The Hospital’s Expanding Authority over Authorizations: The Good, the Bad and the Reality

As a former orthopedic surgeon, Rep. Tom Price (R-Ga.), the current nominee for secretary of the Department of Health & Human Services (HHS), could prove to be a buffer against insurers lobbying for more prior-authorization rules. This would be good news for hospitals that have taken on the role of obtaining authorization from health plans, although it remains to be seen just what Price’s leadership at HHS would look like.

In the meantime, it’s a given that health plans will continue in their attempts to impose increased prior authorization requirements on hospitals. Indeed, organizations like the Kaiser Family Foundation have suggested that increasing prior authorizations is one possible approach for reducing the cost of health plans. For these and other reasons, hospitals should make cost-effective management of obtaining these authorizations a priority.

Historically, management of the authorization process was very much separated between the referring physician who had the responsibility of getting the authorization and the hospital that delivered the care and bore the financial risk. Hospitals either front-loaded FTEs to keep denials in check or used business office appeals teams to get denials overturned. Today, the emergence of integrated delivery systems and hospital-acquired physician practices have given hospitals increased financial responsibility for revenue cycle management across the care continuum, beginning as early as a patient’s first visit to his or her primary care provider.

With the aid of highly functional electronic health records (EHRs) and direct access to required clinical data, hospitals now are poised to take over the management of obtaining authorizations for both employed and contracted physicians. Although assuming this responsibility reduces a hospital’s denial risk, it brings a sizable volume of work that could likewise affect the hospital’s finances.

Authorizing at Scale

Managing prior authorizations traditionally has been a “statusing” activity, requiring staff to log in to a website for the patient’s health plan or call the health plan to verify an authorization is required and the subsequent status of that authorization. The authorization number(s) would then be noted and included on the claim. When the staff charged with submitting the claim cannot find any indication of the authorization, the physician would be contacted. Today, with access to patient medical records and orders, hospitals can bypass this last step. Hospitals know when the authorization has been obtained because they themselves did it.

Acquiring authorization is still a time-intensive process, however. Submitting a request for just one authorization can take up to 15 minutes, which adds up to a paltry four or five authorization requests per hour. Lack of fast access to patient data can slow this process even more.

Managing all aspects of the authorization process puts hospitals in the driver’s seat, which is appropriate given they are the ones taking the financial risk. But attention should be given to determining the appropriate scale of the new role and ensuring it does not add to the high cost of administering care.

Recognizing that taking ownership of authorizations adds a sizeable new activity to a patient access department, for example, organizations should incorporate this activity into the departments in a way that is well integrated with other pre-arrival financial clearance activities. Technology to assist with the new influx of prior authorization requests would clearly be beneficial, but in the very least, consideration should be given to centralizing authorization verification resources to manage requests as they come in from different facilities and to and design efficient workflows that optimize worker efficiency and throughput.

Creating an Automatic Process for Authorization

A key challenge for many hospitals is having limited resources available to assign to handling prior authorizations. One practical way to address this challenges is to reallocate staff. Meanwhile, advanced automation tools are available and continue to be developed that can speed or refine the process—for example, by routing authorization exception accounts to specific staff assigned to handle such accounts.

Although many aspects of healthcare legislation are unclear given the recent change in administration, one thing is certain: Reducing healthcare spending remains a necessary goal. Health plans reduce costs through utilization management and prior authorization. Likewise, hospitals must adopt scalable authorization management approaches if they are to maintain financially viable responsibility for authorization.

Heather Kawamoto is vice president of revenue cycle management, Recondo Technology, Greenwood Village, Colo.