurance payments. Filing prior authorization paperwork puts tons of administrative pressure on responsible physicians.
U.S. Department of Health and Human Services’ (HHS) Office of the Inspector General (OIG) found 13% of prior authorization denials by Medicare Advantage plans were for benefits that should otherwise have been covered under Medicare.
The party that gets the most negative impact from delayed or rejected prior authorization are patients. About 93 percent of physicians said prior authorizations have resulted in care delays, while 82 percent said the process was associated with treatment abandonment. A little over a third of physicians also reported that prior authorizations led to a serious adverse event for patients in their care, including hospitalization and even death. Not to mention, patients are on the hook for the unpaid bills if there are rejected insurance payments.
Smart vision health AI products can change the current status quo. Identifying the requirement for prior authorization at the earliest stage-- patient encounter -- can avoid delay or abandonment of treatment and financial loss for the hospitals. It can help physicians to focus on what they are trained for--delivering care.
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