Most Expensive Administrative Cost for Providers? Prior Authorization.

February 11, 2020 By: Quadax

Administrative overhead is a burden for many providers; automating processes provide cost-saving opportunities.

Technology and automation have been mandated by the Centers for Medicare and Medicaid in certain parts of healthcare processes, but overall, the healthcare industry is way behind in utilizing technology and automation for increased efficiencies and profit. The findings from the Council for Affordable Quality Healthcare, Inc. (CAQH) details some of the potential reasons providers don’t pursue automation, despite its proven benefits.

The seventh annual report from CAQH found that prior authorization costs are the most costly, time-consuming transaction for providers. On average, providers spend almost $11 on each manual prior authorization, which is up from $6.61 just a year ago. Obviously, the costs are significantly lower for partially and fully electronic transactions, at $4 and $2 respectively, but automation of prior authorization transactions remained very low in 2019. 

Why is it so difficult? Unfortunately, there are several reasons:

1. Data inconsistency

Payers don’t use the same codes to communicate prior authorization status, errors and next steps, including the need for clinical documentation to prove medical necessity. Standardization and transparency is needed to make the process easier for all involved.

2. No standardized clinical documentation

Health plans require different levels of clinical documentation detail for prior authorization requests to help determine medical necessity and appropriateness. This lack of standardization makes it difficult to automate a prior authorization response.

3.  Lack of clinical and administrative system integration

Bi-directional integrations between practice management systems and clinical systems, like electronic health records, are uncommon, which means data has to be manually entered into one system from another. This represents an opportunity for human error and a drain on productivity and efficiency.

Despite the known barriers, not much progress is being made year over year. The CAQH found that adoption of prior authorizations increased by only one percent from 2018 to 2019 to 13% overall. However, the CAQH approved a 2-day rule to accelerate the prior authorization process, and 80% of industry stakeholders are in agreement.

The rule outlines the following timelines must be met 90% of the time within a calendar month:

  • A two-day additional information request. A health plan, payer or its agent has two business days to review a prior authorization request from a provider and respond with the additional documentation needed to complete the request. 
  • A two-day final determination. Once a health plan receives all requested information from a provider, its payer or agent has two business days to send a response containing a final determination.
  • Optional close out. A health plan may choose to close out a prior authorization request if it does not receive the additional information needed to make a final determination from the provider within 15 business days of communicating what additional information is needed.

This new rule is very encouraging, considering the health plans participating in the CAQH represent 75% of the insured population in the United States. This rule will not only help reduce administrative costs for providers, but more importantly, it will help save lives by ending delays in care caused by prior authorization requirements.  

Read more about best practices for mitigating prior authorization challenges in this whitepaper.

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