Pre-authorization is approval from an insurance company that must be obtained before a medical service is provided. Without this approval, the insurance company can deny payment for the service even if it is medically necessary. The healthcare provider or patient must request approval, provide medical documentation, and wait for the insurance company’s decision before proceeding with the service.
Pre-authorization affects medical billing directly. Claims for services performed without required authorization get denied. The provider loses revenue. The patient may be responsible for the full cost. Understanding pre-authorization requirements, processes, and management is required for proper medical billing.
This guide explains what pre-authorization is, why insurance companies require it, which services need authorization, how the authorization process works, what happens when authorization is missing, how to manage authorization requirements, and how authorization affects billing operations.
What Pre-Authorization Is
Pre-authorization is a requirement that healthcare providers or patients obtain approval from an insurance company before certain medical services are provided. The insurance company reviews the request and decides whether the service is medically necessary and covered under the patient’s plan.
Pre-authorization goes by several names:
- Prior authorization
- Pre-cert or pre-certification
- Pre-approval
- Prior approval
- Pre-determination
All these terms mean the same thing. The insurance company must approve the service before it happens.
Components of Pre-Authorization
Pre-authorization involves several key components that billing staff must understand.
Request Submission: The provider submits a formal request to the insurance company asking for approval to perform a specific service for a specific patient. The request includes patient information, provider information, diagnosis codes, procedure codes, and clinical documentation supporting medical necessity.
Insurance Review: The insurance company reviews the request against their coverage policies and medical necessity criteria. This review may be done by administrative staff for straightforward services or by clinical reviewers including nurses and physicians for more involved procedures.
Decision: The insurance company issues a decision approving, denying, or requesting more information. Approved authorizations receive an authorization number that must be documented and used when billing.
Validity Period: Authorizations are valid for limited time periods. Services must be performed within the authorization validity window or a new authorization must be obtained.
Documentation Requirements: All authorization activity must be documented including the authorization number, approval date, expiration date, number of services authorized, and any conditions or limitations placed on the authorization.
When Authorization Is Required
Insurance companies decide which services require pre-authorization. The list varies by insurance company and by specific plan. Common services requiring authorization include:
- MRI and CT scans
- Most surgeries including inpatient and outpatient procedures
- Hospital admissions for non-emergency care
- Specialty medications including biologics and chemotherapy drugs
- Durable medical equipment like wheelchairs and hospital beds
- Physical therapy beyond initial visits
- Mental health services beyond initial visits
- Sleep studies
- Genetic testing
- Bariatric surgery
- Transplants
- Home health care
- Skilled nursing facility care
- Certain high-cost procedures and tests
Emergency services typically do not require pre-authorization because there is no time to obtain approval before treatment. However, some plans require notification to the insurance company within a certain timeframe after an emergency admission.
Authorization vs Referral
Authorization and referral are different requirements, though they are sometimes confused.
Referral: A written order from a primary care physician allowing a patient to see a specialist. Required in HMO and some POS plans. This is an internal plan requirement about care coordination.
Authorization: Insurance company approval for a specific service based on medical necessity review. Can be required regardless of whether a referral is also needed.
A patient might need both a referral from their primary care doctor AND pre-authorization from insurance for the same specialist visit or procedure.
The Authorization Decision
When an authorization request is submitted, the insurance company reviews it and makes one of three decisions:
Approved: The service is authorized. The provider can proceed. An authorization number is issued that must be included on the claim.
Denied: The service is not authorized. The insurance will not pay if the service is performed. The denial includes a reason code explaining why.
Pending: More information is needed before a decision can be made. The insurance company requests additional documentation, test results, or clinical notes.
Some authorizations are approved with conditions or limitations. For example, physical therapy might be authorized for a specific number of visits, or a medication might be authorized at a certain dosage but not a higher dosage.
| Authorization Term | What It Means |
| Pre-authorization | Approval required before service |
| Prior authorization | Same as pre-authorization |
| Pre-certification | Same as pre-authorization |
| Authorization number | Reference number issued when approved |
| Retro authorization | Authorization requested after service (rarely granted) |
| Denial | Authorization request rejected |
| Pending | More information needed for decision |
Why Insurance Companies Require Pre-Authorization
Insurance companies require pre-authorization for specific reasons related to cost control, quality management, and plan administration.
Cost Control
The primary reason insurance companies require pre-authorization is to control healthcare costs. Pre-authorization allows the insurance company to review whether a service is necessary before paying for it.
Expensive services like surgery, advanced imaging, and specialty drugs have high costs. Insurance companies want to verify these services are appropriate before committing to pay. Authorization serves as a checkpoint to prevent unnecessary expensive care.
Pre-authorization also encourages use of lower-cost alternatives when appropriate. An insurance company might deny authorization for an expensive brand name drug but approve a cheaper generic alternative. They might deny an expensive MRI but approve a cheaper x-ray first to see if that provides enough information.
Medical Necessity Review
Insurance companies use pre-authorization to verify services are medically necessary. Just because a doctor orders a service does not automatically mean it meets insurance criteria for medical necessity.
Insurance companies have clinical guidelines and coverage policies. Pre-authorization allows them to review whether the ordered service meets these guidelines. A procedure might be appropriate in some clinical situations but not others. Pre-authorization lets insurance evaluate the specific patient’s situation.
Medical necessity criteria are based on:
- Evidence-based clinical guidelines
- Medical literature and research
- Standard of care for specific conditions
- FDA approvals for drugs and devices
- Effectiveness of treatments for particular diagnoses
- Appropriateness for patient’s specific clinical presentation
When a service does not meet medical necessity criteria, authorization is denied even if the service is technically covered under the plan.
Preventing Duplicate Services
Pre-authorization helps prevent duplicate testing. If a patient had an MRI at one facility and wants another MRI at a different facility shortly after, pre-authorization allows insurance to see the first test already happened and deny authorization for an unnecessary duplicate.
This prevents:
- Waste of healthcare resources
- Unnecessary radiation exposure for imaging studies
- Duplicate costs for the same diagnostic information
- Doctor shopping for desired test results
- Redundant procedures when previous results are available
The insurance company’s system tracks recent services when reviewing authorization requests. If similar or identical services were recently performed, the authorization request triggers a review of whether the new service is truly needed or is a duplicate.
Establishing the Proper Setting
Some services can be performed in different settings with different costs. Hospital outpatient departments charge more than ambulatory surgery centers for the same procedures.
Pre-authorization allows insurance to direct patients to lower-cost settings when clinically appropriate.
Setting Options for Same Procedure:
- Hospital inpatient (most expensive)
- Hospital outpatient department
- Ambulatory surgery center
- Office-based surgical suite (least expensive)
Authorization requirements may specify where a service should be performed. An insurance company might approve a procedure only if performed in an ambulatory surgery center, denying authorization for performance in a hospital outpatient department where costs are higher.
This site-of-service management reduces costs without reducing quality of care when the lower-cost setting is appropriate for the patient’s clinical needs.
Managing High-Risk Procedures
Certain procedures have high complication rates or questionable outcomes. Pre-authorization allows insurance companies to review whether these procedures are appropriate for specific patients. Experimental or unproven treatments often require authorization so insurance can deny coverage for services not considered standard of care.
High-risk procedures requiring careful review include:
- Experimental treatments not yet proven effective
- Procedures with high complication rates
- Surgeries that may not improve patient outcomes
- Treatments without strong evidence supporting their use
- Services that may cause more harm than benefit
- Invasive procedures when conservative treatment has not been tried
The pre-authorization review for high-risk services often involves physician reviewers who evaluate whether the potential benefits outweigh the risks for the specific patient.
Encouraging Evidence-Based Care
Insurance companies use authorization requirements to encourage providers to follow evidence-based clinical guidelines. Coverage policies built into the authorization process reflect current medical evidence about what treatments work.
If a provider orders a service that does not align with evidence-based guidelines, authorization may be denied. This pushes providers toward treatments proven effective.
For example:
- Guidelines recommend trying physical therapy before back surgery. Authorization for surgery might be denied if physical therapy has not been attempted.
- Evidence shows certain antibiotics are not effective for viral infections. Authorization for these antibiotics might be denied for viral diagnoses.
- Research indicates specific treatments are first-line therapy. Authorization might require trying first-line treatments before approving second-line options.
This approach aims to improve quality of care by promoting treatments shown to be effective while discouraging treatments lacking evidence of benefit.
Step Therapy Requirements
Step therapy, also called fail-first requirements, is a specific type of authorization requirement. It requires patients to try lower-cost or first-line treatments before insurance will approve more expensive or second-line treatments.
Common Step Therapy Scenarios:
- Try generic drugs before brand name drugs
- Try conservative treatment before surgery
- Try first-line medications before specialty biologics
- Complete physical therapy before approving injections or procedures
- Use oral medications before injectable medications
Step therapy requirements are built into many authorization protocols. The authorization request will be denied if documentation does not show the required steps were completed first.
Exceptions to step therapy exist when:
- Patient tried the step therapy drug previously and failed
- Patient has contraindications to the step therapy option
- Step therapy drug is not appropriate for patient’s specific condition
- Medical necessity supports skipping directly to preferred treatment
Providers must document these exceptions in the authorization request to bypass step therapy requirements.
Plan Benefit Verification
Pre-authorization confirms the specific service is covered under the patient’s particular plan. Insurance plans have different coverage. A service covered under one plan might not be covered under another plan from the same insurance company. Authorization verifies coverage before service.
Coverage verification through authorization includes checking:
- Whether the service is a covered benefit at all
- Whether coverage requires specific circumstances or diagnoses
- Whether the patient’s specific plan includes this benefit
- Whether coverage limitations or exclusions apply
- Whether service requires specific credentials or facility types
- Whether geographic restrictions affect coverage
Verifying coverage through authorization prevents situations where services are performed and then denied as non-covered benefits.
| Reason for Authorization | What Insurance Checks |
| Cost control | Is this service necessary or is there a cheaper alternative? |
| Medical necessity | Does this meet our clinical guidelines? |
| Duplicate prevention | Has patient already had this test recently? |
| Appropriate setting | Can this be done in a lower-cost facility? |
| High-risk procedures | Is this appropriate for this patient? |
| Evidence-based care | Does this follow clinical best practices? |
| Step therapy | Has patient tried required first-line treatments? |
| Benefit verification | Is this covered under patient’s specific plan? |
Which Services Typically Require Pre-Authorization
While authorization requirements vary by insurance company and plan, certain categories of services commonly require authorization across most plans.
Diagnostic Imaging
Advanced imaging studies frequently require pre-authorization because of their high cost and potential for overuse.
Typically Require Authorization:
- MRI (Magnetic Resonance Imaging)
- CT scans (Computed Tomography)
- PET scans (Positron Emission Tomography)
- Nuclear medicine studies
- Multiple imaging studies in short timeframes
- Cardiac imaging including stress tests and echocardiograms
Typically Do Not Require Authorization:
- Simple x-rays
- Ultrasounds in most cases
- Screening mammograms
Authorization for imaging often requires documenting what symptoms led to ordering the test, what previous testing has been done, and why this specific imaging study is needed. Insurance companies may require trying simpler, cheaper imaging first before approving advanced imaging.
Surgical Procedures
Most surgical procedures require pre-authorization, with very few exceptions.
Inpatient Surgery: Nearly all planned inpatient surgeries require authorization. This includes the hospital admission authorization and surgical procedure authorization. Some insurance companies issue one authorization covering both the admission and the surgery. Others require separate authorizations for each.
Outpatient Surgery: Most outpatient surgical procedures require authorization. Minor office-based procedures often do not require authorization, but the line between what needs authorization and what does not varies by insurance company.
Emergency Surgery: True emergency surgery does not require pre-authorization, but the hospital must notify insurance within a specified timeframe, typically 24 to 48 hours after admission.
Authorization for surgery requires:
- Diagnosis justifying the surgery
- Specific procedure planned
- Planned date of surgery
- Facility where surgery will be performed
- Surgeon’s credentials and NPI
- Clinical notes supporting medical necessity
- Documentation of conservative treatments tried if applicable
Hospital Admissions
Planned hospital admissions for inpatient care require pre-authorization. Emergency admissions do not require authorization before admission but require notification to insurance within a short timeframe after admission.
Inpatient Admission Authorization Requirements:
- Diagnosis requiring hospitalization
- Expected length of stay
- Services to be provided during admission
- Why inpatient level of care is necessary rather than observation or outpatient
- Physician orders for admission
- Clinical documentation supporting need for inpatient care
Observation status in hospitals is considered outpatient care and may not require the same authorization as inpatient admission, though some plans require authorization for observation stays longer than 24 hours.
Concurrent review is often required during the hospital stay. The hospital must contact insurance periodically to get continued stay authorization. If continued stay authorization is denied, insurance will not pay for additional days.
Specialty Medications
High-cost medications require authorization to verify medical necessity and confirm appropriate use.
Commonly Require Authorization:
- Biologic medications for autoimmune conditions
- Chemotherapy and cancer drugs
- Hepatitis C treatments
- Specialty psychiatric medications
- Growth hormones
- Medications with abuse potential
- Brand name drugs when generics are available
- Immunosuppressants
- Enzyme replacement therapies
- Gene therapies
Authorization for medications often requires documenting:
- Specific diagnosis requiring the medication
- Previous medications tried and why they failed
- Lab results supporting the diagnosis
- Contraindications to alternative medications
- Expected duration of therapy
- Prescriber’s credentials and specialty
- Patient’s clinical response to prior treatments
Many specialty medication authorizations are valid for limited periods like 3 or 6 months, requiring reauthorization to continue therapy. Reauthorization requires documenting the patient’s response to treatment and continued medical necessity.
Durable Medical Equipment
DME items like wheelchairs, hospital beds, oxygen equipment, and other medical devices often require authorization.
Typically Require Authorization:
- Power wheelchairs and scooters
- Hospital beds for home use
- Continuous positive airway pressure (CPAP) machines
- Oxygen equipment
- Prosthetics and orthotics
- Specialized medical equipment
- Breast pumps in some plans
- Compression devices
Authorization requires medical documentation of why the equipment is needed, how it will be used, whether rental or purchase is appropriate, and expected duration of need.
For wheelchairs and mobility devices, face-to-face evaluation by the prescribing physician is required. Authorization requests must include detailed clinical justification demonstrating the patient’s mobility limitations and why the specific device is medically necessary.
Therapy Services
Physical therapy, occupational therapy, and speech therapy often require authorization, especially beyond initial visits.
Many plans allow a certain number of therapy visits without authorization but require authorization for additional visits beyond that threshold. Common thresholds are:
- 6 visits without authorization
- 10 visits without authorization
- 12 visits without authorization
- 20 visits without authorization
After the threshold, authorization is required to continue therapy. Authorization requests must include:
- Initial evaluation findings
- Treatment plan with specific goals
- Progress notes documenting improvement
- Functional limitations being addressed
- Expected number of additional visits needed
- Timeframe for achieving goals
Authorization may approve specific numbers of visits like 12 additional visits over 6 weeks. When those visits are used, reauthorization is needed to continue.
Mental Health and Substance Abuse Services
Outpatient mental health and substance abuse treatment often requires authorization for ongoing care. Initial visits may not require authorization, but continued treatment does.
Mental Health Authorization:
- Typically allows initial evaluation without authorization
- Requires authorization for ongoing therapy sessions
- May authorize specific number of sessions like 10 sessions
- Requires reauthorization to continue beyond approved sessions
- May require documentation of treatment plans and patient progress
Inpatient Psychiatric Care:
- Requires authorization for admission
- Requires concurrent review for continued stay
- May limit approved length of stay
- Requires strong clinical justification for extended stays
Substance Abuse Treatment:
- Residential treatment almost always requires authorization
- Outpatient intensive programs require authorization
- Medication-assisted treatment may require authorization
- Detoxification services require authorization
Mental health and substance abuse authorizations are subject to federal parity laws requiring coverage similar to medical services. Insurance cannot impose stricter authorization requirements for mental health than for medical services.
Home Health Care
Skilled nursing care provided in the patient’s home typically requires authorization. This includes nursing visits, physical therapy at home, occupational therapy at home, and home health aide services.
Authorization specifies:
- How many nursing visits are approved
- How many therapy visits are approved
- How many home health aide hours are approved
- Duration of authorization
- Services covered under the authorization
Home health authorization requires physician orders documenting the patient is homebound, requires skilled services, and has a treatment plan. Reauthorization is needed to continue services beyond the initial approved period.
Skilled Nursing Facility Care
When patients are discharged from hospitals to skilled nursing facilities for continued recovery, this care requires authorization. The insurance company reviews whether skilled nursing is medically necessary or whether the patient could recover at home with other services.
SNF Authorization Requirements:
- Recent hospitalization (usually within 30 days)
- Need for skilled nursing or rehabilitation services
- Expected length of stay
- Discharge plan
- Treatment plan during SNF stay
Medicare requires a 3-day qualifying hospital stay before covering SNF care. Commercial insurance may have different requirements. Authorization reviews whether the SNF level of care is appropriate or whether the patient could manage with home health or outpatient therapy.
Genetic Testing
Genetic tests are expensive and authorization requirements are common. Insurance companies want to verify the test is appropriate for the patient’s situation and that results will change treatment decisions.
Authorization for genetic testing requires:
- Clinical indication for testing
- Family history if applicable
- How test results will guide treatment
- Why this specific test is necessary
- Patient consent for genetic testing
- Genetic counseling documentation if required
Some genetic tests are covered only for specific indications. Cancer genetic testing might be covered for patients with strong family history but denied for patients without risk factors.
Sleep Studies
Polysomnography (sleep studies) to diagnose sleep apnea and other sleep disorders typically require authorization. Insurance wants to verify symptoms warrant the study.
Authorization requires documentation of:
- Sleep-related symptoms
- Impact on daily functioning
- Medical conditions potentially related to sleep disorders
- Why in-facility sleep study is needed versus home sleep testing
- Previous treatments tried if applicable
Some plans authorize home sleep testing first, requiring that test to be abnormal or inconclusive before authorizing in-facility polysomnography.
Bariatric Surgery
Weight loss surgery requires extensive pre-authorization including documentation of BMI, previous weight loss attempts, nutrition counseling, psychological evaluation, and medical necessity.
Typical Bariatric Surgery Authorization Requirements:
- BMI above specific threshold (often 40 or above, or 35 with comorbidities)
- Documentation of medical conditions related to obesity
- Minimum duration of obesity (often 2-5 years)
- Previous weight loss attempts documented
- Completion of supervised medical weight loss program
- Nutrition counseling completion
- Psychological evaluation clearance
- Letter of medical necessity from surgeon
- Commitment to lifelong follow-up
The authorization process for bariatric surgery can take months due to the extensive requirements. Patients must complete all prerequisite programs before authorization will be approved.
Transplants
Organ transplants require authorization at multiple stages including evaluation, listing for transplant, the transplant surgery itself, and post-transplant care.
Transplant Authorization:
- Initial evaluation at transplant center
- Testing required for transplant workup
- Listing on transplant waiting list
- The transplant procedure when organ becomes available
- Post-transplant medications
- Post-transplant follow-up care
Transplant authorization requires approval from the insurance company’s transplant case management team. The case manager coordinates all aspects of transplant care and authorization throughout the process.
| Service Category | Authorization Frequency | Common Requirements |
| MRI/CT scans | Almost always | Clinical indication, previous testing |
| Simple x-rays | Rarely | Usually none |
| Inpatient surgery | Almost always | Diagnosis, procedure details, medical necessity |
| Outpatient surgery | Usually | Diagnosis, procedure details |
| Emergency care | Not before service | Notification within 24-48 hours |
| Specialty medications | Often | Diagnosis, previous treatments tried, lab results |
| Durable medical equipment | Often | Medical necessity, prescription, usage plan |
| Physical therapy | After certain visits | Diagnosis, treatment plan, progress notes |
| Mental health services | Ongoing care | Diagnosis, treatment plan, progress |
| Home health care | Almost always | Physician orders, medical necessity, service plan |
| Bariatric surgery | Always | Extensive documentation, program completion |
| Transplants | Always | Multi-stage authorization through case management |
The Pre-Authorization Process Step by Step
Obtaining pre-authorization follows a specific process. Each step must be completed correctly to get approval.
Step 1: Identify Authorization Requirement
Before scheduling or providing a service, determine if pre-authorization is required. Check:
- The patient’s insurance company’s website for authorization requirements
- The insurance company’s provider manual or policies
- The patient’s specific plan documents
- Call the insurance company’s provider services line to ask
- Check practice management system if it flags services requiring authorization
Do not assume. Authorization requirements change. A service that did not require authorization last year might require it now. Different plans from the same insurance company may have different authorization requirements.
Where to Find Authorization Requirements:
- Insurance company provider portal
- Provider service phone line
- Written contracts and provider manuals
- Plan benefit documents
- Electronic eligibility verification systems
Step 2: Gather Required Information
Authorization requests require specific information. Gather all required information before submitting the request:
Patient Information:
- Full name as it appears on insurance card
- Date of birth
- Insurance member ID number
- Group number
- Relationship to policyholder
- Contact information
Provider Information:
- Requesting provider name and NPI
- Servicing provider name and NPI if different
- Facility name and NPI where service will be performed
- Provider phone and fax numbers
- Provider specialty
Service Information:
- Specific procedure or service being requested
- CPT or HCPCS procedure codes
- ICD-10 diagnosis codes
- Date or date range service will be performed
- Number of visits or units requested if applicable
- Whether service is inpatient or outpatient
- Place of service
Clinical Information:
- Reason service is needed
- Relevant symptoms
- Physical examination findings
- Results of previous testing or imaging
- Previous treatments tried and results
- Why this specific service is appropriate
- Clinical notes supporting medical necessity
- Lab results if applicable
- Imaging reports if applicable
Some authorization requests require attaching specific documents like office visit notes, lab results, imaging reports, or hospital records.
Step 3: Submit the Authorization Request
Authorization requests are submitted through different methods depending on the insurance company:
Online Portal: Many insurance companies have provider portals where authorization requests are submitted electronically. This is the fastest method. Requests submitted electronically often get responses within 24 to 72 hours.
Phone: Some requests can be submitted by calling the insurance company’s authorization department. This is common for urgent requests. Phone authorizations may receive immediate approval or denial for straightforward services.
Fax: Written authorization request forms can be faxed to the insurance company. This is slower than electronic submission but faster than mail.
Mail: Mailing paper requests is the slowest method and rarely used anymore.
Third-Party Authorization Platforms: Many practices and billing companies use third-party authorization management companies that submit requests to multiple insurance companies through a single system.
When submitting, document:
- Date and time of submission
- Method of submission
- Confirmation number if provided
- Who submitted the request
- Any reference numbers received
Step 4: Provide Additional Information if Requested
If the insurance company needs more information to make a decision, they will request it. Common requests include:
- Additional clinical notes
- Imaging reports or actual images
- Operative reports from previous surgeries
- Lab results
- Specialist consultation notes
- Letters of medical necessity from the provider
- Treatment plans
- Progress notes documenting response to treatment
Respond to information requests promptly. Delays in providing information delay authorization decisions and may result in automatic denials if information is not provided within specified timeframes.
Many insurance companies give providers 10-14 days to respond to information requests. If information is not received within that window, the request may be denied for insufficient information.
Step 5: Receive Authorization Decision
The insurance company communicates their decision through:
- Electronic notification through provider portal
- Phone call to provider’s office
- Fax to provider’s office
- Letter mailed to provider and patient
- Notification through third-party authorization platform
Approved Authorizations Include:
- Authorization number or reference number
- Approved services or procedures
- Number of visits or units approved
- Valid dates for authorization
- Any conditions or limitations
- Place of service if specified
- Servicing provider if specified
Denied Authorizations Include:
- Reason for denial with reason code
- Explanation of why service does not meet criteria
- Information about appeal rights
- Appeal deadline
- What additional information might support approval Common denial reasons:
- Service not medically necessary per plan criteria
- Insufficient clinical documentation provided
- Service not covered under patient’s plan
- Duplicate service already performed recently
- Alternative service should be tried first
- Service considered experimental or investigational
- Patient does not meet clinical criteria
- Required step therapy not completed
Step 6: Document Authorization
When authorization is approved, document:
- Authorization number
- Date authorization was obtained
- Date authorization expires
- Number of visits or units authorized
- Any limitations or conditions on the authorization
- Name of insurance representative who approved it
- Where authorization information is stored in system This information must be accessible to:
- Scheduling staff (to confirm authorization before scheduling)
- Clinical staff (to know what services are authorized)
- Billing staff (to include authorization number on claims)
Store authorization documentation where it can be retrieved easily. Many practices scan authorization approvals into patient charts or store them electronically in the practice management system linked to the patient account.
Step 7: Include Authorization Number on Claims
When billing for the authorized service, include the authorization number in the appropriate field on the claim form.
Electronic Claims: Authorization number goes in the authorization number field (Loop 2300, REF02 with qualifier G1).
Paper CMS-1500 Claims: Authorization number goes in Box 23.
UB-04 Claims: Authorization number goes in FL 63.
Claims submitted without required authorization numbers may be denied even if authorization was obtained. The claim must show the authorization number so insurance can match the claim to the approved authorization.
Step 8: Monitor Authorization Expiration
Track when authorizations expire. Services must be performed within the authorization validity period or a new authorization must be obtained.
Before scheduling services, verify:
- Authorization is on file
- Authorization covers the specific service being scheduled
- Authorization has not expired
- Scheduled service date falls within authorization validity period
- Number of authorized units has not been exhausted
If authorization expires before services are completed, submit a new authorization request or extension request before the expiration date.
Authorization Timeframes
Insurance companies have different timeframes for processing authorization requests based on urgency.
Standard Authorization Timeframe
For non-urgent services, insurance companies typically respond to authorization requests within specific business days:
- 5 business days
- 7 business days
- 10 business days
- 14 business days
The specific timeframe depends on the insurance company and state regulations. Many states have laws requiring insurance companies to respond within specified timeframes.
Submit authorization requests well in advance of when the service is scheduled. If a surgery is scheduled 3 weeks from now, submit authorization immediately. Do not wait until a few days before.
Best Practice Timing:
- Routine services: Submit authorization at least 2 weeks before service
- Surgeries: Submit authorization at least 3 weeks before scheduled date
- Complex services: Submit authorization 4 weeks before to allow for information requests
- Ongoing services: Submit reauthorization requests at least 2 weeks before current authorization expires
Urgent Authorization Timeframe
For urgent medical situations where the standard timeframe could seriously jeopardize the patient’s health, expedited review is available. Urgent authorization requests are typically processed within 24 to 72 hours.
To qualify for expedited review, the requesting provider must document why the service is urgent and cannot wait for a standard review timeframe.
Criteria for Urgent Authorization:
- Waiting for standard review could seriously jeopardize patient’s health
- Delay could cause severe pain that cannot be managed adequately
- Waiting could result in permanent impairment or dysfunction
- Clinical situation requires immediate intervention Urgent authorizations require:
- Marking the request as urgent
- Documenting why delay would harm the patient
- Providing clinical justification for urgency
- Following up quickly if decision is not received within urgent timeframe
Emergency Services
True emergency services do not require pre-authorization because there is no time. However, most plans require notification to the insurance company within 24 to 48 hours after an emergency admission or emergency procedure.
Emergency Notification Requirements:
- Hospital must notify insurance within specified timeframe
- Notification includes patient information, admission reason, expected length of stay
- Insurance may conduct concurrent review during emergency admission
- Failure to notify within required timeframe can result in denial or payment reduction
Emergency is defined as services needed to prevent serious jeopardy to health, serious impairment of bodily functions, or serious dysfunction of bodily organs. Inconvenience or patient preference does not constitute emergency.
Authorization Expiration and Validity Periods
Authorizations are valid for limited time periods. Common authorization validity periods are:
- 30 days from approval date
- 60 days from approval date
- 90 days from approval date
- Specific date range provided in the authorization
- Until specific number of visits are completed
- Ongoing for chronic conditions with periodic review
If the service is not performed within the authorization validity period, the authorization expires. A new authorization request must be submitted.
Some authorizations are for ongoing services and remain valid as long as conditions are met:
- Authorization for 12 physical therapy visits to be used within 90 days
- Authorization for monthly infusions for 6 months
- Authorization for home health services with concurrent review every 60 days
Track expiration dates actively. Do not let authorizations expire before services are performed or completed.
What Happens When Authorization Is Missing
Performing services that require authorization without obtaining that authorization has serious consequences.
Claim Denial
The most common consequence is claim denial. When a claim is submitted for a service that required authorization but no authorization was obtained, the insurance company denies the claim. The denial reason states that pre-authorization was required but not obtained.
These denials are extremely difficult to overturn. Insurance company policy requires authorization before service. When authorization is not obtained beforehand, there is no basis for appeal. The claim is properly denied according to plan rules.
Denial Codes for Missing Authorization:
- CO-197: Precertification/authorization/notification absent
- CO-50: These are non-covered services because this is not deemed a medical necessity
- PR-197: Precertification/authorization missing (patient responsibility) The denial indicates whether the provider or patient is responsible for payment.
Retroactive Authorization Denials
Some providers request retroactive authorization after performing a service without authorization. Insurance companies rarely grant retroactive authorizations. Their policy requires authorization before service, not after.
Retroactive authorization might be granted if:
- The service was truly emergent and there was no time for authorization
- The insurance company made an error (told provider authorization was not required when it actually was)
- Authorization was obtained but the documentation was lost by the insurance company
- System error prevented authorization from being processed
Retroactive Authorization Requirements:
- Written request explaining why authorization was not obtained beforehand
- Documentation of emergency situation if applicable
- Proof of insurance company error if applicable
- Complete clinical documentation supporting medical necessity
- Appeals process if initial retroactive request is denied
Otherwise, retroactive authorization requests are denied. Providers should not count on getting retroactive authorization. Obtaining authorization before service is required.
Provider Responsibility
When services are performed without required authorization, the provider usually cannot bill the patient for the full cost. This depends on whether the patient was informed beforehand.
If Provider Did Not Inform Patient:
- Provider is responsible for the cost
- Patient cannot be balance billed
- Provider absorbs the loss
- This is considered provider error
If Patient Was Informed and Signed Waiver:
- Patient accepted financial responsibility
- Provider can bill patient
- Waiver must be obtained before service
- Waiver must clearly explain authorization requirement and financial risk
Many states have laws limiting when providers can balance bill patients for authorization failures. Even with signed waivers, balance billing may not be allowed in all situations.
Patient Responsibility
Patients bear some responsibility for ensuring authorization requirements are met. However, most insurance companies and state laws place primary responsibility on providers to obtain authorization.
Patient Responsibilities:
- Know which services require authorization under their plan
- Ask providers if authorization has been obtained before services
- Not agree to proceed with services if told authorization is pending
- Understand they may be financially responsible if they proceed without authorization despite being warned
Patient Protections:
- Many states prohibit balance billing for provider authorization failures
- Federal surprise billing laws limit patient liability in certain situations
- Insurance contracts often prohibit balance billing for authorization issues
- Patients can appeal determinations that they are responsible
Patients who were not informed about authorization requirements generally cannot be held financially responsible for the provider’s failure to obtain authorization.
Lost Revenue
For providers, missing authorization means lost revenue. The insurance company will not pay. The provider cannot balance bill the patient in most cases. The cost of providing the service is not recovered.
Financial Impact:
- Direct loss of service payment
- Administrative costs already incurred
- Staff time spent on service provision
- Supplies and equipment used
- Facility costs for service space
- No recovery mechanism in most cases
This is why practices must have strong authorization management processes. Missing authorizations directly impacts practice revenue and is completely preventable with proper systems.
Delayed Care
When authorization is required but not obtained until after scheduling, the service must be rescheduled after authorization is approved. This delays care for the patient, frustrates all parties, and creates scheduling problems for the practice.
Consequences of Delayed Care:
- Patient health may worsen during delay
- Patient satisfaction decreases
- Rescheduling creates scheduling inefficiencies
- Other patients’ appointments may be affected
- Staff time wasted on rescheduling
- Patient may choose different provider Delays also affect practice operations:
- Wasted pre-procedure preparation time
- Cancelled surgical block time
- Staff scheduled for procedures that don’t happen
- Facility fees for cancelled procedures
- Supplies prepared that cannot be used
Administrative Burden
Dealing with missing authorization claims creates substantial administrative work:
- Staff time investigating why authorization was not obtained
- Time spent on appeal attempts
- Communication with patients about their responsibility
- Potential write-offs requiring documentation
- Learning from errors to prevent recurrence
This administrative burden takes staff time away from productive activities and increases operating costs.
| Consequence | Who Is Affected | Impact |
| Claim denial | Provider and patient | Insurance will not pay |
| Lost revenue | Provider | Service cost not recovered |
| Patient balance billing issues | Provider and patient | Who pays becomes disputed |
| Delayed care | Patient | Service postponed until authorization obtained |
| Administrative burden | Provider staff | Time spent on appeals and resolution |
| Patient dissatisfaction | Patient and provider | Frustrated with billing issues and delays |
| Regulatory compliance | Provider | Potential contract violations |
Managing Pre-Authorization Requirements
Medical practices must have systems to manage authorization requirements effectively.
Authorization Tracking System
Implement a system to track authorization requirements and status:
What to Track:
- Which services require authorization
- Which insurance companies require authorization for which services
- Authorization requests submitted and dates submitted
- Authorization status (pending, approved, denied)
- Authorization numbers for approved requests
- Authorization expiration dates
- Services performed under each authorization
- Number of units used versus authorized
- Reauthorization due dates
Tracking Methods:
- Practice management software with authorization module
- Dedicated authorization tracking software
- Spreadsheets for smaller practices
- Electronic health record integration
- Third-party authorization management platforms
The tracking system must be accessible to all staff who need authorization information: schedulers, clinical staff, and billing staff.
Staff Responsibilities
Assign clear responsibilities for authorization tasks:
Scheduling Staff:
- Check if scheduled services require authorization
- Verify authorization is on file before confirming appointments
- Do not schedule services requiring authorization until authorization is approved
- Check authorization expiration dates when scheduling
- Verify number of authorized units not exceeded
Authorization Coordinator:
- Submit authorization requests
- Follow up on pending requests
- Provide additional information when requested
- Communicate authorization status to scheduling and clinical staff
- Track authorization numbers
- Monitor authorization expirations
- Submit reauthorization requests
- Manage authorization denials and appeals
Clinical Staff:
- Provide clinical documentation needed for authorization requests
- Write letters of medical necessity when needed
- Document clinical justification for services
- Respond to insurance company clinical questions
- Participate in peer-to-peer reviews when requested
Billing Staff:
- Include authorization numbers on claims
- Check authorization expiration dates before billing
- Follow up on authorization-related claim denials
- Track authorization-related revenue impact
- Report authorization issues to management
Practice Management:
- Monitor authorization metrics
- Review denial patterns
- confirm adequate staffing for authorization function
- Invest in authorization management technology
- Develop authorization policies and procedures
- Train staff on authorization requirements
Verification Before Scheduling
Before scheduling any service that might require authorization, verify:
- Does this service require authorization for this patient’s insurance?
- Has authorization already been obtained?
- If not, can authorization be obtained before the desired service date?
- If authorization is pending, what is the timeline for decision?
- If authorization might be denied, has patient been informed?
Do not schedule services requiring authorization until authorization is approved. Scheduling first and dealing with authorization later leads to cancellations, rescheduling, patient dissatisfaction, and potential lost revenue.
Scheduling Holds:
- Place services on scheduling hold pending authorization
- Give authorization coordinator deadline for obtaining approval
- Confirm approval before finalizing schedule
- Have backup appointment slots for when authorization is approved
- Communicate clearly with patients about authorization timeline
Patient Communication
Inform patients about authorization requirements:
What to Communicate:
- Service ordered requires authorization from insurance
- Service cannot be performed until authorization is approved
- Timeline for authorization decision
- What happens if authorization is denied
- Patient’s financial responsibility if they choose to proceed without authorization
- How patient will be notified of authorization decision
Documentation of Communication:
- Date patient was informed
- What was explained to patient
- Patient’s questions and responses
- Patient’s decision to proceed or wait
- Any waivers signed regarding financial responsibility
Clear communication prevents patients from being surprised by delays or denials. It also establishes that the patient was informed about authorization requirements, which is important if financial responsibility becomes an issue.
Authorization Request Timing
Submit authorization requests as soon as services are ordered, not right before the service date.
Optimal Timing:
- Same day as service is ordered
- Within 24 hours of order at minimum
- At least 2-3 weeks before scheduled service date
- Earlier for complex services or those likely to require additional information
- Immediately after scheduling for surgeries Early submission allows:
- Time for insurance company review
- Time to respond to requests for additional information
- Time for appeals if initially denied
- Time to reschedule if authorization is delayed
- Time to discuss alternatives if authorization is denied
Waiting until shortly before the service date creates time pressure and increases likelihood of service cancellation or performance without authorization.
Follow-Up on Pending Requests
Do not assume authorization requests are being processed. Follow up on pending requests:
Follow-Up Schedule:
- Check status 3-5 business days after submission for routine requests
- Check status 24 hours after submission for urgent requests
- If still pending, ask what information is needed
- Provide requested information immediately
- Escalate requests that exceed standard processing timeframes
- Contact insurance company supervisor if needed
- Document all follow-up contacts
Proactive follow-up prevents authorization delays and identifies problems early when they can still be resolved.
Escalation Process:
- Start with authorization department
- Escalate to supervisor if no resolution
- Contact provider representative if assigned
- File urgent request if clinically warranted
- Involve patient in contacting insurance if appropriate
- Consider appeal process if request is delayed unreasonably
Appeal Denied Authorizations
When authorization is denied, review the denial reason carefully. Many denials can be overturned with additional information or clarification.
Authorization Appeal Process:
- Review denial reason and understand specific objection
- Determine if additional clinical documentation addresses the denial reason
- Have provider write letter of medical necessity explaining why service is appropriate
- Gather supporting evidence (studies, guidelines, peer-reviewed literature)
- Submit appeal with all supporting documentation
- Request peer-to-peer review if available
- Follow up on appeal status
- Escalate through appeal levels if necessary
When to Appeal:
- Clinical documentation supports medical necessity but was not adequately conveyed
- Service meets coverage criteria but insurance misunderstood situation
- Denial based on outdated clinical information
- Step therapy requirement already completed but not documented
- Service appropriate despite not following typical guidelines
- Experimental designation inappropriate for established procedure
When Not to Appeal:
- Service truly is not medically necessary
- Service is excluded benefit under plan
- Patient does not meet coverage criteria and cannot meet them
- Alternative covered services are equally appropriate
- Appeal cost and effort exceeds potential recovery
Focus appeals on denials that can realistically be overturned. Some denials are correct and should be accepted rather than appealing unsuccessfully.
Peer-to-Peer Reviews
Many insurance companies offer peer-to-peer reviews as part of the authorization appeal process. This allows the ordering physician to speak directly with the insurance company’s medical director to discuss the case.
Peer-to-Peer Process:
- Request peer-to-peer review when authorization is denied
- Insurance schedules call between ordering physician and medical director
- Physician explains clinical situation and medical necessity
- Medical director may approve authorization based on discussion
- Call typically lasts 10-20 minutes
- Document outcome of peer-to-peer review
Peer-to-peer reviews are often successful in overturning denials because they allow direct physician-to-physician communication about the clinical nuances of the case.
Preparing for Peer-to-Peer:
- Review patient chart thoroughly before call
- Have all relevant clinical information available
- Prepare clear explanation of medical necessity
- Know insurance company’s coverage criteria
- Be ready to discuss alternative treatments considered
- Have clinical literature supporting approach if available
Alternative Services
When authorization is denied, discuss alternative covered services with the provider and patient. An insurance company might deny authorization for an expensive test but approve a cheaper alternative. Denying authorization for a brand name drug might lead to approval of a generic.
Alternative Service Discussion:
- What service was denied and why
- What alternatives might insurance approve
- Whether alternatives are clinically appropriate
- Differences in expected outcomes
- Cost differences between options
- Patient preferences and values
Working within insurance company guidelines while still providing appropriate care maintains good relationships with patients and insurance companies. Sometimes the alternative is equally effective but less expensive, making it acceptable to all parties.
Authorization Denials and Medical Necessity
When services are denied as not medically necessary, providers must decide:
Perform Service and Bill Patient:
- Requires patient consent and financial agreement
- Patient must understand insurance will not pay
- Must comply with state balance billing laws
- Document patient’s informed decision
- Provide cost estimate to patient
Do Not Perform Service:
- Discuss why insurance denied authorization
- Explain medical necessity determination
- Offer covered alternatives if available
- Respect insurance company decision
- Document decision not to proceed
Appeal the Denial:
- Gather additional clinical information
- Provide supporting documentation
- Request peer-to-peer review
- Argue for medical necessity
- Follow appeal process through all levels
The decision depends on clinical judgment, patient wishes, likelihood of successful appeal, and financial considerations.
Pre-Authorization for Different Insurance Types
Authorization requirements vary significantly between commercial insurance, Medicare, Medicare Advantage, and Medicaid.
Commercial Insurance Authorization
Private insurance companies have the most extensive authorization requirements. Each insurance company has different lists of services requiring authorization. Authorization requirements can differ between plans from the same insurance company.
Providers must check authorization requirements for each patient’s specific plan. General knowledge is insufficient. The specific plan the patient has determines requirements.
Commercial insurance authorization decisions are made by:
- Utilization review nurses
- Medical directors
- Third-party utilization review companies contracted by the insurance company
- Clinical reviewers with expertise in specific specialties
Commercial Authorization Characteristics:
- Extensive lists of services requiring authorization
- Varying requirements between plans
- Different processing times by insurance company
- Different submission methods
- Plan-specific coverage criteria
- Frequent changes to authorization lists
- Step therapy requirements common
- Prior authorization forms specific to each insurance company
Medicare Traditional Authorization
Traditional Medicare (Parts A and B) has limited prior authorization requirements compared to commercial insurance. Most services do not require prior authorization from Medicare.
Medicare Services Requiring Prior Authorization:
- Certain power mobility devices (wheelchairs)
- Repetitive scheduled non-emergent ambulance transport
- Certain implanted cardiac devices including implantable cardioverter defibrillators
- Non-emergent hyperbaric oxygen therapy
- Certain genetic tests
- Certain home health services in some states
For most services, Medicare does not require pre-authorization. However, Medicare does conduct post-service reviews and audits. Claims can be denied after service if Medicare determines the service was not medically necessary.
Medicare Coverage Determinations:
- Local Coverage Determinations (LCDs) from Medicare Administrative Contractors
- National Coverage Determinations (NCDs) from CMS
- Coverage criteria published for providers to review
- Medical necessity guidelines detailed in policies
- Post-payment audits instead of pre-authorization for most services
Medicare Advantage plans have different authorization requirements than traditional Medicare.
Medicare Advantage Authorization
Medicare Advantage plans are private insurance plans that provide Medicare benefits. These plans can and do require pre-authorization for many services, unlike traditional Medicare.
Medicare Advantage authorization requirements vary by plan. Common services requiring authorization include:
- Inpatient hospital admissions
- Surgeries
- Advanced imaging
- DME
- Skilled nursing facility care
- Home health care
- Many services that do not require authorization in traditional Medicare
- Specialty physician visits
- Certain procedures and tests
Medicare Advantage Authorization Differences:
- Each plan has own authorization requirements
- Requirements more similar to commercial insurance than traditional Medicare
- May require authorization for services traditional Medicare does not
- Utilization management more intensive than traditional Medicare
- May use same authorization processes as commercial products from same company
- Subject to Medicare Advantage regulations on timeliness and process
Providers must check each Medicare Advantage plan’s specific authorization requirements. Do not assume Medicare Advantage plans work like traditional Medicare for authorization purposes.
Medicaid Authorization
Medicaid authorization requirements vary by state because each state runs its own Medicaid program. Some states have extensive authorization requirements. Others have minimal requirements.
Common Medicaid Services Requiring Authorization:
- Inpatient hospital admissions
- Surgeries
- DME
- Transportation services
- Mental health services beyond initial visits
- Dental procedures in states that cover adult dental
- Vision services
- Certain medications
- Home health services
- Long-term care services
State Variation in Medicaid Authorization:
- Each state determines its own authorization requirements
- Some states require authorization for many services
- Other states have minimal authorization requirements
- Authorization processes differ by state
- Forms and submission methods vary
- Processing timeframes vary
- Appeal processes are state-specific
Medicaid Managed Care Authorization
Most Medicaid beneficiaries are now enrolled in Medicaid managed care plans. These are private insurance companies that contract with states to provide Medicaid benefits.
Medicaid managed care authorization works more like commercial insurance than traditional fee-for-service Medicaid:
- Managed care plans set authorization requirements within state guidelines
- Requirements may be more extensive than state fee-for-service Medicaid
- Each managed care plan has own authorization lists
- Submission methods specific to each plan
- Processing similar to commercial insurance
- State oversight of managed care authorization decisions
Providers must learn authorization requirements for each Medicaid managed care plan separately.
TRICARE Authorization
TRICARE, the military health insurance program, has specific authorization requirements that differ by TRICARE plan type.
TRICARE Prime (HMO-style):
- Most specialty care requires referrals and authorizations
- Primary care manages referral and authorization process
- Regional contractor handles authorizations
- More extensive authorization requirements than Select
TRICARE Select (PPO-style):
- Fewer authorization requirements than Prime
- More flexibility but some services still require authorization
- Can self-refer to specialists but may need authorization for services
- Different regional contractors may have slightly different processes
Common TRICARE Authorization Requirements:
- Inpatient admissions
- Mental health care beyond initial visits
- Some outpatient surgeries
- DME
- Certain medications
TRICARE authorization is obtained through the regional contractor for the patient’s geographic area.
| Insurance Type | Authorization Extent | Key Differences |
| Commercial Insurance | Extensive requirements | Varies by plan and insurance company |
| Medicare Traditional | Minimal requirements | Most services do not require authorization |
| Medicare Advantage | Moderate to extensive | Each plan has own requirements, more than traditional Medicare |
| Medicaid Fee-for-Service | Varies by state | State-specific rules |
| Medicaid Managed Care | Moderate to extensive | Similar to commercial insurance |
| TRICARE Prime | Extensive | HMO-style with referral and authorization requirements |
| TRICARE Select | Limited | PPO-style with fewer requirements |
Technology and Authorization Management
Technology solutions help practices manage authorization requirements more efficiently.
Practice Management System Integration
Modern practice management systems include authorization tracking features:
Features:
- Flag services that typically require authorization
- Track authorization requests by patient
- Store authorization numbers linked to specific services
- Alert users when scheduling services without authorization on file
- Prevent claim submission without authorization numbers
- Track authorization expiration dates
- Generate reports on authorization status and metrics
Integration between scheduling, clinical, and billing systems allows authorization information to flow automatically rather than requiring manual entry in multiple places.
Payer Portals
Most insurance companies provide online provider portals where authorization requests can be submitted and status checked electronically.
Portal Benefits:
- Faster processing than fax or mail
- Immediate confirmation of submission
- Ability to check status 24/7
- Faster approval notifications
- Electronic storage of authorization documentation
- Attach clinical documents electronically
- Reduce paper and fax requirements
- Reduce phone calls for status checks
Train staff to use payer portals for all authorization requests when available. Electronic submission and tracking is more efficient than traditional methods.
Third-Party Authorization Platforms
Several companies provide platforms that consolidate authorization requests across multiple insurance companies into a single system:
Platform Features:
- Submit requests to any insurance company through one interface
- Automatic routing to the correct insurance company
- Status tracking across all payers in one system
- Standardized request forms regardless of insurance company
- Integration with practice management systems and EHRs
- Electronic attachment of clinical documentation
- Automated status checking and follow-up
- Reporting and analytics across all payers
Major Authorization Platforms:
- Availity
- Change Healthcare (formerly Emdeon)
- Waystar (formerly ZirMed)
- DrFirst
- CoverMyMeds (for medication authorizations)
These platforms reduce the administrative burden of managing different submission processes for different insurance companies.
Electronic Health Record Integration
EHR systems can flag when ordered services require authorization:
EHR Authorization Features:
- Clinical decision support alerts providers at time of order entry
- Automatic creation of authorization request from order
- Clinical documentation needed for authorization pulled from EHR
- Authorization status visible in patient chart
- Integration with authorization platforms
- Pre-populated authorization requests with clinical data
- Alerts when authorization expires
- Tracking authorization usage against approved units
Integration between clinical and administrative systems reduces delays and missed authorizations by alerting clinical staff at the point of care that authorization will be needed.
Artificial Intelligence and Automation
Emerging technology uses AI to improve authorization management:
AI Applications:
- Predict which services will require authorization based on historical data
- Auto-populate authorization requests with patient and clinical information from EHR
- Identify missing documentation before submission
- Prioritize which requests need immediate attention based on scheduled dates
- Flag authorizations at risk of denial based on clinical information and coverage criteria
- Suggest additional documentation to improve approval likelihood
- Learn from denials to improve future request quality
- Auto-generate letters of medical necessity from clinical notes
These tools are becoming more common and help practices manage increasing authorization requirements with the same or fewer staff resources.
Authorization Analytics and Reporting
Technology enables better tracking and analysis of authorization performance:
Metrics to Track:
- Authorization request volume by service type
- Authorization approval rate by payer and service
- Average time to authorization decision by payer
- Denial rate by denial reason
- Appeal success rate
- Revenue at risk from pending authorizations
- Services delayed waiting for authorization
- Staff time spent on authorization activities
- Authorization-related claim denials
- Financial impact of authorization denials
Regular reporting on these metrics identifies problems, tracks improvement, and demonstrates authorization management value.
Financial Impact of Authorization Requirements
Pre-authorization requirements have significant financial implications for medical practices.
Revenue Loss from Denied Claims
When authorization is required but not obtained, claims are denied. The service was provided. Costs were incurred. But no payment is received. This is direct revenue loss.
Practices with weak authorization management can have substantial revenue losses from authorization-related denials. Even a small percentage of claims denied for missing authorization represents significant lost revenue.
Calculating Authorization Denial Impact:
- Total claim volume per month
- Percentage denied for missing authorization (even 1-2% is significant)
- Average payment per denied claim
- Multiply to estimate monthly authorization-related revenue loss
- Annualize to understand yearly impact
This calculation often reveals that investing in better authorization management pays for itself through reduced denials.
Administrative Costs
Managing authorization requirements costs money:
Direct Costs:
- Staff salaries for authorization coordinators
- Staff time across scheduling, clinical, and billing teams
- Technology costs for authorization management systems
- Payer portal access fees if applicable
- Third-party platform subscription costs
- Training costs for authorization staff
- Fax and phone costs for authorization communication
Indirect Costs:
- Provider time writing letters of medical necessity
- Clinical staff time gathering documentation
- Opportunity cost of staff time that could be used for other activities
- Costs of denied services that must be reperformed
Some estimates suggest authorization processes cost medical practices billions annually in administrative expenses. For individual practices, authorization management can require multiple full-time staff positions.
Delayed Revenue
Services cannot be performed until authorization is approved. This delays care delivery and delays revenue recognition. A surgery scheduled for next week generates no revenue if authorization has not been obtained and the surgery must be postponed.
Cash Flow Impact:
- Revenue pushed to future periods
- Unpredictable revenue timing when authorizations are delayed
- Difficulty projecting monthly revenue
- Potential gaps in revenue if many authorizations are delayed simultaneously
- Interest costs if delayed revenue causes cash flow problems
Managing authorization timeline reduces revenue delays and makes cash flow more predictable.
Patient Volume Impact
Authorization requirements affect patient access and can impact patient volume:
Volume Effects:
- Patients may seek care from providers with faster authorization processes
- Delays waiting for authorization may cause patients to cancel
- Patients frustrated by authorization delays may leave negative reviews
- Complex authorization requirements may discourage referrals
- Providers may limit how many authorization-heavy services they offer
Efficient authorization management becomes a competitive advantage in attracting and retaining patients.
Insurance Contract Compliance
Provider contracts with insurance companies often include requirements about obtaining authorization. Consistently failing to obtain required authorizations can result in:
Compliance Consequences:
- Increased claim audits by insurance company
- Contract warnings or probation
- Financial penalties in some contracts
- Contract termination in severe cases
- Removal from insurance network
- Damage to relationship with insurance company
Maintaining good authorization compliance protects network participation and avoids enhanced scrutiny from insurance companies.
Cost of Appeals
When authorizations are denied and appeals are pursued, costs include:
- Staff time preparing and submitting appeals
- Provider time for peer-to-peer reviews
- Clinical staff time gathering additional documentation
- Costs of external reviews if internal appeals fail
- Opportunity cost of staff time on appeals versus other activities
Not all appeals are successful, meaning this cost is incurred without revenue recovery in many cases.
Common Authorization Problems and Solutions
Problem: Not Knowing Which Services Require Authorization
Many practices do not have clear information about which services require authorization from which insurance companies.
Solution:
- Create and maintain a reference document listing common services and which major insurance companies require authorization
- Update this document quarterly or when changes are announced
- Train staff to check insurance company websites for current requirements
- Call insurance company provider services when unsure
- Build authorization requirement flags into practice management system
- Subscribe to insurance company provider newsletters announcing changes
- Assign one staff member to maintain authorization requirement information
Problem: Authorization Requests Submitted Too Late
Requests submitted days before scheduled services leave insufficient time for processing, information requests, and appeals if denied.
Solution:
- Implement policy requiring authorization requests within 24-48 hours of service being ordered
- Track compliance with submission timeline policy
- Set scheduled service dates based on authorization approval, not before
- Do not finalize schedule until authorization is approved
- Build buffer time between authorization submission and scheduled service
- Escalate urgent requests appropriately
- Follow up proactively on pending requests
Problem: Missing Clinical Documentation
Authorization requests are denied or delayed because required clinical documentation was not included with the request.
Solution:
- Create templates for authorization requests that include checklists of required documentation
- Templates should be service-specific (MRI authorization template, surgery authorization template, etc.)
- Include in checklist: diagnosis, symptoms, exam findings, previous treatments, relevant test results
- Train staff on what documentation each request type needs
- Have clinical staff review requests before submission to verify documentation is complete
- Use EHR integration to pull clinical information automatically
- Maintain library of common supporting documents for frequent authorization types
Problem: Lost or Missing Authorization Numbers
Authorization is obtained but the authorization number is not documented or is documented incorrectly. When the claim is submitted without the authorization number, it is denied.
Solution:
- Create standard workflow for entering authorization numbers into practice management system
- Enter authorization number immediately when received, not later
- Link authorization numbers to specific patients, dates of service, and CPT codes in the system
- Require billing staff to verify authorization number is in system before claim submission
- Build system edits that prevent claim submission without authorization number for services flagged as requiring authorization
- Store copy of authorization approval document in patient chart and billing system
- Verify authorization number matches approval document before billing
Problem: Expired Authorizations
Services are performed after the authorization expiration date, resulting in claim denial.
Solution:
- Track authorization expiration dates in system
- Set up alerts 2 weeks before authorization expires
- Alert scheduling staff when patients with expiring authorizations call to schedule
- Do not schedule services beyond authorization validity period without obtaining new authorization
- Submit reauthorization requests proactively before expiration
- Check expiration date before scheduling every service
- Build system edit to prevent scheduling beyond authorization validity
Problem: No Follow-Up on Pending Requests
Authorization requests are submitted but no one follows up. Requests sit pending, denials are not discovered until after services are performed, and information requests go unanswered.
Solution:
- Assign one staff member to own authorization follow-up
- Implement system to track all pending requests in one place
- Check status of all pending requests every 3 business days
- Respond to information requests within 24 hours of receipt
- Escalate requests pending longer than expected timeframe
- Document all follow-up activity
- Report pending requests at weekly team meetings
- Use tracking system that flags overdue requests automatically
Problem: No Process for Appeals
When authorizations are denied, no one appeals them. Services are cancelled or patients are told their insurance will not cover them, even when appeals might be successful.
Solution:
- Implement authorization appeal process with clear steps
- Review all denied authorizations within 48 hours
- Determine which denials are appropriate and which should be appealed
- Have providers write letters of medical necessity for appealable denials
- Gather supporting clinical documentation for appeals
- Submit appeals within allowed timeframe
- Track appeal outcomes to learn which types of denials are worth appealing
- Measure appeal success rate by payer and denial reason
- Share successful appeal strategies across staff
Problem: Poor Communication with Patients
Patients are not informed about authorization requirements until services are delayed or denied, creating frustration and dissatisfaction.
Solution:
- Inform patients at time of service order that authorization is required
- Explain timeline for authorization decision
- Give patients realistic expectations about when service can be scheduled
- Update patients on authorization status
- Call patients when authorization is approved to schedule
- Call patients if authorization is denied to discuss options
- Document all patient communication about authorization
- Provide patients with authorization number once obtained
- Be transparent about potential for denial
Problem: Services Performed Without Authorization
Services are scheduled and performed without verifying authorization is on file, resulting in claim denials.
Solution:
- Implement hard stop in scheduling process requiring authorization verification
- Do not allow scheduling to finalize appointments without authorization approval
- Train schedulers to check authorization status before confirming appointments
- Build system flags that alert when scheduling authorization-required services
- Create checklist for scheduling staff to verify authorization before appointment confirmation
- Audit scheduled appointments weekly for missing authorizations
- Cancel appointments if authorization not obtained rather than proceeding without it
Problem: Lack of Staff Training
Staff do not understand authorization requirements, processes, or their responsibilities in authorization management.
Solution:
- Provide comprehensive authorization training for all relevant staff
- Include authorization in new hire orientation
- Conduct quarterly refresher training on authorization updates
- Cross-train staff so multiple people can handle authorization tasks
- Create written authorization procedures and workflows
- Provide access to insurance company authorization guidelines
- Share denial reasons with staff to learn from errors
- Recognize and reward staff for good authorization management
Best Practices for Authorization Management
Identify Requirements Early
Determine authorization requirements at the point of service order, not at scheduling or billing.
Early Identification Methods:
- Clinical decision support in EHR alerts provider when ordering service that requires authorization
- Scheduling staff trained to recognize services requiring authorization
- Reference lists of services requiring authorization available to all staff
- System flags services requiring authorization automatically
- Insurance company websites bookmarked for quick reference
Start Process Immediately
Submit authorization requests the same day services are ordered or the next business day at latest.
Immediate Submission Benefits:
- Maximum time for insurance company review
- Time to respond to information requests
- Time for appeals if initially denied
- Reduced risk of delays
- Better cash flow from faster approvals
Use Technology
Implement technology solutions to improve authorization efficiency.
Technology Priorities:
- Practice management system with authorization tracking
- Payer portal access for all major insurance companies
- Third-party authorization platform if volume warrants
- EHR integration to pull clinical information
- Automated alerts for expiring authorizations
- Reporting tools for authorization metrics
Assign Clear Ownership
Designate specific staff responsible for authorization management.
Ownership Structure:
- Authorization coordinator as primary role
- Backup coordinator for coverage
- Clear responsibilities for each role
- Accountability for authorization outcomes
- Authority to escalate problems
- Regular reporting to management
Track and Measure
Monitor authorization performance metrics to identify problems and track improvement.
Key Metrics:
- Authorization request volume
- Approval rate by payer
- Denial rate by payer and reason
- Average time to decision
- Authorization-related claim denials
- Appeal success rate
- Revenue at risk from pending authorizations
- Services delayed for authorization
Communicate Continuously
Keep all stakeholders informed about authorization status and issues.
Communication Points:
- Provider receives feedback when authorizations are denied
- Schedulers know status of pending authorizations
- Billing staff aware of authorization numbers
- Patients updated on authorization progress
- Management informed of trends and issues
- Team meetings include authorization updates
Document Everything
Maintain complete documentation of all authorization activity.
Documentation Requirements:
- Authorization requests submitted with dates
- Clinical information provided
- Additional information requests and responses
- Authorization decisions with numbers
- Expiration dates and limitations
- Denials with reasons
- Appeals and outcomes
- Patient communication
Appeal Appropriately
Develop systematic approach to authorization appeals.
Appeal Strategy:
- Review all denials promptly
- Identify denials worth appealing based on clinical merit and revenue impact
- Gather strong clinical documentation
- Provider involvement in appeals
- Use peer-to-peer reviews when available
- Track appeal outcomes
- Learn from successful and unsuccessful appeals
Build Payer Relationships
Develop relationships with insurance company utilization review staff.
Relationship Building:
- Know contact names for each payer’s authorization department
- Understand each payer’s authorization process
- Learn what documentation each payer values
- Escalation contacts for problematic cases
- Provider representatives for larger practices
- Attend payer educational sessions
- Provide feedback to payers on authorization process issues
Continuous Improvement
Regularly evaluate and improve authorization processes.
Improvement Activities:
- Monthly review of authorization metrics
- Identify recurring problems
- Implement solutions to prevent problems
- Share successful strategies across staff
- Update policies and procedures
- Invest in better tools and technology
- Benchmark against industry standards
- Celebrate authorization management successes
The Bottom Line
Pre-authorization is insurance company approval required before certain medical services are provided. Without authorization when required, claims are denied and revenue is lost.
Insurance companies require authorization to control costs, verify medical necessity, prevent duplicate services, encourage evidence-based care, implement step therapy, and verify benefit coverage. Authorization allows insurance companies to review services before committing to payment.
Common services requiring authorization include advanced imaging, surgeries, hospital admissions, specialty medications, durable medical equipment, ongoing therapy, mental health services, home health care, skilled nursing care, and high-cost procedures. Authorization requirements vary by insurance company and specific plan.
The authorization process involves identifying requirements, gathering required information, submitting requests, responding to information requests, receiving approval or denial, documenting authorization numbers, and including those numbers on claims. Timing is important with standard timeframes for routine requests and expedited processing for urgent situations.
Missing or denied authorizations result in claim denials, lost revenue, delayed care, patient dissatisfaction, and administrative burden. Practices must have strong authorization management systems including tracking, timely submission, proactive follow-up, and appeal processes.
Authorization requirements vary by insurance type. Commercial insurance has extensive requirements. Traditional Medicare has minimal requirements. Medicare Advantage has moderate to extensive requirements. Medicaid requirements vary by state and managed care plan.
Technology solutions including practice management systems, payer portals, third-party platforms, and EHR integration help practices manage authorization more efficiently. AI and automation are emerging tools for improving authorization management.
Common authorization problems include not knowing requirements, late submission, missing documentation, lost authorization numbers, expired authorizations, lack of follow-up, no appeal process, poor patient communication, and insufficient staff training. Each problem has specific solutions that practices can implement.
Best practices for authorization management include identifying requirements early, starting processes immediately, using technology, assigning clear ownership, tracking metrics, communicating continuously, documenting everything, appealing appropriately, building payer relationships, and continuous improvement.
Managing authorizations effectively requires clear staff responsibilities, verification before scheduling, early submission, diligent follow-up, complete documentation, patient communication, systematic appeals, and ongoing process improvement. Practices that manage authorizations well protect revenue, improve patient satisfaction, and maintain compliance with insurance requirements.
