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Studies Show Pros and Cons of Prior Authorization

May 23, 2018

A recent survey of 1,000 physicians by the American Medical Association (AMA) found that 92 percent believe prior authorizations (requirements by payers to approve a medical service, treatment plan, medication or piece of durable medical equipment [DME] before it is provided) have a negative impact on clinical outcomes. And the American Academy of Family Physicians calls prior authorizations “the number-one administrative burden” for family physicians.

At the same time, a new report from the Government Accountability Office (GAO) points to the benefits, including significant cost savings, of certain Medicare prior authorization demonstration programs.

Among the key findings of the GAO study:

  • The Medicare prior authorization programs, which began in 2012 in seven states, saved Medicare anywhere from approximately $1.1 billion to $1.9 billion through March 2017. (The programs tested prior authorizations for home health services; power mobility devices; permanent DME, prosthetics and orthotics; non-emergency hyperbaric oxygen therapy; and repetitive scheduled non-emergency ambulance services.)
  • The GAO acknowledged the difficulty of determining precisely how much of the savings came directly from the prior authorization demonstration projects and other cost-cutting measures of the Centers for Medicare and Medicaid Services (CMS). However, it concluded that CMS should continue its prior authorization demonstration projects, which are currently on hold or scheduled to end this year. Stopping the programs would result in missed opportunities to achieve the stated goal of reducing costs and realizing program savings.
  • Clinicians, hospitals and suppliers reported that prior authorization was an effective tool for reducing unnecessary utilization and improper payments; however, they also reported struggling with documentation requirements.

Among the key findings of the AMA survey

  • Eighty-four percent of respondents reported that their administrative burdens related to prior authorizations were high or extremely high. Practices reported completing an average of approximately 30 prior authorizations weekly and spending an average of 14.6 hours a week working on them.
  • Sixty-four percent of physicians reported needing to wait at least one business day for payer prior authorization decisions and 30 percent reported waiting three business days or longer.
  • Seventy-eight percent of physicians said prior authorization can lead to patients abandoning a recommended course of treatment.
  • Thirty-four percent of physicians said they rely on designated office staff to do nothing but data entry and other tasks required to process prior authorizations.
  • Eight-six percent reported that prior authorizations have increased within the past five years.

The AMA, American Hospital Association, American Pharmacists Association, America’s Health Insurance Plans, Medical Group Management Association and other major organizations have joined forces to work on improving prior authorization processes and reducing their associated administrative burdens.

The organizations’ consensus statement calls for healthcare leaders to work together to regularly review services and medications requiring prior authorization and remove ones that are no longer needed; improve communication between stakeholders to reduce care delays; protect continuity of care for patients; and accelerate the adoption of national electronic prior authorization standards.

The key takeaway from these two studies is that the controversy surrounding prior authorizations is not likely to go away any time soon. Prior authorizations have value, but the data is beginning to show that they impose a major administrative burden and need to be simplified. Government and private health plans are likely to continue testing a variety of prior authorization policies, but clinicians and providers are certain to continue arguing that, while efforts to reduce unneeded medical services are worthwhile, the time-consuming prior authorization process can erode the quality of patient care and needs re-working.

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