Prior authorization requirements have been around for decades, and frustration from providers is nothing new. But a new report suggests that abuse of these policies is compounding hospitals’ already cratering finances and pushing relations with health insurers to the brink.
In the report from the American Hospital Association, 78% of hospitals and health systems said their experience working with commercial payers is getting worse. Just 1% of respondents said it was getting better. The results are based on two surveys — one conducted in 2019 with more than 200 hospitals, the other between December 2021 and February 2022 with 772 hospitals — plus interviews and group discussions with hospital leaders.
The report focuses heavily on payment delays and denied hospital claims caused by prior authorization requirements. Specifically, it found that certain commercial insurers:
- Improperly leverage prior authorization programs
- Deny medically necessary covered services
- Use restrictive medical necessity criteria that aren’t transparent to patients or providers
- Require unnecessary and unreasonable documentation
- Make changes to patients’ coverage after they have enrolled in a plan
Prior authorization, which traces its origins to the utilization management practices following the creation of Medicare and Medicaid in the 1960s, is intended to avoid costly and unnecessary treatment and ensure that care aligns with clinical guidelines. “However, some commercial health plans are applying prior authorization to a wide range of services, including those for which the treatment protocol has remained the same for decades and there is no evidence of abuse,” the report says.
Revenue Cycle Implications
These practices have major financial consequences for the hospital revenue cycle and the healthcare system at large. Collectively, the 772 respondents to the most recent survey reported having more than $6 billion in delayed or unpaid claims over six months old.
A large nationwide health system told the AHA it spends $10 million each month just to manage contracts with health plans. Another estimated that managing prior authorization requirements for all services totaled around $18.2 million in 2019, noting it relies on 65 full-time employees to handle them, plus eight additional FTEs to notify insurers about unplanned, urgent and emergency admissions, another team to handle reviews with payers and handle disputes, and two denials management staff who advocate for patients.
Does this sound familiar to you?
A threat to healthcare revenue integrity
The report adds to evidence suggesting that payers are taking a more aggressive approach in requiring prior authorization. Earlier this year, the Department of Health and Human Services Office of Inspector General reported that inappropriate and excessive denials for prior authorization and coverage of medically necessary services was a growing problem in commercial Medicare Advantage plans. The OIG report found that 13% of prior authorization denials and 18% of payment denials met Medicare coverage rules and should have been approved.
And in a 2021 survey from the American Medical Association, physician practices on average completed 41 prior authorizations per doctor per week, with staff spending nearly two full business days each week completing them.
These denials, and the administrative burdens of keeping up with prior authorizations, add considerable costs to an already beleaguered balance sheet for hospitals. The AHA says more than half of all U.S. hospitals will fall to negative financial margins through 2022.
The good news is most prior authorization denials are eventually overturned on appeal. And you don’t have to battle payers all on your own.
Need help tackling denials?
Aspirion partners with providers’ denial management teams to become the ultimate backstop and point of escalation. We are the go-to resource for Day 1 and large balance denials, with more than 100 attorneys and over 30 clinicians on staff to help you both prevent and overturn denials.
Contact us here to discuss how we can help you alleviate the burden of prior authorization denials.