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Back to the blogFeb 4, 2023

What is Prior Authorization in Medical Billing?

What is Prior Authorization in Medical Billing?

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Prior authorization or pre-authorization is a requirement from health insurance companies to ensure costly procedures are medically necessary. Doctors or medical providers are required to obtain prior approval before proceeding with a variety of procedures, diagnostics, medical devices, and prescription medications. Without proper pre-authorization in medical billing, there’s a chance of denials, required follow-up, or partial payment.  

TempDev helps practices manage their revenue cycle health, which allows them to support their patients’ health better. Practices can ensure fast, reliable, and more accurate support for their patients by integrating prior authorization tools with their practice management system. This is the best way to ensure that insurance coverage, eligibility, and prior authorization needs are verified and up to date in your practice management system before a patient's visit.   

Why are Prior Authorization Services Important? 

With pre-authorization, you can expedite the billing process by reducing denials and the need for follow-up. It’s better to check if prior authorization is needed before moving forward with treatments and procedures which may not be covered by their health insurance company. With prior approval, practices are not only improving the odds that their claim will be paid but also making the medical billing process more straightforward.

Prior authorization necessity should be verified as part of the pre-registration process. After determining the patient's insurance eligibility, the insurance verification team should validate whether prior authorization is needed. If prior authorization is needed, potential CPT codes that will be billed along with the ICD10 codes of the patient's diagnosis must be submitted to the insurance company. The insurance company will then decide whether to allow authorization for the procedure to be billed. With this authorization, the procedure should be scheduled with the patient.

When the proper processes are followed, claim denials, delayed treatments, re-scheduled appointments, and more are avoided. TempDev’s practice management consultants offer training and support, with consultancy, staffing, workflow, and configuration assistance.  

Challenges in Pre-Authorization 

Prior authorization in medical billing can be challenging for a few reasons. The American Medical Association (AMA) believes it is overused. Their concerns center around the research they’ve conducted on the associated costs, patient care delays, and disruptions caused by prior authorization, but there are other issues to consider as well. 

The revenue cycle teams face challenges with determining all of the medical codes, diagnoses, and other factors related to treatment and procedures. There can be other mitigating factors, of course. Here are just a few challenges practices may face in pre-authorization in medical billing.   

    It’s still essential to seek authorization from the health insurance company once it is known what treatment is needed for the patient. Both the practice and the patient need to understand whether the authorization will be approved. If approval is unable to be obtained, a different treatment option will need to be decided upon with the provider and patient.

    What Happens When Pre-Authorization Is Not Done?

    If pre-authorization in medical billing is not obtained from the insurance company, a claim could be delayed, denied, or only partially approved with reduced reimbursement rates. In many cases, the medical organization might absorb all or part of the cost. They may also re-file the claim again, with reasoning for why they're appealing the decision. However, that does not always mean the claim will be approved for payment.  

    While it is impossible to foresee every potential outcome for claim denials, steps can be taken to mitigate denials and avoid them. Some best practices to manage the prior authorization process: 

      By following these best practices, most of the technical and human errors that could delay the claims or result in partial or complete denial of the claim. With revenue cycle consulting, TempDev can help reduce costs, overcome staffing shortages, better position a company for growth, and improve patient care for an organization.  

      How TempDev Can Help with Healthcare Revenue Cycle Management 

      TempDev’s team of NextGen consultants, developers, and trainers can help support the process for prior authorization in medical billing. From dashboards and revenue cycle consulting to automation and workflow redesign, TempDev offers the tools you need to support and improve your financial future. Find out how we can help today.  

      Contact us here or by calling us at 888.TEMP.DEV to get the help you need to support prior authorization in medical billing. 


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