This is part 2 of a three-part series on how to improve the prior authorization process. Part 1 covers the impact of prior authorization. This part explains why they are necessary. Then, part 3 reviews the steps you can take to make prior authorizations easier.
While you often hear the question “Why are prior authorizations required?” from patients, many doctors ponder the same thing. It feels like an unnecessary headache. As a highly-trained professional, you should be able to give your expert opinion on patient care – without being questioned by administrative roadblocks. The truth is today’s current prior authorization process evolved from something else, and its implementation just hasn’t been the best. So, the question remains – why are prior authorizations required?
The Fact Is – Prior Authorizations Are Not Going Away
Despite prior authorizations' negative views and outcomes, they aren’t going anywhere.
How We Got Here
Before prior authorization, there was a process called utilization review (UR). UR was established in the 1960s at the beginning of Medicare and Medicaid legislation. It was used to verify hospital admissions by validating the need for treatment based on a confirmed diagnosis from two doctors. The goal was to limit unnecessary hospital stays, cut costs, and protect patients from receiving care they don’t need.
Over the years, UR evolved into today’s prior authorization system. When initially created, the process was intended to limit the use of brand-new, expensive medications or treatments. It was a cost-control measure for payers and was easily managed by practices because it was limited to a few novel treatments.
While the prior authorization system was initially used to audit hospital admissions, it has morphed into a system that determines whether a specific treatment is appropriate.
Why Are Prior Authorizations Required? To Help Control Costs
While the system has evolved over the years, the goals have not. Cost containment is a top priority for payers, and the pressure to achieve that goal will only increase as healthcare becomes more expensive. Between 2022 and 2031, the average growth across the National Healthcare Expenditure (NHE) is projected to be 5.4%, which will outpace average GDP growth of 4.6%.
In healthcare, a single bad player can have an outsized adverse impact on cost. Medicare and Medicaid fraud in the US costs upward of $100 billion annually. With all of this, payers have a legitimate interest in cutting costs and maintaining control over the care they are willing to pay for.
Why are prior authorizations required? Ultimately, it is so payers can work to cut costs by maintaining control over the care they are willing to pay for through administrative oversight.
Prior Authorization Is Not Bad in Principle—Its Implementation Needs Improvement
This is to say that prior authorization isn’t inherently bad but needs to be balanced for the sake of patients and providers. There are cases in which it makes sense. Doctors agree that going through these processes for routine treatment or generic prescriptions is a waste of time and an infringement on their expertise.
The key is to find a cost effective, time efficient way to manage the entire process from start to finish.