Hidden Costs of Prior Authorization: What Healthcare Providers Need to Know

Hidden Costs of Prior Authorization

Prior approval is a procedure insurance companies use to decide whether to cover a recommended treatment, service, or medication. While it aims to manage expenses and ensure appropriate medical care, prior authorization can lead to costs that impact healthcare providers and patients.

What is Prior Approval?

Prior approval is a process insurance companies use to assess the necessity and effectiveness of treatments, procedures, or medications before healthcare providers perform them. The goal is to confirm that the proposed care aligns with established guidelines and control costs by avoiding treatments.

The standard prior approval process involves healthcare providers submitting a request to the insurance company along with documentation supporting the need for the service. The insurance company then evaluates the request, a process that can take days to weeks, and determines whether coverage should be approved or denied. Services often requiring approval include imaging tests (such as MRIs and CT scans), elective surgeries, specialized medications (incredibly high-cost drugs), and certain types of physical therapy or rehabilitation services.

Impact on Healthcare Providers

Administrative Challenges

One hidden cost associated with approval is its administrative burden on healthcare providers. Doctors, nurses, and office staff must dedicate time and effort to complete and submit authorization requests. This involves gathering details, communicating with insurance companies, and following up on decisions. This added workload can shift resources away from patient care. According to a survey by the American Medical Association (AMA), healthcare providers spend an average of 20 hours per week on authorization tasks. Some practices even assign the workload of two full-time staff members for this purpose.

Financial Impact

The administrative complexity of authorization has financial implications for healthcare providers. Time spent on these tasks means time available for consultations, which can impact a practice’s earnings. Furthermore, delays in receiving authorization could lead to procedure delays or cancellations, resulting in revenue loss.

Smaller practices and clinics may need more robust administrative support in larger healthcare systems. Dealing with authorization requests can strain their tight budgets due to costs such as lost revenue and increased labor expenses.

Effects on Workflow and Efficiency

Prior authorization requirements can disrupt the workflow of healthcare providers. Introduce inefficiencies into practice operations.
Delays in getting approval can result in rescheduling appointments and adjusting treatment plans, leading to frustration for healthcare providers and patients. These interruptions can also impact the patient’s journey, as waiting for approval can postpone diagnoses and treatment. Consequently, this could diminish trust and satisfaction, affecting the provider’s standing and patient loyalty.

The Impact on Patients

Care Delays

For patients, the main consequence of authorization often involves delays in receiving care. Waiting for an insurance company to greenlight a treatment can vary from an inconvenience to an obstacle to timely medical attention. These delays can be especially harmful to patients with chronic conditions, where swift treatment is vital for managing health outcomes. For example, a patient requiring surgery might have their procedure delayed while awaiting insurance approval, potentially worsening their condition and extending their recovery period.

Financial Burdens

Another expense of authorization for patients is the possibility of increased out-of-pocket costs. If an insurance company rejects an authorization request, patients may choose to pay for the treatment themselves or go without it entirely. Furthermore, the arduous and time-consuming process of obtaining approval can push patients to explore treatments that may come with a higher price tag.

Emotional and Physical Strain

Moreover, the procedure for prior authorization can impact patients’ emotional and physical well-being. Navigating the intricacies of insurance requirements, dealing with delays, and facing uncertainties about treatment coverage can trigger stress. This emotional pressure can complicate existing health issues for patients, adding a layer to their burden.

Illustrative Scenarios

Scenario 1: A Small Clinic Managing Prior Authorizations

Let’s consider a primary care clinic with administrative capabilities. The clinic is inundated with many authorization requests for patient needs, from diagnostic tests to specialized medication prescriptions. The clinic’s staff finds themselves overwhelmed by the paperwork and phone calls needed to secure authorizations, diverting their attention from care.

The clinic faces strain as delayed approvals result in missed treatment opportunities. Moreover, the increased administrative workload contributes to staff burnout, leading to turnover rates and compounding the challenges faced by the clinic.

Scenario 2: A Large Hospital System Interacting with Insurance Providers

Conversely, an extensive hospital system equipped with a prior authorization department encounters its own set of obstacles.
Despite having a dedicated team to handle the process, the hospital needs more time to obtain approvals for procedures like surgeries and advanced imaging. These delays disrupt schedules and lead to patient dissatisfaction and administrative challenges. The hospital deals with expenses related to retraining staff and improving administrative procedures to cope with the growing demands of prior authorization.