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Preauthorization In Revenue Cycle Management

Pre-authorization is permission from an insurance company that is required before a patient can receive a certain type of treatment, care, or service. Virtually every payer requires pre-authorization for physical, occupational, and speech therapy.

Feb 23, 2023 5 min read
Preauthorization In Revenue Cycle Management

Preauthorization refers to the practice of acquiring approval from insurers in advance for certain treatments and procedures in order to receive a possible reimbursement for those services. In other words, it is permission from an insurance company that is required before a patient can receive a certain type of treatment, care, or service. Virtually every payer requires pre-authorization for physical, occupational, and speech therapy. In most cases, if pre-authorization is not secured, services will not be covered by insurance. Most often, either the provider or the patient will be stuck with the bill for the entire cost of care. However, a majority of healthcare professionals feel that prior authorizations are time-consuming and interfere with patient treatment. The crux of the matter is that though pre-authorization does not guarantee reimbursement, the absence of pre-authorization can surely result in claim denials or non-reimbursement. Once you acquire pre-authorization from a payer, you will get a pre-authorization number. This number must be included in your claims to avoid unnecessary denials. If your claims are denied based on the lack of medical necessity, you should append this pre-authorization number while preparing an appeal letter.

To answer the most important question,

“How does preauthorization help your practice?”

  • Preauthorization in medical billing helps healthcare organizations collect the proper payment for services rendered, reduce rejections and follow up on rejected claims.
  • Preauthorization is a part of insurance verification and therefore, helps ensure that the insurance details of patients are valid.
  • Preauthorization is a way to ensure that the payer will pay the reimbursement amount without much delay.
  • Preauthorization aids in the verification of insurance details and helps to curb insurance fraud by removing erroneous insurance claims.
  • Preauthorization helps to avoid denials by obtaining payment approval from the insurance provider prior to providing the services.
  • Preauthorization allows insurance providers to assess whether a patient's condition warrants further dental care or treatment.

Preauthorization is not as easy as it seems; there are many challenges involved. These challenges include:

Time consuming

Preauthorizations consume so much time that they become an added burden on your staff. To successfully complete preauthorization, a lot of steps need to be followed. They include filling out request forms and submitting it to the insurance providers. A lot of time goes into the collection and verification of all the information required to process a prior authorization request. Not having a pre authorization can lead to patients not getting their treatments and creating some discord at your practice.

Complexities in preauthorization

Preauthorization can be much more complex than perceived. It can be a tumultuous task for your practice to keep up with the constantly changing policies and codes. As a result, your practice would be compromised if these changes are not implemented swiftly or there may have occurred unnecessary preauthorization submissions.

Lack of transparency

Lack of communication between the practice and the insurance providers regarding the status of the preauthorization request can result in delays and costly back-and-forths between them. Lack of transparency can lead to a lot of confusion, which results in another set of discomfort at your practice. Therefore, it is important to have proper transparency between the practice and the insurance provider.

So many insurances and even more insurance plans

There are so many payers in the market with so many more insurance plans, each having their own set of terms and conditions.

Some standards for prior authorization have been set. So, get to know some of the best practices:

  • The use of prior authorization related to emergency care is prohibited by the Affordable Care act.
  • There is a move to ban prior authorization for certain behavioral health care by some states in the United States of America.
  • The law in some states requires the use of standardized prior authorization methods and new transparency reporting.
  • The use of “gold card” laws that requires health plans to waive prior authorization for services ordered by providers with a track record of prior authorization approval has been adopted by some states in the US, while other states are considering doing the same.

Application request for preauthorization

Ensure the completed form with your request for preauthorization is bereft of any errors. Errors in your application requesting preauthorization would inevitably lead to your request being rejected. 

Submit all relevant documents on time

While submitting your preauthorization request, remember to submit all the supporting documents within the given timeframe.

Adhere to the guidelines

Preauthorization is dependent on many factors. Of these, medical necessity takes credence. Remember, not all procedures or treatments require preauthorization.

For example:

  • If a patient has had a medical emergency or needs emergency treatment, (it is not required) obtaining a preauthorization is not a requirement since it may take 5 to 10 days for the insurance provider to respond to your preauthorization request.

  • There has been a move to ban prior authorization for certain behavioral health care by some states in the United States of America.

  • The law in some states requires the use of standardized prior authorization methods and new transparency reporting.

  • The use of “gold card” laws that requires health plans to waive prior authorization for services ordered by providers with a track record of prior authorization approval has been adopted by some states in the US, while other states are considering doing the same.

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Feb 23, 2023 5 min read

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