September 08, 2023

Prior Authorization: Benefits, Burdens, and Bold Ideas for Improvement

Prior authorizations have been a mainstay of utilization management strategies. Understanding the challenges they present for different stakeholders across the industry can lead to improved efficiency while helping employers remain steadfast to cost, quality, and member experience goals.

Full Series

Introduction

Prior authorizations (PAs) have been used as a primary utilization management tool for many years. Employers see prior authorization as one of the most important tools at their disposal to prevent inappropriate utilization of a medication or medical service. According to Business Group on Health’s 2024 Large Employer Health Care Strategy Survey, 96% of employers use PAs to manage specialty medications, whether the claim goes through the pharmacy or medical benefit.¹ However, multiple concerns related to the large volume of PAs, associated administrative burden and delays in treatment, along with the inability of PA processes to keep up with progressing care protocols and personalized medicine standards, are causing increased frustration with the PA process for various stakeholders, including patients.

Regularly monitoring and evaluating the PA processes in place for their plans can help employers determine whether the PA process adds value to them as plan sponsors and plan participants. Additionally, employers can use this information to gain insights into areas in the PA process that need improvement and advance their cost and quality of care objectives. By asking for regular reporting on PAs from their partners, employers can ensure that this utilization management solution is accomplishing what it is truly intended to do.

The Evolving Role of PA in Health Care

PA is one of the most common tools used to determine whether a health care service or medication is medically necessary, as well as to control utilization and costs. The PA process, however, which includes how decisions are made on what drugs and procedures should be subject to PA, seems to be lagging behind the growing and evolving body of evidence-based guidelines and treatment protocols. According to a survey of health plans conducted by the American Medical Association (AMA), most health plans said that their PA programs are based on peer-reviewed and evidence-based studies. However, 31% of physicians report that PA criteria are rarely or never evidence-based. Therefore, it is no surprise that most physicians (89%) believe that the PA process has a negative impact on patients’ clinical outcomes.³ Monitoring the results and effectiveness of the PA process and, in turn, reporting on them appears to be inadequate given the significant effort required to manage the volume of prior authorizations. Therefore, employers have an opportunity to do more with their partners to obtain these data and understand the impact of PAs on the health of their populations.³

The role of PAs has been expanding since their inception, and their permeation into the health care delivery system across just about every specialty comes with specific challenges and no simple fixes. Concurrently, the innovation seen in health care delivery, such as improvements in evidence-based guidelines, rapidly emerging changes in practice patterns and greater adoption of precision medicine, all imply a push toward greater personalization of treatment. The role of PA in this ever-advancing system seems to evolve slowly in some areas and lag tremendously in others. At times, this lag seems to be changing the role of PA from a utilization management tool to assess patient safety supported by evidence-based guidelines into one that exists solely as an invisible rubber stamp required on a clinical case, irrespective of what the most recent clinical guidelines say about the need for a PA. This incongruity between the PA process and up-to-date medical practices results in a high level of unwarranted variation seen across practices and hospitals in the U.S.

While the challenges with the PA process are the major focus of this article, there are many cases where the use of PA prevents inappropriate utilization of services or medications and redirects patients to different appropriate treatments, either those that are more cost-effective or lower cost options prior to high-cost therapies. For example, when Blue Cross Blue Shield of Massachusetts (BCBSMA) implemented a new PA program for opioid prescriptions in July 2012, they saw the prescribing rate for opioids decrease by almost 15% during the first three years after the policy was implemented, just as the opioid epidemic was ravaging communities and filling news headlines.⁴

Stakeholder Perspectives on the Prior Authorization Process

The following section explores some intended and unintended consequences of PAs on employers (plan sponsors), patients, providers, health plans and pharmacy benefit managers (PBMs).

Prior Authorization Challenges for Employers

Employers care about the health of their employees and covered family members. PAs can help patients avoid errors in treatment. On the other hand, related administrative delays can cause increased nonadherence or delays in treatment. It is essential for employers to use PA to strike a balance between clinical appropriateness and avoiding unnecessary delays in care. According to physicians treating patients in the 18-65 age bracket, 58% state that PA has interfered with their patients’ ability to perform their job responsibilities.³ The indirect financial impacts on employers manifest in the form of the following:

• Lost workdays;
• Reduced productivity as a result of delayed care; or
• A possible adverse health event taking place due to PA-related delays in care.

Because of these issues, along with operational costs and patient impacts, some plan sponsors question the efficiency of PA processes, the growing volume of procedures subject to them and the incremental value of prior authorizations to the broader effort to control costs and ensure appropriateness of care.

Employers often are not aware of the impacts and results of prior authorizations, as these processes are managed by third-party administrators (TPAs), health plans and PBMs. Employers not only lack the information about what services and medications require a PA, but an absence of reporting on the process or inability to get information about PAs from their partners makes it challenging for many employers to assess the effectiveness of the process and its role in achieving desired health outcomes and/or cost savings. Moreover, the lack of monitoring and evaluation of the effectiveness and usefulness of PA processes has left advancement of the process stagnant—a cycle that has compounded over the last few decades.

Research supports this assertion. In a March 2022 survey by Medical Group Management Association (MGMA), 98% of provider practices reported that PA requirements remained the same or increased over the previous 12 months, with a majority of MGMA members reporting increased PA requirements year over year since 2016. This finding points to an opportunity for employers to hold partners accountable for the sheer volume of PAs administered and billed and advocate for removing PAs that do not add value.⁹

Without increased transparency surrounding the decision-making process by their partners, employers don’t have the information necessary to understand where the PA process can be improved or engage their partners to establish a less burdensome experience for their members.

Prior Authorization Challenges for Patients

Without a doubt, of all the stakeholders involved in the PA process, the group most directly impacted is the patient. Even for patients, PAs have pros and cons. While a PA may potentially delay a patient’s access to necessary treatment, they can also prevent unsafe or inappropriate treatments from being prescribed or from being offered a treatment not covered under their health plan that would result in unexpected out-of-pocket (OOP) costs. Those potential benefits for patients, however, are overshadowed by the additional complexity PAs add to an already hard to navigate health care journey, not to mention the frustration and loss of trust in their provider, plan, or health care system itself that PAs often cause. If a PA request results in a denial, it can extend the time it takes to receive a treatment needed by the patient, which may lead to additional visits, or even worse, deteriorating health and higher-cost treatments needed later.

While patients can appeal PA denials, the process can be arduous, discouraging and ultimately fruitless. This can be the case if certain criteria are not met, mistakes with the original PA denial are not highlighted by the patients or if pieces of necessary information are not included.

Contesting an initial PA denial when trying to receive necessary care is complex and may require coordinating with the patient’s provider and health plan to ensure that all the correct codes were used to file the PA request and that the physician has submitted a letter with the appeal that systematically refutes the reason for the denial. In the Medicare Advantage (MA) market, it seems that a large majority of PA appeals can result in an overturned decision, but the percentage of appeals submitted is very low. According to KFF, among PA requests that were submitted to MA insurers on behalf of MA enrollees in 2021 and were denied, only 11% were appealed, but 82% resulted in full or partial overturning of the initial PA denial.

This finding suggests that a large portion of patients don’t appeal PA denials, even though it is likely that the initial decision can be reversed, or abandon treatment altogether.⁵ According to the AMA, 80% of physicians surveyed report that issues related to the PA process at least sometimes lead to patients abandoning treatment, and 33% report that PA led to a serious adverse event for a patient in their care.³

Prior Authorization Challenges for Providers

As PAs are designed and administered today, they often disrupt workflows and cause a disproportionate administrative burden on providers while offering little incremental clinical insight. Physicians surveyed in December of 2022 stated that their practices completed 45 PAs per physician per week, spending about 14 hours, or almost two business days, each week completing them.³ The U.S. Surgeon General identified PA as a major contributor to clinician burnout, with about 88% of physicians describing the burden associated with PA as high or extremely high.^{6, 3}

Determining the method used to submit a PA seems to be a major cause of the burden for physician practices. PAs can be submitted via phone, fax, secure email, a payer portal or electronically. Web portals are the most common method used, with 37% of payers and 33% of providers reportedly using this method, but 67% of providers said that that it is at least somewhat difficult to determine which method to use when submitting a PA request.⁷ According to WEDI’s Prior Authorization Survey, 62% of providers reported that they do not have the technology to evaluate whether a PA is required without initiating a PA request.⁷ Even if they find a vendor to optimize the process, only 45% of vendors reported that they have the necessary technology to alleviate this issue.⁷

These survey data illustrate how and why the PA process is time-consuming for providers. According to a study in the Journal of the American Medical Association, the top six specialties with the highest rates of PA for services are:

Many of these specialties have experienced significant clinical progress in recent years, but an equivalent advancement in the design of the PA process is yet to be seen. In fact, virtually all medical groups state that PA requirements are not improving.⁹ Additionally, there is a scarcity of data to show how the PA process adapts to new, clinically appropriate care protocols and growing personalization of care delivery. The number of innovative treatments and procedures tagged with a PA, regardless of their effectiveness, may limit physicians’ ability to adapt care protocols to the unique needs of patients. The oncology space is a prime example of where a large number of standardized PAs can derail personalized treatments at a time when the industry is moving more toward precision medicine.

Providers are stretched thin, and the inefficiencies riddled throughout the PA process cause a high administrative burden. This concern is the most significant contributing factor to why provider groups are advocating for change; they are hoping that reevaluation of the PA process may show how resources can be redeployed to reduce waste and increase efficiency to alleviate provider burden.

The Role of Health Plans and PBMs

Though health plans and PBMs manage PAs, employers usually have the option to customize the list of drugs and procedures subject to prior authorization. Some PBMs and health plans may offer their utilization management strategies to clients as an a la carte menu, allowing employers to place a PA requirement on selected services. The more common approach, however, is for carriers to offer standard PA packages based on the level of intervention (low/med/high) and administrative cost their client accepts. Some health plans and PBMs may seek standard-of-practice accreditation for their PA “formulary” from various medical and physician groups in order to demonstrate that the services designated as requiring a PA are aligned with the most recent clinical evidence.

After deciding on what procedures and drugs are subject to PA, employers can also influence the criteria of granting PA approvals for therapies they wish to manage in customized ways. Designing the PA process for managing GLP-1 prescribing is a recent good example of how employers engage in this process.¹⁰

The desire for more control over access to costly services pushes employers to continue asking for PAs to be added to their utilization management portfolio; however, the same scrutiny is often not applied when considering PA removals. Some health plans and PBMs inform their employer clients when a service becomes a standard of practice, encouraging the removal of any PA requirement on that service.

Potential Avenues to Improving Prior Authorization

Vendor Carve-outs

Some employers are exploring vendor carve-outs for the PA process in order to achieve more transparency on PA decisions and to apply a higher level of scrutiny for protocol administration and outcomes. Like any carve-out, this decision involves significant consideration on the part of the employer, including assessment of the vendor’s capability to handle volume and the potential disruption to other utilization management processes for which the PBM or health plan is responsible. Additionally, PA carve-outs have the potential to be an increased burden to physicians, who would need to deal with the PA vendor and PBM for coverage and formulary decisions and for PA requirements.

Gold Carding

A Texas law aimed at improving PA processes by reducing physician burden took effect September 2021.¹¹ The law states that physicians who have a 90% PA approval rate for certain services over a 6-month period are exempt from PA requirements for those services. This exemption is referred to as a “gold card.” Gold carding would seemingly reward physician practices that consistently remain in line with evidence-based guidelines for treating their patients, but it also may just be rewarding physicians who consistently achieve approval due to their mastery of navigating the current PA process.

This new approach to PA is supported by many medical associations, including the AMA, the American Hospital Association (AHA), the American Pharmacists Association and the American Academy of Family Physicians.¹² According to Cave Consulting Group, an additional 30% of specialists across the country should be gold carded for their consistently high PA approval rates.¹³ However, if the clinical protocols deployed by gold carded practices become outdated and are not concordant with the latest evidence-based guidelines, the treatments that are receiving expedited approval will not serve to ensure the highest quality of health care. Furthermore, gold carding is based only on historical data; while it significantly rewards providers with a high approval rate, it does not decrease the potential for these providers to request an unnecessary procedure or medication.

Some parties are skeptical about what results the gold carding program will show, but data corroborating success of the model is being awaited by many practices and health plans across the country. With providers continuing to voice their discontent with the PA process, states like Louisiana and Michigan passed gold carding legislation in 2022, and similar legislation was introduced in Mississippi but failed to pass.¹⁴

Automation

Automated PAs (aPAs) and electronic PAs (ePAs) are supported by many stakeholders in the U.S. health care industry. According to the 2021 Council for Affordable Quality Healthcare (CAQH) Index, adoption of aPA or ePA in 2020 increased to being prevalent in slightly over a quarter of the market, from 21% to 26% in 2021.¹⁵ CAQH stated there is an annual cost-saving opportunity of $437 million, including savings that can be captured by both payers and providers, if ePA is adopted nationwide.¹⁵ The distinction between ePA and aPA is essential for some stakeholders, as ePA is still a time-consuming process, with staff needing to access multiple portals and search manually for missing information. On the other hand, a system implementing a true aPA process may relieve much of the burden faced by stakeholders dealing with information siloes and resulting inefficiencies. It is worth remembering that any automation process carries a risk of removing human judgement that may be necessary in some decisions about appropriateness of treatments for distinct patients, reducing the value aPAs may add to care delivery and outcomes.

Prior Authorization Policy Landscape

Recently, there has been increased bipartisan interest in passing legislation aimed at making the PA process less burdensome and more standardized across the industry. In December 2022, the Centers for Medicare and Medicaid Services (CMS) published two proposed rules with provisions related to PAs administered for Medicare and Medicaid beneficiaries. The first rule aimed at improving the ePA process by establishing appropriate timelines for when PA decisions need to be made and increasing the level of transparency about how these decisions are made. The second rule focused on standardizing the criteria for using PAs in MA plans.

While these rules were still pending, in mid-2023, a bipartisan group of almost 300 members of Congress submitted letters to the Department of Health and Human Services encouraging them to implement the rules and go even further to alleviate the burden of PAs. For example, lawmakers urged CMS to include provisions in the proposals to enable faster decision-making and reduce delays as well as provider burden. The proposed rules from CMS also include a requirement that the response to expedited PA requests be faster, shortening the time from 72 hours to within 24 hours. These proposed rules are focused on improving the PA process for certain government-sponsored plans, including MA, Medicaid managed care, state Medicaid and Children’s Health Insurance Program (CHIP) programs, and ACA exchange plans, but there may be potential for interest in similar types of requirements for employer-sponsored plans in the future.

Many states have also introduced bills to limit the volume of PAs or change the way they are managed. As of May 2023, almost 90 bills regarding PA reform were being considered in 30 states, with over a dozen still being discussed for passage.¹⁶ States can only regulate insured coverages (individual or group), but some states are attempting to enact legislation purporting to apply to self-insured Employee Retirement Income Security Act of 1974 (ERISA) plans as well, which would be problematic for uniform plan administration under ERISA preemption principles. These bills may help providers by reducing their administrative burden and expediting the process, but the proposed legislation does not focus on making the PA process more effective in guiding patients to appropriate care while limiting waste and saving dollars.¹⁴

Additionally, other evolving federal requirements, such as rulemaking under the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA), may have a significant impact on PA implementation and design. MHPAEA rules may cause plans to change the scope and terms of PA to ensure that its application is in parity between coverage for medical and surgical care and mental health and substance use disorder treatments. Compliance with these rules is expected to be challenging for employers, and the implications on how the PA process is conducted may require additional effort among industry stakeholders to align their goals and manage the PA process effectively.

Employer Recommendations

The PA landscape is complex and involves numerous stakeholders across the health care industry, but employers can begin to determine how to optimize their PA process by taking the steps listed below:

• 1 | Collaborate with your health plan and PBM to achieve PA goal alignment and increased transparency about the benefits, limitations and overall impacts of the PA process.
• 2 | Encourage health plans and TPAs to collect outcomes data to measure the effectiveness of the process as defined by its impact on patient satisfaction and trends.
• 3 | Ask your partners (health plan, TPA, PBM) to report on PA trends regularly, including volume of requests submitted, approved, denied, appealed and overturned. Consider including the requirements to report PA results in contracts.
• 4 | Spur your partners to identify common reasons for incorrectly submitted PAs. Focus on educating members on engaging patient advocates and leaning on their expertise when navigating the PA process.
• 5 | Engage your health plan’s care management teams, vendor partners and navigators to help your members find lower cost alternatives to appropriate services and therapies to help them navigate away from treatments that likely will trigger a PA requirement.
• 6 | Promote discussions among health plans/PBMs and providers within your network about the clinical evidence behind certain common treatments and medications to see where PAs may not be necessary and where more stringent PA processes may be required. Motivate partners to use the PA process as a tool to inform providers on evolving evidence-based treatment protocols, not as one to create barriers to new standards of care.
• 7 | Galvanize the health plans in your network to work with the providers to improve efficiency and consistency of the PA process, reduce the need for manual intervention and align recommendations on how the process can be designed to help providers comply with efforts to offer the most effective covered treatment.
• 8 | See how progress in health data interoperability and digitalization can boost PA automation.
• 9 | Review the existing volume of PA requirements and the related cost and consider removing those that do not add value frequently, especially as you consider adding new ones.
• 10 | Shift perspective when designing a PA package from focusing solely on cost savings to also focusing on member experience and promoting value in care delivery.

Conclusion

Many employers understand the benefits of PA as a mechanism for ensuring patient safety, reducing errors and controlling fraud, waste and abuse. Due to numerous shortcomings, however, employers are seeking improvements to the PA design and process. Along with other stakeholders, employers recognize the importance of PAs, but they also realize that there is a need to focus on improving the PA process and continuously reassess how PAs can be designed to add value to care delivery. PA can be a tool that accomplishes the cost, quality and safety objectives that have evolved alongside treatment advancements to deliver appropriate care to patients. That being said, the process will accomplish its goals only if it keeps pace with the rapid evolution of the health care system itself.

More Topics

Articles & Guides Plan Design & Administration Cost Management Pharmacy