Why the CMS Prior Authorization Rule Is a Win for Providers and Payers

Author:  Nikki Henck

February 3, 2022

PA Series: Part 1 of 6

Most health plans in the US require providers to submit prior authorizations (PA) for certain health benefits, services, prescriptions and supplies. The PA process begins with the provider inquiring from the payer whether a PA is required for the health service and if so, the provider must then submit a PA request. Not only does this process pose an administrative burden to both payers and providers, PA in its current state often leads to care delays and presents a potential risk to patients. As the industry continues to move towards a more patient-centered and value-based system of care, PA modernization is an opportunity for payers and providers to reduce costs and provide greater value to patients, organizations and the industry as a whole.

With this in mind, the Centers for Medicare & Medicaid Services (CMS) proposed the Prior Authorization Rule to reduce the burden of PA on payers, providers, and ultimately, patients. The “CMS Interoperability and Prior Authorization” rule, with proposed start date of January 1, 2023, requires payers regulated under this rule (as it applies to Medicare, Medicaid, CHIP and QHP products) to utilize APIs that give providers more streamlined access to data. 

Aimed at improving data exchange to reduce provider and payer burden, the rule will require payers to implement and maintain these APIs using the FHIR standard. While the rule applies to payers alone, both providers and payers will reap rewards from this interoperability innovation. 

Following the announcement of the final rule in 2021, Seema Verma, CMS Administrator, stated in a press release: “Today, we take a historic stride toward the future long promised by electronic health records but never yet realized: a more efficient, convenient, and affordable healthcare system. Thanks to this rule, millions of patients will no longer have to wrangle with prior providers or locate ancient fax machines to take possession of their own data.”

“Many providers, too, will be freed from the burden of piecing together patients’ health histories based on incomplete, half-forgotten snippets of information supplied by the patients themselves, as well as the most onerous elements of prior authorization,” Verma continued. “This change will reverberate around the healthcare system for years and decades to come.”

The True Cost of Prior Authorization for Providers, Payers and Patients

As the heart of payers’ utilization management operation, PAs represent an enormous burden to both payers and providers. Furthermore, PAs can result in significant negative outcomes for patients. Studies on the true cost of prior authorizations show:

  • 51% of organizations in the USA still handled PAs manually in 2019.
  • The average cost of a manual PA rose from $6.61 to $11 from 2018 to 2019 (a 66% increase).
  • Practices complete an average of 40 PAs per physician, per week.
  • 40% of physicians have staff who work exclusively on PAs.
  • 90% of physicians report a negative impact on patients due to the burden of PAs.
  • PAs result in delayed care, according to 95% of physicians surveyed.
  • Up to 79% of physicians report that the PA process leads to patients abandoning treatment.
  • 32% of physicians report that PA criteria are rarely or never evidence-based.
  • Physicians report that PA policy changes during the COVID-19 pandemic had limited reach and minimal lasting impact.
  • The medical industry could save up to $454 million by transitioning to electronic PAs.

Manual PAs present a heavy administrative and financial burden for providers that involves tackling a series of phone calls, faxes, emails and web portals before finally gaining approval. In addition, the manual process of PAs impedes communication between payers and providers, obstructs the potential for collaboration, and creates unnecessary delays that result in suboptimal care.

A Lack of Interoperability Is the Biggest Obstacle Facing Payers

While government-sponsored programs such as Medicare, Medicaid, CHP and Qualified Health Plans are required to implement utilization management programs, most payers struggle to efficiently conduct medical necessity reviews in a timely manner. This results in unnecessary costs and delays in patient care.

The biggest obstacle facing payers in efficiently managing is the lack of interoperability currently in place. This means payers:

  • Must refer to multiple systems to gather the data required for medical necessity review.
  • Need to attach PDFs as supporting documentation for the request, which means that staff must pull faxes and index them to each case.
  • Lack the access to readily available clinical data, resulting in nurses needing to go through pages of scanned PDF files (often hundreds of pages long) to obtain the relevant information before rendering a decision.
  • Have inadequate presentation of demographic and clinical information, meaning the need for nurses to contact providers for additional information. When this information is not provided, a denial is issued, which can lead to delays in the patient receiving necessary care.

These hurdles, paired with varying complexity in the types of medical necessity review (inpatient versus outpatient, for example), result in significant variations in the amount of time spent on reviews. This results in a review cost from as low as $12 per case, to more than $70 per case. With the adoption of interoperable systems, the rule aims to reduce these variabilities for more predictable, consistent and lower administrative costs.

Leveraging FHIR to Reduce Administrative Burden for Payers and Providers

Historically, payers have struggled with a lack of access to patients' records and have relied on using multiple systems to manage PAs. The data silos created by these disparate systems (including data that is often months or years old) have meant difficulty collecting, analyzing and utilizing patient data, ultimately hampering prompt decision-making.

The Fast Healthcare Interoperability Resources (FHIR) standard defines how healthcare information can be exchanged between different computer systems, regardless of how it is stored on those systems. FHIR aims to make healthcare information, including clinical and administrative data, easily and yet securely available to those who require access to it.

The resources available through FHIR give users access to a comprehensive dataset on patients, in near real-time, that can be delivered and utilized by payers and providers to facilitate faster and more appropriate care. With FHIR, electronic PAs mean mapping clinical information from one point to another in a more timely and informative manner, which eliminates the ‘chart chase’ currently facing providers and payers. The accuracy of the information and the ability to obtain complete information on the patient in near real-time reduces administrative work such as compiling supporting documentation, calling and faxing payers and more. 

The interoperability supported by FHIR offers a complete medical picture of the patient and allows payers to render decisions much more quickly. These faster determinations result in a reduction in wait times for patients, better treatment outcomes, as well the much-coveted reduction in the administrative burden and costs on payers and providers.

Smile Digital Health supports FHIR-based prior authorizations, which in turn reduces the administrative burden for providers and payers. Interoperability driven by FHIR helps improve the coordination between payers and providers necessary for more timely and cost-effective prior authorizations.

The Prior Authorization Rule Will Improve Efficiency, Transparency and Immediacy

Although PA is crucial to healthcare services, patients, providers and payers experience a burden from the process. In fact, PAs have been identified as a major cause of provider burnout, as they expend vast resources to navigate the process – resources that could be better spent on patient care. Due to the complex nature of patient data, as it currently stands, patients unnecessarily pay out-of-pocket or abandon treatment altogether due to delayed PAs. At the same time, providers and payers both tolerate high administrative costs, reduced patient outcomes, and a lack of communication, collaboration, and transparency. The CMS Interoperability and Prior Authorization rule, when implemented properly, can deliver:

  • Transparency: For some providers, the lack of clarity around benefits, coverage, medical policy, and care guidelines used to determine medical necessity, make PAs difficult to understand. For providers, on the other hand, being unable to communicate to their patients why they can’t obtain a particular health service is a point of tension. The PA rule requirements for interoperability will alleviate this by requiring the payer to clearly communicate the reason for denial – resulting in a higher level of trust between payers, providers and patients.
  • Efficiency: The ability to transmit a request electronically and provide complete data for adjudication can support auto-case-creation and reduce clinical review times, decrease staff time significantly from the provider perspective and ease the burden of the medical necessity review process for payers.
  • Immediacy: It is in the best interest of both payers and providers when real-time decisions are rendered. The immediacy of a decision turnaround thanks to electronic PA reduces time and cost, and - most importantly - allows clinicians to care for their patients more promptly and effectively, enabling providers to schedule patients at the point of care

The rule presents an opportunity for both payers and providers to reduce costs and improve coordination and continuity of care. By embracing the FHIR standard, payers will not only reduce administrative costs but create an enterprise asset that sets them apart in the market. FHIR allows payers to create an interoperable data source that integrates seamlessly with their EHRs, breaking down information silos and putting data in the hands of both providers and patients, in a timely manner, for better outcomes across the board.

Through improved transparency, efficiency and immediacy, payers and providers will enjoy a greater level of trust, a mutually reduced administrative burden and create a better value proposition for their clients and patients.

To continue learning about the Prior Authorization Series, read our blogs:

Part 1: Why the CMS Prior Authorization Rule Is a Win for Providers and Payers
Part 2: A Mutual Burden for Providers and Payers and How Interoperability Can Facilitate Change
Part 3: Breaking Down CMS Rule: Open Standards Bring Healthcare Out of the Stone Age
Part 4: How CDS Hooks Will Break Down Data Silos in Healthcare
Part 5: Harnessing the Real Power of Data Interoperability
Part 6: Coming Soon…