Jan 03rd 2017

Tracing the Path and Significance of Prior Authorization

Health insurers require prior authorization (PA) for certain healthcare services, treatment plans, prescription drugs, and/or durable medical equipment before a patient can receive them. The determination focuses on whether the service, drug, or product is medically necessary. It does not guarantee that the insurer will cover the cost.

The PA process—and research into its effectiveness—dates back more than 25 years, when states began analyzing how to curtail drug costs within the Medicaid program. The  Omnibus Budget Reconciliation Act of 1990 included PA among explicit provisions for limiting drug coverage and cutting costs. The legislation also required the Health and Human Services Secretary to study the impact of PA programs on beneficiary and provider access to prescription drugs as well as on program costs, and to make recommendations for PA reforms if needed.

Prior authorization is also known as prospective review and falls under the purview of a set of utilization management activities that are governed typically by the states department of insurance. Health plans or insurance companies employ PA programs with significant oversight and monitoring by those same state insurance departments.

A Costly Proposition

According to a study published in 2009 in Health Affairs, based on 2006 American Medical Association (AMA) data, the estimated national cost to physician practices of interactions with health plans (including compliance with PA requirements and pharmaceutical formularies) totaled between $23 billion and $31 billion per year. On average, primary-care physicians spent a little over an hour weekly on PA. Nursing staff spent more than 13 hours per physician per week on authorizations, far exceeding nurses' other types of health-plan interactions. In comparison, physicians and staff devoted only a “small fraction" of this time to providing quality data to health plans or to reviewing practice-specific quality data generated by plans, according to the study.

In June 2011, an AMA white paper stated that “intensely manual" prior authorization programs had placed excessive administrative burdens on physicians and payers. The paper called for automation/ standardization of PA across payers through a process that could be integrated within the respective workflows of physician practice management and payer administrative systems.

Where PA is Headed

2013 Medical Economics report identified imaging procedures such as CT scans and MRIs, as well as brand-name pharmaceuticals with no generic equivalent, as leading areas for required PAs. PA programs to manage advanced imaging have been in place with most healthplans (commercial insurers) for more than 10 years. They typically include medical necessity review for all outpatient, elective, MRIs, CTs, and PET scans. Also on the rise: PA for procedures and referrals related to workers compensation claims.

More recently, large commercial insurers (Aetna, Cigna, most Blues plans, and United Healthcare) have mandated PA for genetic testing. The move has come in response to an exploding market for genetic testing products, according to Lon Castle, MD, chief of molecular genetics and personalized medicine at EviCore healthcare. While spending on genetic testing remains relatively low at about 10 percent of insurers' total lab costs, the price of such tests is expected to spike 15 to 20 percent annually, prompting health plans to explore PA as a means of utilization management.

Moving forward, physicians on the front lines of care are pushing for some kind of compensation for their PA activities. At the American Academy of Family Physicians (AAFP) annual meeting in September, resolutions under consideration called for development of a procedure code to account for time spent on PA on patients' behalf and, separately, for a per-member, per-month fee to be paid by payers to help compensate practices for PA services. AAFP delegates also adopted a measure that would establish the group's formal policy on PA.

At the same time, some public health experts anticipate that payers will continue to assess PA as they experiment with and implement new benefit structures, especially in the area of specialty drugs. As such, PA is likely to remain an important topic of discussion informing utilization management policies that will affect patients, physicians, and payers.