The Importance of Prior Authorization in Medical Insurance Claims

In medical billing, many procedures are involved. One of the vital procedures that helps to reduce healthcare costs and prevent unnecessary procedures is prior authorization. 

Based on a report, 13% of prior authorization denials by Medicare Advantage plans were for benefits that would otherwise have been paid by Medicare. 

So, it becomes a crucial aspect of medical insurance claims. Without prior authorization, healthcare providers may face significant challenges like delivering timely care for their patients.

This blog post shares what is it, its importance, and more about prior authorization in medical insurance claims.

What is Prior Authorization in Medical Billing?

Prior authorization is a critical procedure in medical billing. This process involves getting pre-approval from the patient’s insurance companies before proceeding with treatment, medication, or procedure.

The main aim of this procedure is to ensure that the proposed intervention is essential and covered by the patient’s insurance plan. The prior authorization process includes:

• Identifying the need for authorization
• Gathering relevant clinical information and documentation
• Submit a request to the insurance company
• Insurance company reviews submitted information carefully
• Request additional information if needed
• Communicate decision to the provider
• Provider informs patient about the decision
• Appeal if the request is denied
• Insurance companies review and issue decision
• Maintain thorough documentation and records

The Importance of Prior Authorization in Medical Insurance Claims

Without Prior Authorization, the provider and patient may not have an idea whether the procedure is covered by the insurance plan. This will lead to the burden of the cost entirely on the patient.

It is also important for several other reasons:

• It helps to reduce the cost by ensuring that procedures are truly necessary before approving them.
• Verifying that the proposed treatment and medications are aligned with the medical guidelines.
• Acts as a safeguard against unnecessary or fraudulent medical services.
• Prevent potential harmful or unnecessary treatments by a thorough review of the patient’s medical history and proposed care plan.
• Helps to Allocate medical resources more efficiently by prioritizing necessary treatment.

Related: 8 Actionable Steps to Increase Your Practice Revenue by 10x with RCM

The Purpose of Prior Authorization in Medical Billing

Prior authorization has multi-purpose factors, it doesn’t just hole for one thing. Here are the three purposes of prior authorization in medical billing that you need to know about:

1. Ensuring medical necessity

• One of the primary purposes of prior authorization is medical necessity.
• This ensures that the proposed treatment or medication is really necessary for the patient.
• Insurance companies also check for other factors such as that the medical service is not being duplicated.
• Also, insurance companies will check that the treatment recommended for the patient’s situation is up-to-date and research-backed evidence.

2. Controlling healthcare costs

• Another importance of prior authorization is that it helps to control healthcare costs.
• The insurers also want to ensure that the treatment or medication provided for the patients financially makes sense.
• For instance, if Drug A and Drug B both treat the patient’s health condition. But Drug A is more expensive than Drug B.
• If the healthcare provider prescribes Drug A (which is expensive) the health insurance plan also wants to know the reason why Drug B would not work as well as Drug A.
• Even though Drug A costs more than Drug B and the healthcare provider prescribes that Drug A is a better option than Drug B, It might get pre-authorized.
• However, if there is no medical rationale for choosing the more expensive Drug A over the cheaper Drug B, your health plan may refuse to authorize it.

3. Preventing unnecessary procedures

• Prior authorization also aims to prevent any unnecessary procedures or duplication performed for the patient.
• For instance, if the patient is been having physical therapy for three months and the provider is requisition authorization for physical therapy for another three months.
• In this case, the insurance plan wonders if the added three months is necessary and helping the patient.
• If the patient is not making any progress or the added three months is making it worse, your health plan may decline to authorize any additional PT sessions. 
• The insurance company will speak with the healthcare professional to better understand why they believe another three months of PT will benefit the patients.

Related: 9 Strategies You Should Follow to Improve Revenue Cycle Management

Benefits of Prior Authorization

Prior authorization benefits insurance companies, healthcare providers, as well as patients in several ways. 

For insurance companies

With prior authorization, insurers can review requests for medical services and medications beforehand. Insurance companies can thoroughly review if the treatment is truly necessary. 

This allows them to steer patients toward more affordable treatment options. It also helps to prevent the misuse of expensive medications and treatments that are not backed by strong evidence.

In this way, prior authorization can improve patient outcomes while keeping the healthcare cost-effective.

For healthcare providers

Even though prior authorization adds administrative burdens, there are few benefits for healthcare providers. It helps to ensure that the treatment is medically necessary for promptly reviewing documentation. This can minimize liability risks and improve patient outcomes.

Additionally, if treatment is pre-approved, providers have peace of mind knowing insurance will cover the cost, reducing the risk of denied claims and frustrated patients.

For patients

Prior authorization is frustrating but it also benefits the patients. It helps to ensure that the medication and treatment procedures are safe and appropriate. 

This can also lead to cost savings, as insurers may recommend lower-cost alternatives that are just as effective as the expensive ones. Also, prior authorization can streamline the care and give patients peace of mind knowing their treatment is covered by the insurance plan.

Vozo Revenue Management Cycle Service for your Medical Practice

At Vozo, we understand your struggle in navigating through all the revenue cycle processes such as regulations, medical coding, and reimbursements. 

That’s why we bring the best cutting-edge service to optimize your revenue cycle management from start to finish. Here’s how Vozo can help you to transform your practice’s financial performance.

• Automated tools for error-free coding and faster reimbursements
• User-friendly billing to keep patients satisfied and payments flowing
• Robust data security and compliance protocols to protect your practice
• Detailed reporting and analytics for smarter business decisions
• Solutions that grow alongside your evolving needs

With Vozo RCM service, you can reduce the headaches associated with revenue cycle management and focus on what matters the most – quality patient healthcare delivery.

“Partner with Vozo RCM Service and unlock the full potential of your healthcare practice and maximize its revenue”.