A Primer on Prior Authorizations for the Physician Practice

bestpracticesAlthough prior authorization has been an issue among healthcare providers for at least a quarter of a century, surprisingly little is known about its cost, either to individual practices or to the healthcare system as a whole. In 2006, PCPs spent a mean of 1.1 hours per week on authorizations, primary care nursing staffs spent 13.1 hours, and primary care clerical staff spent 5.6 hours, according to a 2009 study published in Health Affairs. The study estimated that the overall cost to the healthcare system of all practice interactions with health plans, including authorizations, was between $23 billion and $31 billion annually.

More recently, a study of 12 primary care practices published earlier this year in the Journal of the American Board of Family Medicine put the mean annual projected cost per full-time equivalent physician for prior authorization activities between $2,161 and $3,430. The study’s authors concluded that "pre-authorization" is a measurable burden on physician and staff time.

While insurance companies differ somewhat in the areas where they require prior authorizations, the two most common are imaging procedures such as computerized tomography (CT) scans and magnetic resonance imaging (MRI), and brand-name pharmaceuticals. Plans also vary in how aggressive they are in requiring prior authorizations. The 2013 AMA National Health Insurer Report Card reports rates as low as 2% for Anthem and as high as 12.5% for United Health Care. The AMA report has Medicare requesting a prior authorizations 3.4% of the time.

Practices should go through payers’ Web sites to obtain prior authorizations whenever possible. Going online usually gets a quicker response and avoids wasting time on hold on telephone calls. It also reduces the cost significantly. A study by the actuarial firm, Milliman, shows online authorizations can reduce the cost by up to 80%.

Practices with large volume and/or more than one location often can realize efficiencies by centralizing the prior authorization responsibility. Putting just one or two individuals in charge of prior authorizations for the entire practice will enable those employees to become highly skilled in the process and develop relationships with the payers.

Some advocates recommend seeking pre-approval from payers for a plan-of-care if it has proven successful with multiple patients over time. Communicate with the payer ahead of time what your treatment plan is for a certain diagnosis. Describe what you will do for a patient presenting with this disease and request blanket approval for this plan-of-care without the requirement of a call for authorization. If you don't get approval with your initial request, keep trying.

The next step is to try and minimize the number of times you’re required to get a prior authorization. For medications, you should become familiar with insurers’ formularies, and develop a list of drugs they all cover for common diseases. You should also make sure that the staff has the forms required for the drugs and procedures that most commonly require a prior authorization easily available. A state-of-the-art RCM system should include flags for procedures requiring a prior authorization so the process can be started as the appointment is being booked. MDeverywhere's Practice 1st solution

Tips for Handling Prior Authorizations:

  • Use the payer's website rather than the telephone.
  • Look at how many prior authorizations each of your payers required during the past year and consider dropping then if the payer's reimbursement rates don't justify the time spent obtaining the authorizations.
  • Based on your volume, consider designating one or two individuals to handle prior authorizations for the entire practice. Make sure that they have access to patients' records and providers' notes.
  • Make sure that you are following recommended treatment guidelines as appropriate before ordering a high-cost procedure. If you are deviating from treatment guidelines, be prepared to make your case as to why.
  • Unless contraindicated, always consider the generic form of a medication if one is available in the same therapeutic class.
  • Make sure you have met all of the payer's criteria before submitting a prior authorization request.


  • http://www.jabfm.org/content/26/1/93.abstract
  • Milliman, Inc., “Electronic Transaction Savings Opportunities for Physician Practices.” Technology and Operations Solutions. Revised: Jan. 2006
  • Medical Economics: Curing the Prior Authorization Headache

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