For decades, payers have used prior authorizations (PA) with the intent of curbing costs by preventing the unnecessary use of medical procedures or treatments. But in recent years, more and more physicians have contended that the practice impedes their ability to provide care.
Amid pushback from provider groups and a swell of state and federal legislation aimed at PA reform, payers are reevaluating the need for PA for certain drugs and services, particularly those with a high PA approval rate. Throughout 2023, several payers revealed they are cutting down on their use of PA as a utilization management tool.
To gain a better understanding of current payer perspectives on PA, the MMIT Index team fielded one of its monthly Rapid Event Primers on this topic in October 2023. Before we share the results, let’s take a look at what’s happening with PA on a national scale.
Limited utility, high administrative burden
When used effectively, PAs can help cut down on low-value or unsafe care, protecting patients from ineffective (or even harmful) care and reducing unnecessary costs for payers. But according to research by organizations like the American Medical Association (AMA), PAs often end up doing just the opposite. A majority of AMA-surveyed physicians say PA sometimes results in care delays, patient abandonment of needed treatments, and higher healthcare utilization; 33% of surveyed physicians report that PA has led to a serious adverse event for a patient in their care.
Several national organizations, including the Medical Group Management Association (MGMA), have also noted that PA requirements have increased over the years, requiring both payers and providers to devote more time—and money—to the process. PAs require physician offices to fill out PA forms and payers to adjudicate them. Criteria such as lab values, genetic tests, and documentation of medical necessity can lead to more complex PAs. In turn, these PAs impose an even greater administrative burden for both physician offices and payers, which is compounded by the process of filing (and reviewing) appeals when PAs are denied.
Electronic PAs can help ease some of the pressure, but the implementation of electronic systems has been slow and inconsistent. According to the Office of the National Coordinator for Health Information Technology (ONC), approximately 35% of providers still submit PA requests via fax, phone or mail. Of the payers surveyed by the MMIT Index team, 21% still rely on a manual PA process, while 7% use a combination of manual and electronic PAs.
Payers cutting back on PA
Some high-profile payers recently revealed initiatives to reduce their reliance on PA. As of third-quarter 2023, UnitedHealthcare is eliminating almost 20% of its PAs for most commercial, Medicare Advantage and Medicaid businesses “as part of a comprehensive effort to simplify the health care experience for consumers and providers.”
In August, Cigna Healthcare revealed that it is removing nearly 25% of PAs for medical services. The company also noted that including the newest eliminations, it has removed PAs on more than 1,100 medical services since 2020. More recently, in September, Blue Cross Blue Shield of Michigan announced plans to “relax” about 20% of its PA requirements.
The momentum shows no signs of slowing. In October, nine out of ten payer stakeholders surveyed by MMIT Index reported they were working to reduce the number of PA requirements for procedure codes. Many of them said that drugs and services with high approval rates would be considered for PA removal; others noted that products with low utilization and low cost would also be considered.
The one respondent who said their company was not reducing PA requirements cited the tool’s role in preventing fraud, waste and abuse. The majority of the nine payers removing PAs cited analysis of historic approval/denial rates, followed by the need to cut down on the time and expense spent on PAs, as their primary reasons. Most respondents who expect to reduce PAs within the next 12 months said they anticipate a 10% overall reduction in PAs.
Legislation targets PA process
Efforts to streamline the PA process, increase transparency, and speed approvals are underway at both the state and federal level. Almost 40 states have enacted some kind of legislation around PA.
This summer, the House Ways and Means Committee approved the Health Care Price Transparency Act of 2023 (H.R. 4822), which includes a bill targeting PA. In addition to requiring Medicare Advantage (MA) plans to implement electronic PA, the bill would require the Dept. of Health and Human Services to establish a process for plans to provide decisions in real time for routinely approved items and services.
In December 2022, CMS proposed a rule that would, among other things, require certain payers to implement resources to support electronic PA, include a specific reason for a denial, publicly report certain PA metrics, and make decisions on PAs within 72 hours for urgent requests and seven days for non-urgent ones. The requirements would apply to MA organizations, state Medicaid and Children’s Health Insurance Program agencies, Medicaid managed care plans, CHIP managed care entities, and Qualified Health Plan issuers on the exchanges.
The value of manufacturer input
While it may seem that payers are calling all the PA shots, manufacturers can potentially influence payer decision-making regarding the need for PAs. If manufacturers believe that a PA for their product is not needed, or is more complex than necessary, they can provide the payer with supporting information in hopes that the PA might be reduced or removed. Manufacturers may also offer payers contracts to influence PAs via formulary tiering.
Ultimately, while the use of PAs can be an effective tool in ensuring the right patients receive the right treatments, excessive use can lead to increased costs and administrative burden for both payers and physicians.
For greater insights into payer perspectives, see MMIT’s Biologics & Injectable Index. To understand how PAs function for a particular drug or indication, learn about MMIT’s Patient Access Analytics solution featuring combined coverage, claims, lab and pathways data.