First-time approval the goal for prior authorizations and claims

Getting it right the first time should have its advantages. Just like prior authorizations (PAs) take up an oversized amount of staff time, claims processing also can overwhelm practices that don’t follow proper procedures.

The prior authorization burden on practices is well-documented. According to a 2022 survey from the American Medical Association, practices complete 45 PAs per week, per physician. Physicians and their staff spend nearly two days per week just working prior authorizations. It’s no wonder that 94% of physicians report delays in patient care because of PAs, with 88% describing the burden wrought by prior authorizations as either high or extremely high.

Good news may be on the way for overburdened hospitals, care facilities and physician practices. The U.S. Centers for Medicare & Medicaid Services (CMS) released new rulemaking late last year that proposes to streamline PA procedures and the exchange of data between payers and providers. Admittedly, CMS rules only affect federal payment programs, but commercial payers often adopt similar measures for their members. If finalized, the new rules would go into effect Jan. 1, 2026.

While claims processing generally isn’t subject to federal rulemaking, hospitals and practices must remain ever-vigilant on claims to maximize revenue and minimize days in accounts receivable.

Prior authorizations on the fast track?

Under the proposal, CMS would require payers to adopt a Prior Authorization Requirements, Documentation and Decision (PARDD) application programming interface (API) built on the standard of FHIR, or Fast Healthcare Interoperability Resources. Other proposals include requiring payers to provide a specific denial reason so providers can resubmit PAs, speedier turnaround on both urgent and routine PAs (time frame varies), and requiring payers to publicly report specific PA metrics on their websites on an annual basis.

Proponents include the American Hospital Association (AHA) on behalf of its 5,000 member hospitals and 270,000 affiliated physicians. In its March 23 comments, the AHA urged a “baseline level of enforcement and oversight.” It also asked that any electronic standards be adequately tested before mandated adoption. Others voicing their support include 300 members of Congress, the American Association of Neurological Surgeons (AANS), and the Congress of Neurological Surgeons (CNS).

However, the AHA was also a signatory to a July 27 letter against the proposal because of the possibility of different required electronic data standards in the notice versus previous guidance. Other signatories were AHIP, the American Medical Association, and the Blue Cross Blue Shield Association. Finally, federal legislation that directly tackles PAs in Medicare Advantage plans has been around in some form since 2019.

Payers taking tentative steps on PAs

Payers themselves are taking tentative steps toward reducing the prior authorization burden on medical providers. Starting Sept. 1, UnitedHealthcare plans to eliminate nearly 20% of current prior authorizations for most commercial, Medicare Advantage and Medicaid business lines. In early 2024, the company also plans to start a national Gold Card Program to eliminate prior authorization requirements for most procedures for qualifying care provider groups. Qualified providers “will follow a simple notification process for most procedure codes rather than the prior authorization process.” Members also have new tools to track their prior authorizations.

Humana and Aetna have ended PAs for cataract surgeries in certain geographies. Aetna has also eliminated PAs for physical therapy in five states. Further, Health Care Service Corporation (HCSC) has started using artificial and augmented intelligence in the PA process, which it says can process PAs 1,400 times faster by streamlining submissions and auto-approving requests when certain criteria are met. The health plan operates in Illinois, Montana, New Mexico, Oklahoma and Texas.

Claims processes also need an overhaul

While the time physicians and staff spend on prior authorizations is well-documented, claims processing often flies under the radar — despite the importance of timely collections to the bottom line.

Claims data from 2021 for many providers shows a worsening situation for claims in terms of initial response times and amount of denied claims. Professional claims show a 12% rejection rate, with a 13-day lag time between submission and initial response, an increase of three days. Further, the average denied charge rose by 2% to $288 per claim. Multiply that by the number of claims a practice submits on a weekly basis, and you can see that a significant amount of money is tied up in claims.

Hospital outpatient claims fare worse, with a 26% rejection rate, a 15-day lag time (up four days), and an average denial amount of $602. If the hospital is billing Medicare Part A or Part B, expect an initial denial rate surpassing 80%. When billing for hospital outpatient services, the rejection rate in 2021 was 98%.

The right tool for the job

In today's digital age, there’s no reason why some clearinghouses should take more than a week for the payer to acknowledge a claim. In fact, claims response times should be measured in hours, not days. To address these growing challenges, the billing staff at both large and small medical providers require claim management tools that pinpoint issues. They also need a clearinghouse that communicates directly with the payer's electronic data interchange (EDI) systems. Each additional step a claim takes to reach the payer can introduce significant delays. Unfortunately, few clearinghouses provide transparency regarding the number of steps a claim undergoes within their network.
When a claim is initially rejected, staff require a streamlined process for resubmission, equipped with tools to research and rectify the necessary elements. This ensures that remittance is received in the shortest possible time. It's essential to note that not all clearinghouses maintain the same standards. Your clearinghouse should not be a source of additional delay in your claim processing times. Staff seek claim management tools that boost their productivity, ensuring maximum revenue for practices and facilities. If your practice management system doesn't provide these tools, your clearinghouse should.

Nihal Titan is director of operations for Claim.MD, a leading EDI clearinghouse founded in the early 1980s and processing tens of millions of transactions every month.