How payers can get a jump on prior authorization changes

December 11, 2024

How payers can get a jump on prior authorization changes

By leaning into FHIR® standards and investing now in integration with key providers, payers can improve member experience and streamline compliance.

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Prior authorization, the process payers use to decide whether a procedure is medically necessary, remains a major source of friction and dissatisfaction. Lengthy wait times frustrate health plan members. Required documentation and follow-up detract from providers' ability to efficiently deliver care. Prior authorization is expensive, too-according to one study, reviews cost between $80 and $120 per transaction. So it's not surprising that the Centers for Medicare & Medicaid Services (CMS) estimates that automating prior authorizations and reducing administrative burden could save the industry $15 billion over the next decade.

In the US, federal regulators and state legislators are tackling the administrative burden associated with prior authorizations with rules and laws designed to make the process more transparent and streamlined. These regulatory efforts can take advantage of maturing industry data standards that support wider interoperability and data sharing.

Federal and state efforts are not synchronized, however, and individual states often have unique requirements. That means payers will face different compliance requirements across multiple states for various lines of business. But those that act on CMS compliance requirements now, using HL7®* FHIR® standards, should see early returns, process improvements, and more robust future data exchanges. We explore the advantages of this proactive approach below.

Federal and state regulators taking different routes

Payers operating government-sponsored plans and commercial plans in the US need to be familiar with both the CMS rule (see our discussion of the rule here) and state legislation. Significant differences exist among these efforts.

The Final Rule (CMS-0057) requires specific improvements to the prior authorization process for government health plans by January 1, 2026. Then, by January 1, 2027, payers must implement a prior authorization API that supports electronic exchange of prior authorization requests and decisions. The API must list all payer-defined procedures requiring prior authorization, outline the necessary supporting documentation, and provide a mechanism for providers to submit requests and receive decisions. This prior authorization API is just one of several APIs that payers with government lines of business must implement by the 2027 deadline.

Meanwhile, more than 80% of US states have passed, or are in the process of passing, legislation affecting prior authorizations-and many of these initiatives don't align with CMS requirements. Several have tighter deadlines, while others have broader transparency standards. For example, Illinois requires payers to report the top five reasons for prior authorization denials. Colorado requires payers to post approval and denial metrics on their public websites by provider specialty, the medication, diagnostic test or procedure, the reason for denial, and denials overturned on appeal. In contrast, the federal rule requires approvals and denials to be reported as percentages of aggregated requests made, not of specific procedures.

Delivering prior authorization and more in a data-fluid industry

Building separate solutions or workarounds to meet each state's requirements alongside the CMS regulation will be expensive and impractical. Another strategy to avoid is depending on platforms built specifically for providers. These will simply deliver data to payers; the value comes when the new APIs seamlessly integrate with the payer's internal systems and workflows, spanning core administration, utilization management, care management and more.

The optimal way to approach compliance despite regulatory uncertainties is to build and test the CMS-mandated prior authorization API now. Building the API on an open, standards-based payer platform will enable payers to align commercial and government plan requirements and improve processes costs effectively. Here's a rundown of the advantages of tackling the CMS-required API today:

• Avoid tangled operations. A standards-based solution should eliminate the need to create state-specific solutions by processing diverse prior authorization requirements based on business rules and logic.
  
  
• See immediate results while reducing risk. Some early prior authorization API adopters have increased productivity already, and applying lessons learned from pilots to wider rollouts reduces their risk.
  
  
• Positioning for real-time bidirectional data flows. Additional CMS-required APIs will complement the prior authorization API by increasing member-centric data flows that should streamline care coordination and continuity of care.

Where to start streamlining

To get started, payers must map their existing prior authorization operations and understand their impact on provider workflows and how improved processes could streamline these workflows. This knowledge is critical for collaborating with health systems. Payers cannot develop the CMS API and automate prior authorization practices in isolation.

A leading health plan based in the southeastern US worked with us to evaluate its prior authorization processes. We identified requests by service type, procedure code groups, source of requests and volume to uncover patterns. This analysis involved reviewing dozens of medical policies and determining automation opportunities based on the conditions outlined in each policy. Additionally, we worked to understand pain points for providers and members. Automating key areas allowed the plan to reduce decision times by four to five days and saved $4 million annually.

While analyzing prior authorization processes, payers can also gather the intelligence needed to identify partners for piloting an API. The ideal partner is a health system committed to innovation and with whom the payer shares a high volume of patients. Early collaboration with provider champions can help improve the adoption of the API. The areas with the greatest potential for mutual time and cost savings include orthopedic surgery, home health, behavioral health, physical therapy and imaging.

Being proactive is the wise choice

In an informal poll we conducted recently, 13% of payers said they intended to maximize business opportunities from prior authorization compliance, while 20% planned to focus solely on compliance. Most payers hope to balance both compliance and business objectives. Implementing a FHIR®-based API and platform that supports prior authorization and more will help these payers meet CMS requirements while also improving payer-provider collaboration.

Payers that begin the process now will have the advantage of discovering new business cases for faster returns. Additionally, these early adopters will gain a substantial preview of a new generation of real-time data exchange, which can drive innovative experiences for members, patients and providers.

*HL7® and FHIR® are the registered trademarks of Health Level Seven International and their use of these trademarks does not constitute an endorsement by HL7.

For more details on how payer-provider integration can deliver cost savings and efficiency gains, read our recent whitepaper, "Leaders embrace FHIR®-based prior authorization solutions."

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