Role of Prior Authorization in Medical Billing

Role of Prior Authorization in Medical Billing

Defining Prior Authorization

Under medical and prescription drug plans, some treatments and medications may need approval from insurance carriers before being delivered care by healthcare providers. Prior authorization (or pre-authorization) is usually required if the patient needs a complex treatment or prescription. This list of medical treatments and medications is different for every insurance carrier. For example, some of the medical treatments and medications that may require prior authorization are: 

  • Medications that may be unsafe when combined with other medications
  • Medical treatments that have lower-cost, but equally effective, alternatives available
  • Medical treatments and medications that should only be used for certain health conditions
  • Medical treatments and medications that are often misused or abused
  • Drugs are often used for cosmetic purposes

As mentioned above, each insurance carrier has a different list of medical treatments and medications requiring prior authorization. Practice owners need to keep a close eye on changing prior authorization guidelines. Claims rejected due to the absence of prior authorizations are considered as ‘hard denials’ i.e., difficult to receive insurance reimbursement after claims got denied. Prior authorization may be needed before getting outpatient services in a hospital or hospital-affiliated facility. This ‘place of service’ authorization may help guide providers and customers to a more cost-efficient location while ensuring the quality of care when the use of an outpatient hospital is not medically necessary. Sometimes, patients might need additional treatments or prescriptions after their initial visit. For such treatments, you need to get a medical necessity review, or simply ‘authorization’ from the insurance carrier.

Key Facts of Prior Authorization

  • The prior authorization process gives insurance carriers a chance to review how necessary medical treatment or medication may be in treating a patient’s condition. For example, some brand-name medications are very costly. During the review, an insurance carrier may decide a generic or another lower-cost alternative may work just as well in treating medical conditions.
  • Once you send a prior authorization request to an insurance carrier, they will either approve it; deny it; ask for additional information; or recommend an alternative that’s less costly, but equally effective, before your original request is approved. If you’re unhappy with your prior authorization response, you can ask for a review of the decision.
  • Prior authorization is not required if the patient has an emergency and/or needs emergency medication. However, coverage for emergency medical costs is subject to the terms of your health plan. Insurance carriers generally respond within 5 to 10 working days after your prior authorization request is submitted.

No Surprises Act (NSA)

The No Surprises Act was enacted in 2020 and goes into effect on January 1, 2022. It provides federal consumer protections against unanticipated out-of-network bills called ‘surprise bills.’ Surprise bills arise in emergencies when patients typically have little or no say in where they receive care. They also arise in non-emergencies when patients at in-network hospitals or facilities receive care from providers (such as anesthesiologists) who are not in-network and whom the patient did not choose. The No Surprises Act (NSA) requires surprise bills must be covered without prior authorization and in-network cost sharing must apply.

Ever Increasing Burden of Prior Authorization

Most providers feel that prior authorizations are too time-consuming and they distract providers from patient care. Providers also feel that prior authorization requirements have increased exponentially and now becoming burdensome to healthcare practices. Providers do not appreciate spending time undertaking administrative tasks like completing prior authorizations when they are not properly reimbursed for the time spent or when they do not have trained staff to expedite the process.

The simplest way to reduce the ever-increasing burden of prior authorizations is to outsource your medical billing services to the leading medical billing company Legion Health Care Solutions. We are providing complete medical billing and coding services to healthcare providers of various medical specialties. Please get in touch with us in case of any medical billing assistance on 727-475-1834 or email