Getting paid for prior authorizations

Prior authorizations (PAs) from health insurance payers have become a necessary administrative burden for physicians and their staff to provide care to patients. There are a number of legislative proposals at the federal and state levels to speed up the PA process. Some advocates say the best proposal is a financial one: Insurance companies and payers should reimburse physicians and their staff for the time they spend on requesting approval to treat patients.

Under consideration

In May, the American Medical Association (AMA) will convene its CPT (current procedural terminology) Editorial Panel, the board that considers creating, modifying and eliminating the codes used to process claims and develop guidelines for medical care review. The agenda includes an application for “Prior Authorization Services,” to establish codes to report services by physicians, qualified health plans and staff related to payer authorization of procedures.

Those deliberations may seem arcane, except that PA has received national attention as physicians and patients go public with examples of how waiting for approvals is causing delays in care that cause real harm to patients. In March, the New York Times published an opinion video, “Denying Your Health Care Is Big Business in America,” with testimonials from physicians and patients about how PAs are a severe drag on medicine. The video went viral in medical circles.

These physicians and patients aren’t the only ones.

Speaking to Medical Economics, Megan Srinivas, M.D., M.P.H., an infectious disease specialist in Iowa, described waiting two days for a prior approval for needed medical imaging for a patient fighting infection in intensive care. David Podwall, M.D., a New York neurologist, discussed PA wrangling for multiple sclerosis medications and learning patients could get just a limited supply – six months instead of a year.

“We have to fight that and, again, you are usually successful, but it’s a lot of fighting,” Podwall said.

“You couldn’t create a more disjointed, disorganized system than what we have,” he added.

The case for pay

Creating new CPT codes is a potential solution to a financial imbalance that PAs create between insurers and physicians, said Alex Shteynshlyuger, M.D., a urologist and surgeon who practices in New York.

“There is an incredible incentive for insurance companies to impose prior authorization because each prior authorization that is not done is a net financial benefit to insurance companies – they don’t have to pay for care,” Shteynshlyuger said. “And each prior authorization currently performed by physician offices, physicians themselves and their staff is a net loss to physician practices, as it’s not reimbursed.

“So the only way to fix the problem is to make sure that the costs are allocated properly and the physicians are compensated for the work that they do, for the clinical, cognitive work that they do, as well as the administrative part of that,” he said.

Now numbering hundreds of millions a year, PAs have become an established practice in medicine and payers have a financial incentive to insist on more. It does not appear that they or federal regulators are willing to eliminate the process, Shteynshlyuger said. He also cited the work of Harvard economist David Cutler, whose proposal for a national clearinghouse for health information included the recommendation of a reimbursement schedule for physicians who request PAs.

Despite the delays, physicians comply because they care about their patients and want to get paid. Those tempted to skip the PA process due to cost, time and aggravation have patients with worse outcomes because patients who receive treatments as ordered by physicians, even if it requires PA, do better than those who don’t get needed treatments.

“There’s extensive published literature that shows the need to do prior authorization changes physicians’ recommendations for care, and it’s not always for the best,” Shteynshlyuger said. “Sometimes physicians try to avoid prior authorization by recommending, say, less ideal treatment options.”

How many authorizations are there?

New CPT codes for PA would fulfill another important function in health care research by logging results for a current unknown in the health care system, said Howard A. Green, M.D., a Florida dermatologist.

Doctors rely on evidence when diagnosing patient conditions and prescribing treatments. Physicians, administrators and lawmakers compile data to assess processes and outcomes all across health care. But there are no measurable equivalents for PAs, Green said.

“This is a no-brainer for physicians. Let us quantify it, let us make it transparent,” Green said.

Considering the number of patients and payers in the United States, there is potential for millions more PAs – perhaps billions.

For example, as of 2020, the U.S. Department of Labor estimated the nation had about 2.5 million group health plans governed by the Employee Retirement Income Security Act; in 2023, KFF reported 3,998 Medicare Advantage (MA) plans. As of 2021, Medicaid estimated more than 200 million people were covered by private health insurance, with 92 million people using Medicaid or the Children’s Health Insurance Program, and 62.5 million using Medicare or MA.

Green cited the online job network site LinkedIn, where a people search for “prior authorization” netted about 68,000 results, as of mid-March 2024. Multiply that by two, three, four, five – there may be hundreds of thousands of people whose job is to review PA requests.

Not every physician deals with every health plan and every reviewer. But how many workers are there? How many PA requests do they receive? How many do they approve or deny, and why? How many appeals are there? How many of those get approved?

Physicians, patients and payers all have anecdotes about PA, but no one has hard data about patient benefits or harms. Or, if they do, they don’t disclose it publicly, Green noted.

“Talking about prior authorization, no one knows,” Green said. “The physicians complain, but no one’s releasing any data. Health insurers aren’t releasing any data. The pharmaceutical benefit managers, a wholly owned subsidiary of the health insurers, aren’t releasing any data. And the physicians can’t code for it, so we can’t release data. We can do polls.

“So it’s this big, happy – or big, unhappy – bureaucracy about nothing, because it’s not coded and there’s no accountability and there [are] no numbers. It doesn’t exist,” he said.

Hurting reform efforts

Apart from patient care, the broken PA process sometimes forces hospitals to eat the cost of patient care, while individual physicians and their staff get paid in burnout, said Srinivas, who also is an elected state representative in Iowa.

“It’s just such a foreign concept to people outside of health care that you do so much work that you don’t get paid for,” so from that standpoint, billing for the work would be just and fair, she said.

But new PA codes – and, eventually, physicians getting paid for PAs – would be a massive head turn that undermines years of effort to reform the process, Srinivas said.

It can take years to educate people about issues they are not familiar with, especially something as complex as health care payment, and to overcome human instinct to be suspicious of change, Srinivas said. Physicians, patients and their advocates have put in that time to explain PAs to lawmakers. There is proof that it is working.

In January, the U.S. Centers for Medicare & Medicaid Services (CMS) announced new standards, starting in 2026, for a 72-hour turnaround for urgent PA requests and seven calendar days for nonurgent requests. Celebrating a 72-hour response time shows just how bad the system is, Srinivas said. Even so, the CMS rules are “a huge step forward,” she said.

“This is going to have far-reaching impacts for my colleagues, but ultimately for people who just need the care that they need,” Srinivas said. “And I’m very hopeful that this will open more and more people’s eyes, people who are not in medicine, more people who are legislators at the state and federal level, and even people who work for insurance companies, commercial insurers, that there is a way to do this that is better for everybody and that that is the direction we should be going [in].”

As of spring 2024, AMA logged 30 state legislatures contemplating at least 90 bills dealing with PAs. Iowa, Minnesota, Wyoming, Massachusetts, Oklahoma and North Carolina have comprehensive PA reform bills pending this year, and lawmakers in New Jersey, Tennessee, Washington, D.C., Arkansas, Washington, Louisiana, Montana, Rhode Island, West Virginia and Texas all enacted reforms, through new or updated laws in 2023.

The states generally regulate commercial insurance and they operate Medicaid programs under federal guidelines. Added to CMS’ MA rules, state reforms can cover large percentages of populations.

“People realize that this is power that we can harness at the state level and still affect patients in a very positive manner,” Srinivas said.

Would insurers pay?

AHIP, the trade organization representing America’s health insurance payers, did not respond to Medical Economics’ inquiries about this issue. In a letter to the New York Times, AHIP President and CEO Mike Tuffin responded to the editorial video by addressing the patient care element of PAs.

“Coverage decisions for treatments, surgeries or procedures follow clinical recommendations from leading medical societies, clinical experts and federal health authorities,” Tuffin said. “In cases where prior authorization is used, it’s designed to ensure that clinical care aligns with evidence-based recommendations — not to deny or discourage patients from getting the care they need.”

Tuffin did not comment on the concept of reimbursing physicians to do them.

Even if new CPT codes went on the books, insurance companies might not pay for them. But the advocates said it’s a start.

“There are many codes that are not payable,” Podwall said. “But it doesn’t mean that that can’t be part of a negotiation. You can’t bill for something unless there’s a code, so we’ve got to start with the code.”

Federal mandates in health care are nothing new, so the federal government legally could order the insurance companies to pay if physicians bill for the PA codes, Shteynshlyuger said.

“This is a very simple solution to the problem,” he said. “It’s a fair solution for everyone.”