A growing number of states have passed prior authorization legislation to combat payer requirements resulting in delayed care, lost revenue, and dissatisfied patients.

  • Patient access departments lack resources to appeal the surge in denied claims.
  • A coalition created criteria to streamline prior authorization processes.
  • Some health plans have agreed to eliminate authorization requirements for hundreds of services.

Ask any patient access leader to describe his or her biggest headache, and the answer likely will have something to do with the authorization process.

“The authorization process is probably our top issue within the revenue cycle,” says Margaret Schuler, system vice president of revenue cycle for Ohio Health.

Patient access departments struggle to keep up with all the authorization requests. “It’s gotten completely out of control. The payers are making up their own rules,” says Karen Hoppe, a senior consultant at Craneware, an Atlanta-based company specializing in revenue cycle improvement.

Patient access departments lack sufficient resources to appeal all of the “no auth” denials they’re facing — something that hasn’t gone unnoticed by payers. “Payers are using that as a ‘do not pay’ tactic — what’s the percentage of denied claims that are really going to get reworked?” asks Hoppe.

The sheer number of denials is overwhelming many departments. “I’ve never seen so many claims denied as in the past year or two, and I’ve been in the business since the early ’90s,” says Hoppe. “It’s amazing to me how payers can consistently deny claims and hospitals have no recourse.”

Legislation: Partial Solution

Some states have passed legislation addressing “surprise” medical bills in response to public outcry over patients being stuck with unexpected high costs due to a hospital or provider’s out-of-network status. “But I don’t hear a lot about how payers are denying claims,” says Hoppe. “I would love to see more being done at the federal level so the payers cannot be just denying claims without good reason.”

A growing number of states are passing laws to curtail payers’ authorization practices. Delaware, Ohio, Arkansas, and Virginia all have passed prior authorization legislation.

“Ohio’s Prior Authorization Bill is a great first step to improving the issues,” says Angela Ferguson, MBOE, director of patient access services and precertification at The Ohio State University Wexner Medical Center in Columbus. The following provisions went into effect Jan. 1, 2017:

  • Insurers must disclose all prior authorization rules to providers at least 30 days in advance of the new requirement.
  • Enrollees of the health plan must receive basic information about which drugs and services require prior authorization.
  • Providers are allowed to request a “retrospective review” for unanticipated procedures that were performed during an authorized procedure, with some limitations.
  • Providers are allowed to request a “retrospective review” for services that required a prior authorization that was not obtained, when certain criteria are met.

As of Jan. 1, 2018, insurers will be required to have a web-based system to receive prior authorization requests and a faster timeframe for prior authorization decisions.

“Insurers also will need to include more clarity when responding to a prior authorization request, including acknowledging receipt of the request and specific reasons if denying,” says Ferguson.

The newly enacted legislation is welcome, but timeframes are still too long, says Ferguson: “Payers will still have 10 days to respond to non-urgent requests, and 72 hours to respond to urgent requests.”

Standardized timeframes for all payers is one of the biggest advantages that Ferguson sees with the legislation. Currently, payer timeframes vary widely. “There are payers who take 14 days, 21 days, or 30 days,” she explains. “It is very challenging for staff to manage all these different timeframes.”

If a test is scheduled seven days out and the payer has a 14-day turnaround time, the authorization may not be in place in time. This requires a conversation with the provider.

“If the test can safely be rescheduled, we will do that. If it can’t, we move forward,” says Ferguson. “Sometimes those turn into cases that you have to do appeals on, and sometimes are ultimately written off.”

The legislation will not affect the number of services requiring authorizations. “There’s the chance that payers will require authorizations on a broader scope of services,” says Ferguson.

Previously, payers required authorizations mainly for high-dollar procedures, primarily surgeries. Now, payers also are requiring authorizations for high-volume procedures. “Even though MRIs and CT scans are not the most expensive procedures we do, the volume is greater than surgical procedures,” says Ferguson.

Although the legislation won’t solve all authorization headaches for patient access, it has called attention to the issue. “If nothing else, it’s making people more aware of all the behind-the-scenes work that has to be done because of the requirements of the payers,” says Ferguson.

Schuler says consistent medical necessity standards are needed: “If payers and providers could agree on medical necessity standards across the industry, we wouldn’t need the authorization process.”

Because the problem has not been addressed federally, states are developing their own regulations. “The payers are national payers. From the payer’s vantage point, they are going to now have to put in processes which address each individual state,” says Schuler.

Automation Is Needed

Part of the problem with prior authorizations is that the process is very manual. “It becomes a rework process over and over again,” says Schuler.

Payers already have invested significant resources in their provider portals. The problem is that the portals are not automated. Patient access has to go to many different portals to find information on what’s required. “It’s very inefficient and ineffective. You have to comb through hundreds of medical policies. It’s just not feasible,” says Schuler.

Medicare is very transparent in the publication of its medical necessity criteria.

“We’ve had the ABN [Advance Beneficiary Notice of Noncoverage] process and NCCI [National Correct Coding Initiative] edits,” notes Schuler.

The same is not true for commercial payers. “You can’t buy an ABN medical necessity scrubber for the managed care payers. You have to go to every payer portal and read their individual medical policies,” says Schuler. (See strategies for medical necessity denials.)

Other payers are following Medicare’s lead in denying claims for medical necessity.

“Prior to the past few years, we’ve only seen Medicare denying for Local Coverage Determination policies,” says Karen Hoppe, a senior consultant at Craneware, an Atlanta-based company specializing in improvement of the revenue cycle. Now, commercial payers, Medicare Advantage payers, and the Medicare managed care payers are doing so.

“Medicare is very strict, and we have to follow their guidelines,” notes Hoppe. “But nobody is keeping these commercial payers in line.”

One obstacle is that some of the tools patient access uses to check current procedural terminology (CPT) and diagnosis requirements only look at Medicare’s policies. These tools usually do not include other payers since, until recently, medical necessity denials from commercial payers were uncommon. “Hospitals are incurring denials from other payers that they are not used to seeing,” explains Hoppe. “Hospitals need software that pulls in all the other payers’ policies.”

If the diagnosis code on an order is not going to pass medical necessity requirements, patient access has to contact the provider’s office to obtain a new diagnosis. Next, patient access has to contact the payer.

“It’s a very cumbersome process — one which is hopefully done prior to the patient coming in,” says Hoppe. To prevent medical necessity denials, patient access departments can do these three things:

1. Set up a one-on-one education session for high-volume practices to discuss why medical necessity denials are happening.

“It’s often front-desk staff or a nurse who fills out the orders and are not familiar with medical necessity requirements,” says Hoppe.

Doctors often think they know the payers’ medical necessity policies — but are not coding to the specificity that the payer requires. “Sit down with the physician offices and show the denials by the payer,” says Hoppe.

2. Enlist the help of higher-ups.

“A successful approach requires buy-in of the hospital’s chief medical officer,” says Hoppe. This individual can contact physicians who are not complying with medical necessity requirements.

3. Create a daily report to see if the test ordered or scheduled matches the test that was actually performed.

The report should be run the day after the patient’s visit. “When you find any discrepancy, get a new authorization and run the new CPT code through medical necessity software,” says Hoppe.

However, many payers do not allow retro authorizations. “The hospital is going to end up writing those off and having a loss for those procedures,” says Hoppe.

Payer policies are not in an electronic toolset that makes it easy to check medical necessity based on the diagnosis and current procedural terminology (CPT) codes. “Payers are also hiring companies to administer their medical policies,” says Schuler. Most diagnostic services are managed by a third-party authorization vendor, further complicating the process.

“If authorizations are here to stay, electronic transactions are necessary to reduce costs,” says Schuler.

Many Added Costs

Clinical care is being delayed because of payer timeframes. “When somebody’s dealing with cancer or a high-risk medical condition, they don’t want to wait for their care,” says Schuler.

Patient satisfaction and customer service are top priorities for patient access, but prior authorization requirements clearly frustrate patients.

“Patients can receive unexpected non-covered services billed to them, and/or a delayed statement months after delivery of service, due to the lengthy appeal process,” says Schuler.

Hoppe knows of at least one payer who routinely denies any claim without an authorization in the system, even though the authorization actually was obtained. “They are trying different tactics to deny claims,” she says. “Hospital associations and state associations really have to band together to fight the payers.”

Larger health systems might be able to negotiate better contract terms with payers, putting smaller community hospitals at a distinct disadvantage.

“They don’t have the resources to go fight these payers. They are losing money and, ultimately, will get bought out by a bigger hospital,” says Hoppe. “There needs to be more collaboration across hospitals. Many really work in their own silos.” (See story on a coalition formed to address prior authorization requirements.)

Jack Resneck Jr, MD, chair-elect of the American Medical Association (AMA) has seen prior authorization requirements worsen in recent months: “The problem has been going on for some time, but it does seem to have exponentially increased.”

A coalition including the AMA and more than 100 other healthcare organizations is urging health plans to reform prior authorization requirements for medical tests, procedures, devices, and drugs.

“We are trying to collaborate with other groups to change the playing field a bit,” says Resneck. “We want to work with the health plans to right-size the requirements they have.”

The coalition created a set of 21 recommended principles for prior authorizations. (The Prior Authorization and Utilization Management Reform Principles can be downloaded at http://bit.ly/2neduYK). These reflect growing concern about the authorization process interfering with patients getting needed care. “Both doctors and hospitals are feeling it,” explains Resneck.

Below are some findings from a recent AMA survey of 1,000 practicing physicians.

  • Practices complete an average of 37 prior authorizations each week per physician, taking 16 hours to process.
  • Seventy-five percent of surveyed physicians described prior authorization burdens as high or extremely high.
  • More than one-third reported having staff who work exclusively on prior authorization.
  • Nearly 90% of physicians reported that prior authorization sometimes, often, or always delays access to care.

“We are all wasting time that could be spent taking care of actual patients,” says Resneck.

Care Adversely Affected

Resneck, vice chair and professor of dermatology at the University of California, San Francisco, has seen a sudden uptick in prior authorization headaches in his own practice. “I make a choice that’s good for the patient and I’m being responsible in selecting a generic, and it still doesn’t make it through,” he says.

Previously, having to obtain a prior authorization was somewhat of a rarity. It happened occasionally, such as with a critically ill patient with melanoma needing a brand new, innovative biologic drug. For the vast majority of prescriptions, though, it was “business as usual” and the payer simply paid for the drug that was prescribed.

“But that’s not what I’m experiencing anymore,” says Resneck. “A $50,000 biologic drug or a 40-year-old topical generic seem to be equally likely to require an hour of work to get that prior authorization.”

Payers sometimes flatly deny a drug, but offer no alternatives. Physicians then end up on the phone with the pharmacist trying multiple different medications to see what the payer will approve. “It’s a guessing game, because there is no transparency in the prior authorization process,” says Resneck.

Other times, payers suggest an alternate medication that is clearly inappropriate for the patient’s condition. Recently, a payer denied a medication for a patient with severe psoriasis who had just been hospitalized for the disease. “We had finally gotten the patient stable on a medication, and because something in their plan changed, the payer is requiring that the patient totally start over with a step therapy program — which puts the patient back on a topical cream,” says Resneck.

Recently, Resneck prescribed a medication that cost his patient $20 to fill. The following week, he prescribed it again for a different patient with a similar plan, assuming the out-of-pocket costs would be in the same ballpark. This time, the cost was several hundred dollars, which triggered a phone call from an upset patient unable to pay for the prescribed medication.

“I get those angry phone calls all the time,” says Resneck. “Patients are understandably frustrated. They are ready to move on to the next stage of their treatment or workup, and get stuck in limbo.”

Patients leave physician offices with a clear treatment plan and wish to begin immediately, but are made to wait several days for the payer to decide whether or not the service is authorized. Patients may be told they need a radiology study for a diagnosis, for instance, but are held up by the payer’s denial.

The coalition argues that an electronic process at the point of care is needed so providers can know which drugs are covered, if what they’re prescribing requires a prior authorization, and what the cost is going to be for the patient.

“There are some attempts by payers to do that. But you have to log out of your EMR [electronic medical record] and log onto their proprietary website, ending up with passwords for 20 or 30 different health plans,” says Resneck. “That’s not what we’re talking about.”

Rather, an integrated system is needed, allowing providers to get information for all payers directly from their own EMRs. “We have to make this better for patients and doctors,” says Resneck. “A few hours later, we are having to start all over again because we’ve hit a brick wall with prior authorization.”

Requirements for “peer-to-peer” reviews are surging. The payer’s physician is often from a different specialty, however. “Sometimes the peer you call really isn’t somebody who’s treated the same disease,” says Resneck.

Continuity of care is another big concern. “Sometimes, there is a formulary change right in the middle of a benefit year, or a prior authorization is not even valid for the usual course of care,” says Resneck.

Signs of Progress

There is some indication that the pressure to reduce prior authorization burdens is getting through to payers. “We have already seen a couple of health plans that have eliminated several hundred requirements,” says Resneck.

Recently, BlueCross BlueShield of Western New York announced it will eliminate prior authorization requirements for 212 services. “These are small examples, but it gives me enthusiasm to keep up the work and to have conversations with other health plans,” says Resneck.

The vast majority of the drugs, tests, or services that require a prior authorization are approved in the end, but only after lots of rework and delays.

This is a waste of everyone’s time, says Resneck: “As a doctor, there are times when I know I’m eventually going to get a certain prior authorization approved.”

He sees these services as “low-hanging fruit. Plans can start looking at changing their processes to waive those requirements.”


  • Jack Resneck Jr., MD, Professor, UCSF School of Medicine, San Francisco, CA. Phone: (415) 353-9610. Email: Jack.Resneck@ucsf.edu.

Authorizations are an attempt to manage healthcare costs by reducing services that are not medically necessary. “But even though it appears to be reducing utilization of services, it’s adding to the cost of care due to the administrative burden of the process,” says Schuler.

A physician community already struggling with reimbursement cuts likely lacks resources for the labor-intensive process to authorize an ordered service at the hospital. “Therefore, either the authorization process doesn’t happen, or it’s performed by the hospital,” says Schuler.

Many patient access departments obtain authorizations on behalf of providers. To get paid for rendered services, hospitals have to add resources to patient access and the business office. Even payers are adding resources to manage the denials ending up in appeals.

“Everyone loses in the authorization process right now — the patient the provider, the payer, and the hospital,” says Schuler. “We need a solution that works for everybody.”


  • Angela Ferguson, MBOE, Director, Patient Access Services and Precertification, The Ohio State University Wexner Medical Center, Columbus. Phone: (614) 293-2453. Email: Angela.Ferguson@osumc.edu.
  • Karen Hoppe, Senior Consultant, Craneware, Atlanta, GA. Phone: (781) 789-4272. Email: K.Hoppe@craneware.com.
  • Margaret Schuler, System Vice President, Revenue Cycle, OhioHealth. Phone: (614) 544-6427. Fax: (614) 544-6486. Email: Margaret.Schuler@ohiohealth.com.