What prior authorization actually is
Prior authorization is a health plan agreeing, in advance, that it will cover a specific service for a specific member. It is a coverage decision, not a clinical one. The physician decides what the patient needs; the plan decides what it will pay for. Almost every frustration in the process traces back to people on one side of that line assuming they are on the other.
#What it is not
Not a medical opinion- An approval is not the plan agreeing the service is appropriate, and a denial is not the plan saying it is wrong. A denial says the plan will not pay under this benefit, under this policy, on this evidence. The patient can still have the procedure. Somebody else pays.
Not a guarantee of payment- This surprises practices repeatedly. Almost every authorization letter carries language to the effect that authorization is not a guarantee of payment and remains subject to eligibility, benefits and the terms of the plan at the time of service. A patient who loses coverage between the authorization and the procedure has a valid authorization and no benefit.
Not the same as a referral- A referral is a primary care physician directing a patient to a specialist, usually an HMO plan design requirement. An authorization is the plan approving a service. Some plans need both and treat them as separate transactions. The words are used interchangeably in conversation and are not interchangeable in the claim.
Not universal- Whether a service needs authorization depends on the plan, the service, the place of service and sometimes the ordering provider. The same CPT code for the same patient can require authorization under one plan and not another.
#Why plans require it
The stated purpose is utilization management: confirming that a service meets the plan's medical necessity criteria before it is delivered, in order to avoid paying for care that is unnecessary, duplicative or not the most appropriate setting. Plans point to imaging, spinal surgery, and high-cost drugs as categories where clinical variation is wide and cost is high.
The criticism is equally well established: that the volume of requirements, the administrative burden and the delay impose costs on practices and patients that are not counted against the savings. Both things are true at once, and a practice does not have to resolve the argument to have to work the process.
#The shape of the transaction
Underneath the portals and the fax machines, prior authorization in the United States has a standard electronic form: the ASC X12N 278 Health Care Services Review. A requester asks a utilization management organization to review a proposed service for a member, and the organization answers. That is the whole model.
The 278 has existed for decades and is a HIPAA-named standard transaction. Despite that, a large share of prior authorization in practice is still conducted by web portal and by fax. Understanding why is most of understanding the operational reality, and it is covered in Submission channels.
#Where the work actually goes wrong
In practice, authorizations rarely fail because the clinical case was weak. They fail on process:
- Nobody established whether an authorization was required until the day before the procedure.
- The request went out missing a field the payer treats as mandatory and was rejected rather than reviewed.
- The request pended and nobody chased it, so the service date arrived undecided.
- The authorization was granted and the number never reached the claim, so the claim denied for no authorization on a service that had one.
Each of those is addressed in its own article. None of them is a clinical problem.