Has the time come to replace prior authorization with price transparency and shared decision-making?

Prior authorization – it is a process that seems to have been the bane of a healthcare provider’s existence since time immemorial.  Payers argue that it is necessary to help manage health care costs and ensure that the patient is aware of more cost-effective treatment options that may be just as clinically effective.1  Prior authorization can also be a valuable tool in reducing over-utilization of high-dollar drugs or procedures, or to guard against fraud.  Providers argue it is a time-consuming process that delays care and creates a heavy administrative burden.  

In a 2010 American Medical Association (AMA) survey, physicians reported spending an average of 20 hours per week on prior authorization activities.2  When the survey was repeated in 2016, little had changed. Respondents still report spending an average of 20 hours per week on prior authorization activities, and more than a third have staff members who work exclusively on prior authorization requests, with the number of requests submitted each week averaging 36.6.  The average wait time for a prior authorization decision is one to three days, and 90 percent of respondents indicate that this waiting period leads to delays in care.3

There have been and continue to be multiple efforts to address these issues; however, none has had a significant impact on reducing the administrative burden associated with prior authorizations, or the cost.  According to the 2013 U.S. Health Care Efficiency Index published by CAQH/CORE, the cost of prior authorizations at that time ranged from $3.95 per transaction for health plans to $18.53 per transaction for providers.  

The rise in consumerism in healthcare and emergence of payment methodologies that focus more on the quality of care delivered than the quantity provide an opportunity for health plans to rethink their prior authorization strategy.  Transparent pricing and shared decision models could ensure that patients have access to information about less expensive, equally effective courses of treatment.  Shared financial risks and episode of care, or bundled payment arrangements encourage physicians to recommend the most cost effective treatment.  These changing dynamics eliminate two of the main reasons carriers cite for needing prior authorization. Applying prior authorization for fraud purposes only would greatly reduce the number of procedures requiring prior authorization, saving providers and payers alike hundreds of hours of work over the year, greatly reducing the administrative and cost burden associated with them, and improve access to care.

It is unlikely that prior authorizations will ever be fully eliminated, but at a time when not only the cost of healthcare, but physician burn-out is becoming an issue of increasing concern4 it certainly seems to be worth reconsidering how and when to employ them.

1 Castelucci, Maria.  “AMA, AHA form coalition to reform prior authorization requirements.”  Modern Healthcare.  01/26/2017.

2 Bendix, Jeffrey, MA.  “The Prior Authorization Predicament.”  Medical Economics.  07/08/2014.

32016 AMA Prior Authorization Physician Survey.

4Parks, Troy. “Report reveals severity of burn-out by specialty.”  AMA Wire.  01/31/2107.  https://wire.ama-assn.org/life-career/report-reveals-severity-burnout-specialty

About the author: Pam has more than 25 years' healthcare industry experience. As the Senior Director of Health Business Solutions for HIMSS, she oversees the overall management and strategy development for HIMSS Health Business Solutions initiatives.