Prior authorization, also referred to as preauthorization, precertification or predetermination, was instituted for certain health benefits and services as a cost containment strategy and as a result of increased health care expenditures. Prior authorization programs establish that the health insurers' medical necessity guidelines have been met for the service requested by a provider based upon a patient's diagnosis and history and that services are being provided in the most cost-effective manner.
The prior authorization process includes a review of the treatment plan and service requested to determine the patient's eligibility; the date, place, and type of service; and the CPT code to be used. The process is highly complex and lacks transparency, and criteria, policies, and processes vary significantly among health and pharmacy benefits entities.
Streamlining the prior authorization process would reduce administrative costs for payers and for providers. Prior authorization programs include a considerable number of medical services and prescription drugs, and prior authorization requirements vary widely among health plans. However, radiology and advanced imaging and pharmacy benefits seem to be the two types of health services that represent a clear and significant administrative load for providers.
Background: Radiology Benefits Management
Cost containment is important in the area of advanced imaging services, including magnetic resonance imaging (MRI), computer tomography (CT) scans, positron emission tomography (PET). Medicare spending for imaging services more than doubled, increasing to about $14 billion, according to Medicare claims data from 2000 through 2006. Spending on advanced imaging, such as CT scans, MRIs, and nuclear medicine, rose substantially faster than other imaging services such as ultrasound, X-ray, and other standard imaging.
Diagnostic accuracy, greater affordability of equipment and more opportunities for revenue generation that have lead nonhospital sites to supply these services are some of the reasons for the rise in the number of CT scans performed.
Challenges: Radiology Benefits Management
As health plans attempt to rein in expenses related to the rise in the number of diagnostic imaging performed (second only to pharmaceuticals in terms of annual spending and growth), a new industry of radiology benefits managers (RBMs) has emerged to handle preauthorization of physician imaging orders. Approximately 90 million individuals, half of those privately insured, were covered by RBMs in the United States in 2008.
Medicare Payment Advisory Commission (MedPAC), a Medicare advisory board focused on payment policy, has urged CMS to consider how the private sector utilizes a privileging process for physicians who bill Medicare for performing and interpreting diagnostic imaging studies. MedPAC's goal is to improve affordability and the quality of care delivered to Medicare beneficiaries. Further, in June 2008, the Government Accountability Office (GAO) provided Medicare with a report on Part B Imaging Services that included recommendations for Medicare to implement prior authorizations for advanced imaging services. This recommendation became part of the passage of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) that includes a requirement for providers of advanced imaging services to be accredited by January 1, 2012. This would be a fundamental shift in how Medicare operates.
Background: Pharmacy Benefits Management
Pharmacy benefit managers (PBMs) are organizations that provide administrative services in the processing and analysis of prescription claims for pharmacy benefit and coverage programs. PBMs provide plan members with access to a broad spectrum of medically necessary drugs while attempting to reduce costs. The three largest PBMs are Medco Health Solutions, CVS Caremark, and Express Scripts, which collectively covered a combined 190 million members and managed a combined $80 billion in drug spending in 2004.
PBMs implement cost containment programs that require prior authorization of certain medications on formulary preferred drug lists before prescriptions are filled. Some formularies are composed of five tiers (levels from generics to non-brand). This means that patients may experience quantity limitations and step-therapy (fail first on a less costly medicine approach) requirements imposed by the pharmacy benefits plan. Three types of quantity limits are typically in place: (1) dose efficiency edits (limits coverage of prescriptions to one dose per day for drugs that are approved for once-daily dosing); (2) maximum daily dose (an informational message is sent to the pharmacy if prescription falls outside recommended minimum and maximum doses); and (3) quantity limits over time (limits coverage of prescriptions to a specific number of units over a defined amount of time).
Challenges: Pharmacy Benefits Management
In order to meet the PBM requirements described above, physicians must verify patients’ insurance benefits and know what to do when the drug prescribed requires prior authorization. This process is challenging and time consuming as a result of the multitude of formulary configurations.
The method by which therapeutic interchanges take place (fax) also increase costs and cause workflow disruptions to physician-prescribers. In order to make a decision, physicians must access patients' medical records, review them, and decide whether to authorize the change, contact the patient, or discuss the option the next time the patient is seen in the office. Physicians are not paid for the time spent on these administrative activities. According to a MGMA survey, pharmacy-related administrative processes (prior authorization, pharmacy call-backs, etc.) cost the average yearly cost for a 10-physician practice approximately $137,000.
The challenges posed by PBMs and RBMs illustrate the issues faced by physicians and other providers in the prior authorization process. Variation in prior authorization program policies, requirements, and criteria only magnify the problem. It is important to develop a systematic approach to ensure that appropriate care is provided without limiting innovation, risking financial losses, and causing increased administrative complexity. Program goals include transparency and optimization of administrative processes, as well as the promotion of learning and improvements in quality of care.
HASC Recommendations
- Health plan support of automation, simplification, transparency, clear communication, and, to the extent possible, standardization of prior authorization processes among health plans and pharmacy benefits plans.
- Identification of methods to research the impact that prior authorization programs may have on cost-effectiveness and quality of care.
- Support of electronic prescribing (e-prescribing) national networks, such as SureScripts®, in product offerings by EHR vendors, health plans, and PBMs to achieve the goal of providing real-time, patient-specific formulary access into e-prescribing functionality.
- Support the CAQH CORE Phase III rule writing process, which includes a review of the current 5010 version of the HIPAA 278 standard transaction, Health Care Services–Request Authorization, with the goal of determining if the need for operating rules to support this transaction exists.
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